Note
i.
Appendix numbers are based on the
pathfinder
ii.
It might be unrealistic to draft an
answer like this under exam conditions
2. Financial
Analysis of Ice Age
A.
Wider Context
Worsening
general economic conditions and changing consumer preferences have led to a
drastic reduction in demand. This will make it more difficult for Ice Age to
improve its turnover.
The
rise in inflation will increase Ice Age’s costs and reduce its profits.
Rising
interest rates will increase Ice Age’s borrowing costs. This can also reduce
Ice Age’s profits.
B. Return on Equity (Appendix 2)
Ice
Age had returns on equity of 0.46% and 1.09% in 2014 and 2013 respectively
compared to the industry average of 7.1%. Its return on equity reduced in 2014
and it was worse than the industry average. This is a cause for concern for Ice
Age’s shareholders.
This
drop in Ice Age’s Return on Equity is mainly due to the 57.4% fall in Ice Age’s
net income in 2014.
C. Gross profit Margin (Appendix 2)
Ice
Age’s gross profit margins were 30% and 32% in 2014 and 2013 respectively
compared to the industry average of 43%. Its gross profit margins in 2013 and
2014 were worse than the industry average.Download the full solution HEREhttps://drive.google.com/open?id=0B_3dCAGibRm5UkpVamRjYmd2ekE
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