QUESTION 1: Analyse the overall liquidity position for each of the two companies in 2018 as compared to 2017.

| April 14, 2018


QUESTION 1:  Analyse the overall liquidity position for each of the two companies in 2018 as compared to 2017. Calculate the values for two liquidity ratios to help support your answer and justify why you have chosen these ratios. Note: ensure that you analyse in this question, not just describe the ratio values.                     
QUESTION 2:  Calculate the Cash Conversion Cycle (CCC) for each of the two companies in 2017 and 2018. Using your answer, analyse the efficiency of each of the two companies in managing their working capital in 2018 as compared to 2017. Note: ensure that you analyse in this question, not just describe the CCC values.        
QUESTION 3:  a. Analyse the sources of finance for each of the two companies in 2018 as compared to 2017. Use two capital structure ratios to support your answer and provide an explanation regarding the changes in the composition of the sources of finance for each enterprise. Note: ensure that you analyse in this question, not just describe the ratio values.

  b. Assume that the average debt ratio for the Capital Goods industry in 2018 was around 50 per cent. What can you infer about each of the two firms’ current capital structure and gearing (leverage) effect in 2018 as compared to the industry average?                                
QUESTION 4:  Using the DuPont method, analyse the profitability of each of the two companies in 2018 as compared to 2017 from a shareholder’s point of view. Based on your calculations, explain the main reason(s) for the change in the profitability for each company over the two years. Note: ensure that you analyse in this question, not just describe the ratio values.                                          
QUESTION 5:  In light of your analysis in questions 1 to 4, what is your team’s final recommendation to Paramount Investment Fund, with regards to the potential of investing in any of the two firms? Discuss the basis for your recommendation

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