Assignment Task
Case Business Analysis and Valuation
NMG, Inc. is a clothing manufacturer that designs and markets new women’s clothing. The company just closed Fiscal Year 2023 ending December 31st and completed the balance sheet and income statement. You are hired as a clothing manufacturer and asked to perform the following tasks:
1-Prepare a forecasted income statement, balance sheet, and cash flow statement for the company for 2024.
2- a- Calculate the listed financial ratios for 2023
b- Using the past three years’ data for the company, perform a financial ratio analysis.
3-Compare and contrast the company’s 2023 ratios with those of the industry.
Forecasting assumptions for 2024:
1- Revenue will grow by 10% and the tax rate will be 21%
.2- The CAPEX will be 6.5% of Revenue and Depreciation expense will be 6.2% of Property, equipment, and leasehold improvements gross at the start of the year which was $10, 985 million.
3- The company issues $105 million of stock-based compensation, and it is fully vested. Additional paid-in capital will increase by the same amount. The company includes this form of compensation in operating expenses.
4- The company has a dividend payout ratio of 25.6% of net income.
5- No change in the following income statement accounts: Amortization of intangibles, Interest income, Interest expense, and Other, net.
6- No change in the following balance sheet statement accounts Goodwill, Long-term debts less current portion, Ordinary shares, or Other comprehensive loss.
7- There is no change in macroeconomic readings, including the inflation rate.
8- The Restructuring and other, net is zero.
9- Consider the following accounts increase based on the percentage of the revenue in 2024.
Accounts receivable, net 8.20%Inventories8.20%Other current assets2.50%Deferred income taxes9.20%Other assets, net1.80%Accounts payable14.50%Accrued employee compensation2.40%Accrued warranty0.85%Accrued expenses6.40%Long-term accrued warranty1%Other non-current liabilities1.20%
RATIO ANALYSISNMG, Inc. 2023Industry AverageCURRENT RATIO 1.98QUICK RATIO 1.24INVENTORY TURNOVER (days) 93INTEREST COVERAGE 4.26ASSET TURNOVER (days) 529RECEIVABLES TURNOVER (days) 58GROSS MARGIN 32.50%OPERATING MARGIN 7.30%PROFIT MARGIN 5%ROA 3.70%ROE 6.70%Debt to equity 1.01Dividend payout ratio 0.28
NMG, Inc. Net Income statements (in millions)202320222021for the year ending December 31. Revenue$10,390$11,184$10,771Cost of Revenue$6,939$7,261$7,058Gross Profit$3,451$3,923$3,713Product Development$991$1,026$1,232Marketing and Administrative$453$562$606Depreciation$520$559$539Amortization of Intangibles$23$53$104Restructuring and other, net($22)$89$178Stock-based compensation$0$0$0Total Operating Expenses$1,965$2,289$2,659Income from Operations$1,486$1,634$1,054Interest Income$84$38$12Interest Expense($224)($236)($222)Other, net$25($18)($29)Other expenses, net($115)($216)($239)Income before Income Taxes$1,371$1,418$815(Benefit) provision for income taxes($640)$236$43Net Income$2,011$1,182$772
NMG, Inc. Consolidated Balance Sheets (In millions except share and per share data)202320222021as of December 31. Current Assets Cash and Cash Equivalents$2,220$1,853$2,539Accounts receivables, net$989$1,184$1,199Inventories$970$1,053$982Other current assets$184$220$321Total current assets$4,363$4,310$5,041Property, Equipment, and leasehold improvements, net$1,869$1,792$1,875Investment in debt security$0$1,275$0Goodwill$1,237$1,237$1,238Other intangible assets, net$111$188 $281Deferred income taxes$1,114$417$609Other assets, net$191$191$224Total Assets$8,885$9,410$9,268Current Liabilities
Accounts payable$1,420$1,728$1,626Accrued employee compensation$169$253$237Accrued warranty$91$112$113Current portion of long-term debt$0$499$0Accrued expenses$552$598$650Total current liabilities$2,232$3,190$2,626Long-term accrued warranty$104$125$120Long-term accrued income taxes$4$10$15Other non-current liabilities$130$100$122Long-term debt less current portion$4,253$4,320$5,021Total Liabilities$6,723$7,745$7,904Shareholders’ Equity Ordinary shares-par value $0.0001, 2.6 billion shares authorized, 1,354,218,154, and 1,340,697,595 shares issued and outstanding, respectively Additional paid-in capital$6,545$6,377$6,152Accumulated other comprehensive Income (loss)($34)($16)($17)Retained Earnings($4,349)($4,696)($4,771)Total Shareholders’ equity$2,162$1,665$1,364Total liabilities and shareholders’ equity$8,885$9,410$9,268
