Investment Analysis (Case Study Sample)

The company's liquidity position has been decreasing before implementing the strategy, as shown by the current ratio, which decreased from 1.410848 in 2015 to 0.717134 in 2017. The current ratio is less than the recommended current ratio for any company, which is 2:1, and this may have been caused by an increase in current liability faster than the increase in current assets. It implies that the company may have challenges meeting its maturing short-term debts as they fall due (Husna & Satria, 2019). It may be because the company is not using its current assets efficiently, or it may not be managing its working capital properly.
The company's profitability position before implementing the strategy shows an increase, as shown by the gross profit margin, which increased from 31.42% in 2015 to 36.99% in 2017. This may have been caused by a decrease over time in the cost of goods sold which shows the company is able to control its production decision (Husna & Satria, 2019). The company's debt ratio shows a slight increase from 46.14% in 2015 to 52.21% in 2016 before decreasing to 44.90% in 2017. This shows that the company is risky to investors and lenders (Husna & Satria, 2019). The higher debt ratio makes it more difficult for the company to borrow money from financial institutions because it has low creditworthiness.
The return on assets (ROA) of the company has been slightly increasing from 0.005261(0.1%) in 2015 to 0.091407 (9.14%) in 2017. Generally, the ROA of the company for the three years before implementing the strategy is low, which shows that the company is less efficient in generating profits (Husna & Satria, 2019). Therefore, from the ROA, it is evident that the company is not making maximum use of its assets in generating profits. Lastly, the company's price-earnings ratio (p/e) shows an increase from -214 in 2015 to 24.05 in 2016 before dropping to 6.93 in 2017. It shows that investors were expecting a high growth rate of the company in 2016, or the shares of the company were overvalued.