Xiaomi Company Creditworthiness (Coursework Sample)

Xiaomi Company Creditworthiness Assessment
Information about Xiaomi Company
Xiaomi Company is a manufacturing company based in China that was founded in 2010 as electronic. The company has since grown and developed leading to expanding its market outside China creating customer relationships. Xiaomi currently operates in Singapore, Japan, South Korea, Russia, and South Africa. It offers services and products such as smartphones which it developed one year after being founded in 2011. The company produces laptops competing with other big electronic companies in the industry and they also make mobile apps. Xiaomi is an electronic company that ventures in producing innovations in science and technology and providing a better experience for its customers.
The Xiaomi Company based in China is listed in the Honk Kong stock exchange market where its business transactions are carried out. Total revenue recorded was about 8B which was an increase of 17.7% in the stock exchange market. The net profit of the company was around 11.5B that was a 34.8% increase in the stock market. This makes the Xiaomi company the leading in electronic products due to the high sales being recorded by the company. The company was selling at about 25.70 HKD in the Hong Kong stock market. It recorded a P/E ratio of about 26.18 and had a market capitalization of about 647.75B. Xiaomi company has had an average opening stock of 26.10, the highest being 26.50 and the lowest being 25.35. The Xiaomi Company since founded has had great achievements which can be seen and demonstrated by the Hong Kong stock exchange market.
Business growth is essential through increasing the marincreasing3ket share of the company by having loyal customers who are satisfied by the products being offered. In 2012 the electronic company revenue surpassed RMB 10B and two years later it surpassed USD 10M being the fastest company to do so. In 2017 the company had over RMB 100B and in 2019 it surpassed RMB 200B being the youngest company to be shortlisted in the Fortune Global 500 list. The electronic company had a bond market of over about 1B yuan, this is the highest bond market recorded by a company with less than 10 years in the industry. Xiaomi had recorded having 47.4B yuan in cash and a short-term deposit of about 31.6B yuan.
Business is done by the electronic company involves three major products that include, smartphones, IoT and lifestyle products, and Internet services. These three services and products recorded total revenue of 205 000 RMB B with smartphones having 59.3%, IoT and lifestyles had 30.2%, Internet services 9.6%, and other products having 0.9%. Xiaomi electronic company has invested in more than 290 companies having a book value of about 30.0B. The company is currently expanding its business to the world, by exploring the 5G internet connection. Xiaomi as a way of growth is investing in artificial intelligence products and devices and creating innovations in internet technology.
The financial statement for Xiaomi Company.
Computation and analysis
Altman Z Score analysis was conducted for the Xiaomi Company to predict its bankruptcy and decide if it is liable for the US $1 M loan for two years.
Altman Z Score formula = [working capital / total assets * 1.2] + [retained earnings / total assets * 1.4] + [EBIT / total assets * 3.3] + [sales / total assets * 0.99] + [marketing value for equity /total liabilities * 1.2]
[working capital / total assets * 1.2] = [160000 / 180000 * 1.2] = 1.06
[retained earnings / total assets * 1.4] = [90000 / 180000 * 1.4] = 0.7
[EBIT / total assets * 3.3] = [75000 / 180000 * 3.3] = 1.375
[sales / total assets * 0.99] = [210000 / 180000 * 0.99] = 1.155
[marketing value for equity /total liabilities * 1.2] = [18400 / 105065 *0.6] = 0.105
Altman Z score = 4.395
Using the score sheet Xiaomi electronic company as a perfect balance sheet that can enable it to secure the loan it wanted. The company's dealings in smartphones that have high market value will help it secure a loan easily due to the high sales the company is recording. Xiaomi company has a good working capital, retained earnings, and fewer liabilities that the company to have a Z score above 3.0 making it have no risk of being bankrupt.
Analyzing the Xiaomi electronic company using the five Cs to measure its creditworthiness, how will it be able to repay the loans when granted the money. This will also help as it will give a clear insight into the potential worthiness of Xiaomi electronic company as a borrower. The bank will be able to try and figure out the likely hood of the company becoming a defaulter and easily calculate the intended risk of a financial loss to the lender.
Character defines how good the company can be trusted when issued the loan it wants for the specified period. The character of a company can be known by studying the credit history of the company with different lenders and banks. Xiaomi has recorded a perfect credit history which can be shown by different banks it has borrowed money from. The company has no record of defaulting and the loan granted to them and has used the loans for the right purpose. Xiaomi has the right reputation needed to secure the loan and a good track record indicating they can be granted the loan.
The capacity of Xiaomi electronic company is high due to the high selling rates and income the record annually through their business activities. Xiaomi makes annual revenues of about 200 000 RMB B that indicates they can repay the loan if they are granted the money. The capacity of Xiaomi company will help the lender to measure the ability of the company to pay the loan by measuring income against recurring debts. Xiaomi company has a lower debt to income ratio that makes it favorable for the loan for the two years. The electronic company being conceded among the best electronic company in the market makes it have the right capacity to secure the loan easily has it has shown them the potential of paying back the money.
Capital owned by Xiaomi electronic company and stated by the Hong Kong stock exchange market is of high value or worth. Xiaomi company has invested in more than 290 companies having different shares indicating they have the right amount of capital needed for them to be able to be granted a loan. The company has inves