KPMG case Essay Example | Topics and Well Written Essays - 750 words

KPMG case - Essay Example Company had initial public offering in 2004 with a par value of $0.50 Price per share as of year end of 2007 plunged to $12.00 from $15.75 of 1st quarter quote with an EPS of $0.69. The company had approximately 9,500 holders as of February 29, 2008. This part will show trends of profitability, liquidity and solvency using ratios for the three year period. The trend analysis will present any significant fluctuation or movement in the three year operations that will have an impact in its financial operations. It will also be compared to industry sector using industry index as benchmark. (Reuters) Analysis will be presented in 3 parts, profitability, liquidity and solvency ratios. (See Annexes 1 and 2) Definition of financial terms provided by Investopedia. The comparison of the financial performance of the company against the industry (Reuters) where TMH belong and trend analysis of its own performance provided an insight on the strengths and weaknesses of the company and is presented below. Cash flows of the company consist of retained earnings and proceeds from loan transactions. The cash flows are used to pay debts, interests, taxes and other operating expenses. Retained earnings are not sufficient to fund payments for interests, taxes and long term debts. Accounts receivables and inventory of homes locks up cash for operations and affects cash flows. A slow turn over of accounts receivables and inventories reflects problems in the efficiency of management. The usual 120 to 180 loan repayments should be looked into as large amount of cash is tied up into this. 3.2. Complexity of underlying transactions. The sale of mortgage manufactured home contracts to unrelated financial institutions involves complex transaction particularly to default payments of mortgage borrowers. Recent economic crisis saw foreclosures of mortgage properties in financial institutions, and these losses could be passed on to TMH in cases of default. 3.3. Extent to