FINANCIAL ANALYSIS

UNIVERS ITY

Financial Analysis

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Contents
Introduction ..................................................................................................................................... 3
Environmental Scanning ................................................................................................................. 3
Financial Analysis with Ratios: ...................................................................................................... 5
Gross Profit Margin: ................................................................................................................... 5
Return on total assets: ................................................................................................................. 6
Return on Equity: ........................................................................................................................ 6
Earnings per Share: ..................................................................................................................... 7
Current Ratio:.............................................................................................................................. 8
Debt to Asset Ratio: .................................................................................................................... 8
Inventory Turnover Ratio: .......................................................................................................... 8
Price Earnings Ratio: .................................................................................................................. 9
2013 Calculations ....................................................................................................................... 9
Free cash Flow: ............................................................................................................................. 10
Cost of Capital: ............................................................................................................................. 11
Economic Value Added: ............................................................................................................... 12
Conclusion .................................................................................................................................... 13
References ......................................................................................Error! Bookmark not defined.

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Introduction

InvoCare provides highest value and service quality to families in coping up with the

loss. It is important for the organization to provide simpler options to families in experiencing

loss. According to a research, one needs someone to take good care and to assist in difficult

times. InvoCare assists or help the people in making plans for dealing with loss. We have well

trained caretakers, who seek guidance to show care and they also follow clients lead. They also

arrange your events and provide clients with options in implementinn plans and arranging events

as well. InvoCare assist their client with innoovatiovative techniques to solve the issues or

handling of a given task (Invocare.com.au, 2015).

Environmental Scanning

The elements identified by PESTEL framework shows a very unpredictable and complex

environment, which are hard to anticipate and predict. The main perspective determines the key

variables affecting the achievement of strategies and subsequent success. The term environmental

scanning thus determines the approach to identify the variables including the social, economical,

political, technical and ecological events that has the probability to become the driving force in

future.

They have implemented diverse ideas and strategies that are perfect to run effective

business operations. The approach through, which they advertise products and subsequent

information to clients, are remarkable for executing a successful marketing strategy. Some

particular approaches that InvoCare has adoptedto market its items incorporate the following

attributes: maintain a competitive and reasonable cost focused on the demographic region they are

offering to, while offering several methods to orderitems. For instance, an individual can attain

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their services through both Internet and phone. Individuals can additionally order distinctive items

(Clark & Kent, 2013).

A detailed analysis on InvoCare Corporation sheds light on three essential risk factors. The

primary factor includes the impact of the organization’s huge workforce. Thus, effective

communication is vital whereas the circulation of communication will generate probable issues

with respect to more than 58,000 workers. The hugecollection of employees and workforce may

also generate a sense of inequalities between representatives. Moreover, InvoCare must have the

capacity to backing the development of the organization's work drive through effective and

efficient method for communication (Invocare.com.au, 2015). With the rapid growth in InvoCare,

supporting a large number of workers along with the perspective of consistent changes in top-

administration posts can be perilous. The organization is constantly creating new plans to

accumulate new and creative strategies and alternate points of view by evolving

executives;however, representatives may not generally comprehend the main concept behind this

strategy that subsequently generates ineffective and inefficient workforce.

The third risk factor observed while investigating the InvoCare Corporation is the

company's high overhead costs. The research endeavor notes that, "Substantial overhead expenses

are generally due to impacts of an expansive work-power and countless stakes" ("The InvoCare

Company,"1996). As InvoCare items services and products are, spreading worldwide it is

necessary to maintain and administer large workforce and respective communication

(Invocare.com.au, 2015).

The following are the few attributes that are considered as risk factors for the company:

 Increased rate of operating cost

 Continuous change in top management

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 The protest from religious groups against the publication of material, which is considered

hostile by them

 Poor management strategies

 High-risk involvement in investments

 InvoCare is in need to generate innovative ideas to attract customers.

Financial Analysis with Ratios

In order to determine the InvoCare’s financial strength and subsequent weaknesses we use

financial ratios. The tools determine financial strength and weaknesses to assist the stockholders,

managers and the attributes involved through interested parties. The company leaders get

assistance in order to determine areas that need additional attention. Moreover, the financial ratios

indicate company’s current and future probable plans whereas the ratios and its associated tools

also identify past and current trends. However, a company than requires a skilled person to

interpret the ratios for a accurate financial analysis. (Annual Report InvoCare International, 2012)

Gross Profit Margin

Kent (2013) depicts the strategy for determining gross profit margin. Initially, one subtracts

revenues-minus cost of products sold, and afterward separates by incomes. The organization is

more profitable when the gross profit margin is increased.

In the previous five years, the gross profit margin of InvoCare Company has changed. For instance,

the gross profit margin on June 30, 2008, was 21.88%. On December 31, 2012, its gross profit

margin was 18.45%, indicating a decline of 3.43%. In the previous five years, the minimalgross

profit margin for InvoCare was 12.88%, on December 31, 2008. The low of December 31, 2008,

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came just six months after a June 2008 high of 21.88%. The InvoCare Company's most astounding

gross profit margin in the previous five years was June 2012 with a greatest of 26.70% (Y-Charts,

2013).

Return on total assets

Return on total assets (ROA) identifies the profitability of an organization related to its

aggregate assets. One computes productivity proportion by separating net wage by aggregate

assets. The ROA shows to some degree how effective administration is in utilizing assets to

produce wage. At the point when making correlations among organizations with ROA, one ought

to look at comparable organizations because the ROA can change broadly among distinctive

organizations. The assets of an organization incorporate both equity and debt related to

organization's operation. Therefore, administration's and managements role is to adopt a plan that

can convert organization’s assets into profit.

In 2010, the InvoCare Company's ROA was 5.7%, in 2011, 6.66%, and in 2012, its ROA

rose to 7.5%. According to the data, in 2010, the ROA for comparative businesses was 7.12%, in

2011, the ROA for comparable commercial ventures was 7.93%, and in 2012, comparative

commercial ventures reported a ROA of 7.67%. The ROA rates demonstrate that InvoCare

Company's ROA enhanced from 2010 to 2011 and from 2011 to 2012.

Return on Equity

The Return on Equity (ROE) gives a general evidence of an organization's proficiency. At

the end of the day, the ROE determines the total benefit that is generated given the assets related

stockholders.

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In the course of recent years, the figures for the InvoCare Company uncover the maximum

ROE was 14.54% in June 2008, and the minimum ROE was in December 2009. The organization's

ROE was average of 11.83% from 2008 through 2009. On December 31, 2012, the OA for the

InvoCare Company yielded 13.54%, a ROE rate that increased from past years. The organization

positions in the 64th percentile among comparative media organizations and spots at number 15

of 42 among competitive market.

Earnings per Share

Earnings per Share (EPS) are vital for an organization as it indicates the overall financial

strength and weakness. It is the most essential attribute for deciding the value for cost per stock.

According to the analysts, the EPS is the main attribute that is used to compute the cost to-profit

and price to earnings. In order to determine the (EPS), one ought to first subtract the profits on

favored stock from the measure of the net salary and afterward separate that distinction by the

amount of extraordinary shares.

The InvoCare Company's EPS has been developing in the course of recent years at a yearly

rate of 10%. This development is considerably more momentous due to the financial crisis. With

the rapid EPS development, experts indicate that InvoCare will develop its EPS by 15% a year

amid the following five years. The value for every offer of InvoCare stock in April 2013 shows

that this projection may well be a legitimate one. InvoCare shares exchanged at $42 an offer and

a P/E of 16 in April 2013, assumes that adjust well to that sort future development. Along these

lines, it is conceivable that InvoCare shares could yield a yearly return of 155 through the following

five years.

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Current Ratio

The current ratio determines the organization’s financial stability. The current ratio is

important in terms of the identification of the organization’s short-term debt obligations that means

that if the current ratio is at the peak than the company is in possession of increased liquid assets

that relates to the current debt obligations.

According to the financial statement, that demonstrates a current ratio of 0.99 times. This

proportion is 57.69% lower than that of Services segment and 80.36% lower than that of

Entertainment-Diversified industry. The InvoCare has a current ratio of 0.99 times that shows the

financial success.

Debt to Asset Ratio

The Debt to Asset Ratio of InvoCare on December 31, 2012, was .4254, and on December

31, 2011, that figure was .3861. On December 31, 2010, InvoCare's Debt to Asset Ratio was

observed at .3375 (Y-Charts, 2013). Since InvoCare's Debt to Asset Ratio fell underneath a degree

of 1, which shows that organization is utilizing equity to fund the organization more than debt. It

additionally shows that InvoCare has a larger number of assets compared to debt. The previous

three years shows a slight pattern to a decreased debt to asset ratio that is profitable for the

investors.

Inventory Turnover Ratio

For the InvoCare Company, the stock turnover degree in December 2011 was 21.54,

however it expanded to 22.85 by December 31, 2012. The comparison with ITT Ratio of the

InvoCare Company to the "Inside Services division 10 different organizations shows a higher stock

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turnover ratio”. The InvoCare Company's inventory turnover ratio has demonstrated a slight

improvement in the ranking of the market. It has enhanced so far to 36 altogether positioning. The

past quarter, the InvoCare Company's aggregate positioning among comparative organizations in

inventory turnover ratio was at 49. In 2007, the InvoCare Company's inventory turnover ratio was

45.54, so the general facts from 2007 to 2012 show that InvoCare's inventory turnover ratio has

diminished respectably since 2007. On the other hand, the organization has demonstrated a slight

improvement from 2011 to 2012

Price Earnings Ratio

For April 2013, the InvoCare Company's Price Earnings Ratio (P/E degree) was at 20.33,

which was the S & P 500 intermittently balanced value income. On December 31, 2012, the Price

Earnings Ratio was 21.34, and on December 31, 2011, this figure was 20.52. In April 2011, the

InvoCare cyclically Price Earnings Ratio was 23.14. The value for every offer of InvoCare stock

has dropped somewhat from April 2011 until April 2013. The April 2013 figure speaks to a

decrease of 2.81 focuses since April 2011 (Y-Charts, April 2013).

2014 Calculations

Tax rate = 100 × Income taxes ÷ (Net income attributable to The InvoCare Company (InvoCare)

+ Income taxes)

= 100 × 2,984 ÷ (6,136 + 2,984) = 32.72%

Interest expense, after tax = Interest expense × (1 – Tax rate)

= 349 × (1 – 32.72%) = 235

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EBIT(1 – Tax Rate) = Net income attributable to The InvoCare Company (InvoCare) + Interest

expense, after tax

= 6,136 + 235 = 6,371

RR = [EBIT(1 – Tax Rate) – Interest expense (after tax) and dividends] ÷ EBIT(1 – Tax Rate)

= [6,371 – 1,559] ÷ 6,371 = 0.76

ROIC = 100 × EBIT(1 – Tax Rate) ÷ Total capital

= 100 × 6,371 ÷ 59,991 = 10.62%

g= RR × ROIC

= 0.77 × 9.69% = 7.42%

Free cash Flow

InvoCare share price is worth $86.85. InvoCare Cash Flow for every Share for trailing

twelve months (TTM) finished in Jun. 2014 was $3.48. Henceforth, InvoCare Co's Price-to-Cash-

Flow Ratio throughout today is 24.96.Amid the previous 13 years, InvoCare Co's most elevated

Price-to-Free-Cash-Flow Ratio was 49.71. The least was 9.58. Also the average was 17.58.

InvoCare Cash Flow for every Share for the three months finished in Jun. 2014 was $1.17.

Its Free Cash Flow for every Share for trailing twelve months (TTM) finished in Jun. 2014 was

$3.48. Amid the previous 12 months, the normal Free Cash Flow for every Growth Rate Of Share

of InvoCare Co was 14.90% for every year. Amid the previous 3 years, the normal Free Cash Flow

for Growth Rate Of Share was 17.00% for every year. Amid the previous 5 years, the normal Free

Cash Flow for every Growth Rate of Share was 15.80% for every year. Amid the previous 10

years, the normal Free Cash Flow for Growth Rate Of Share was 7.80% for every year. Amid the

previous 13 years, InvoCare Co's most elevated 3-Year normal Free Cash Flow for every Growth

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Rate Of Share was 38.60% for every year. The least was -31.50% for every year. Also the average

was 7.60% for every year.

Price-to-Free-Cash-Flow Ratio = Shared Price / Free Cash Flow per Share

(TTM)

=86.85 / 3.48

=24.96

InvoCare Co's Share Price of today is $86.85.

InvoCare Co's Free Cash Flow per Share of trailing twelve months (TTM) that has ended in month

of June in 2014 was approximately 0.97 (Sep. 2013 ) + 0.31 (Dec. 2013 ) + 1.03 (Mar. 2014 ) +

1.17 (Jun. 2014 ) = $3.48.

Price-to-Free-Cash-Flow Ratio = Market Cap / Free Cash Flow

Cost of Capital

Value1 Weight Required rate of return2 Calculation

Equity (fair value) 149,082 0.91 15.44%

Borrowings and 14,818 0.09 1.71% = 2.68% × (1 – 36.23%)

Capital lease obligations (fair value)

Equity (fair value) = No. shares of common stock outstanding × Current share price

= 1,716,544,546 × $86.85 = $149,081,893,820.10

Borrowings and capital lease obligations (fair value).

Required rate of return on equity is estimated by using CAPM

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Required rate of return on debt

Required rate of return on debt is after tax.

Estimated (average) effective tax rate

= (32.72% + 35.20% + 36.68% + 36.86% + 38.26% + 37.65%) ÷ 6 = 36.23%

WACC = 14.20%

Economic Value Added

Weighted Cost of Total Cost of Capital $

Company Total Capital $ Millions Equals
Capital Multiplied by: Millions

InvoCare 12.3% $9,283 $1,141

InvoCare Numbers Represent Fiscal Year 1995 / Source: HVS Executive Search

After Tax Net Operating Profit $ Total Cost of Capital $

Millions Millions
Company EVA $ Millions

Minus Equals

InvoCare $1,660 $1,141 $519

To compute InvoCare EVA, first focus is to find out the cost of capital for both equirt and debt.

The cost of debt is basically the premium rate the banks and/or bondholders charge. Though equity

accompanies a price tag , there is no line item for equity on the P&L articulation however it is not

free. The InvoCare's aggregate or total cost of capital is $1,141 million. At the point when

contrasted with InvoCare's after-tax net operating profit of $1,660 million, an EVA of $519 million

is the result. In the EVA is positive similar to InvoCarethan the real wealth is produces whereas if

the EVA is negative than the shareholders are burned

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Conclusion

The InvoCare Company is a diversified media company surpassing its competitors in most

of its operations. It captures most of the entertainment spectrum around its industry.The Cable and

Media Network Business line accounts for about 27% of the company total revenues and 48.5%

of the total operating income from cable networks. If long-term contracts are possible, it would

make the company’s cash flow much more stable that from other of the company’s business

segments. Thanks to the recent launch and growth of the company’s game development, new

growth avenues are expected. Reviewing the overall balance sheet, I can say that it is generally

strong, having a solid cash balance. Successful new franchises may be developed with the

acquisition of small firms; which bring along new characters and ideas.

Even though, fluctuations in net revenues and incomes, these are very small. So that not

great changes were present during the last three years. Revenues have increased, but net incomes

have decreased in the past few years. But as I said, it is nothing really huge to worry about. These

fluctuations might be due to the increases in assets and liabilities in the 2010. The new mergers

and acquisitions that were present trough those years influence the increases and decreases in

liabilities and assets. To merge or acquire a new company, expenses are involved and loans might

be taken to pay for them. InvoCare Company is also characterized for having a strong management

team, which have had the ability to develop entertainment franchises for the domestic and

international distribution. The company is being undertaken different approaches into growth

initiatives; as its increasing presence on the Internet, and its international expansion of cable

networks and theme parks. Moreover, the Company also features ESPN network, which have the

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dominant position in sports. And will continue to be for the prospect years; it is a key revenue

driver in the InvoCare’ cable segment and for the Company in general.

Bibliography
Invocare.com.au, (2015). Home. [online] Available at: http://www.invocare.com.au/
[Accessed21 Oct. 2015].
Invocare.com.au, (2015). Annual Reports. [online] Available at:
http://www.invocare.com.au/investor-relations/annual-reports [Accessed 21 Oct. 2015].

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