Astral Records LTD North America Some Financial Concerns Case Solution

1. Please assess the current financial health and recent financial performance of Astral Records. What strengths or weaknesses would you highlight to Sarah Conner?

To say that Astral Records North America was in a particularly critical financial situation at the time that Sarah began working for the company would be an understatement. A decrease in the overall profitability of the company was seen between the years 1990 and 1993, as established by the study of profitability data. This reduction occurred between the years 1990 and 1993. Following a peak of 23.4% in the year 1990, the profit operating ratio of the company saw a decline to 17.1% in the year 1993. This figure represents a significant decrease. This fall had place after the ratio had already reached its maximum. During the period of time spanning from 1990 to 1993, the firm had a decrease in its average tax ratio, which is further information that should be taken into consideration. In the year 1990, the firm was able to generate a return on sales that was seven point nine percent. Over the course of the year 1993, the proportion had already decreased to 5.5% of the total workforce. By the time the year 1990 arrived, the organization had achieved a Return on Assets ratio of 4.4%, which was considered to be fairly significant. An overall decrease of 3.3% was the result of all that took place. Taking into consideration the debt to equity ratio, it would seem that the company has been making a concerted effort to increase the total amount of credit obligations that it has. Furthermore, the information that was provided demonstrates that the ratio of the company's debt to its assets has increased over the course of the last several years. At first look, it would seem that the bulk of the company's assets are being invested via the use of debt. There will not be a significant amount of difficulty for the firm in terms of making the payment of the interest that has been collected on the loans that are still due from time to time. It is possible to demonstrate this by contrasting the earnings before interest and taxes that were earned within the same time period relative to one another. The information that Astral Northern America has gathered on the use of its assets is evidence that the company is able to effectively generate revenue from the assets that it has.

2. Please forecast the financial statements of Astral for 1994 and 1995. What will be the external financial requirements of the firm in those years? In your opinion, can the company repay its loan within a reasonable period?

An increase in Astral's yearly net revenues occurred prior to Sarah Corner being named CEO of the company. Before she took up the post, this was the situation.