Managerial Finance Company Report 2022

MBA 542: Managerial Finance
Company Report
STUDENT NAME: .
Please note:
1. Please submit (1) this report, and (2) Excel file for ratio calculation through Moodle.
2. Your answers should be typed below each question (12 Times New Roman, black fond color).
Please do not change the format of the document. Content of your answers and references should
follow APA style with single space.
3. Make sure you read each question and its specific requirement carefully to meet all requirements.
4. Your submission will be checked using TurnItIn where originality will be checked against other
students’ submission and anything that’s available on the Internet.
5. Please note that whenever the questions mention “your company”, it refers to the company you
choose to analyze.
6. Basic Definitions and Formulas not required
Your Report consists of three parts:
Part 1: Background (Analyze company data, environment, social
aspect, economical, and its competitors, etc.)
Part 2: Financial Analysis including your spreadsheet ratios
(Ratios in an excel sheet and then use them in the document and
analyze it with competitors and then industry on a whole)
Part 3: Managerial Actions (Analyze as a CFO to increase the
value of the company)
Part 1: Background of your company (10 points each)
1. Company
1.1 Brief business description:
 What does your company do? Which industry/industries?
 What is the company’s business model?
 What are the main activities through which your company generates revenue?
 You should get the company’s most recent annual report and provide a pie chart on percentage of
revenue coming from various business units/products, and a similar pie chart on various
geographic areas where revenue is generated.
Note: you should be able to find all the information above on the company’s most recent annual report.
Type your answers starting from here:
The company which is considered for this assessment is Vestas Wind system on the basis of
which the analysis would be conducted. The company is a Denmark-based energy company which is
considered is engaged in the operations of manufacturing and distributing wind turbines which are used
for generation of power. The company was founded in 1945 and has its operations in several countries
such as Denmark, United States, Germany, Australia and several other countries. As per the recent
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estimates, the company is considered to be the largest wind turbine company in the world. The company
operates in two areas which is project and service (www.vestas.com, 2019). The company belongs to
power industry and basically engaged in wind-based power generation. The company is a growing
company and the company has reported revenues of (Euro) EUR10,134 million for the fiscal year ended
December 2018 which is an increase of 1.8% over FY2017.
The business model of Vestas Wind System aims at sustainable growth of the energy sector and
utilize the renewable sources for the purpose of generation of energy. In addition to this, the business
aims to provide efficient source of energy for the future generation. The business model of Vestas Wind
system of providing cheap renewable energy sources so that in the energy sector, sustainable
development can be promoted. The management of Vestas Wind System is dedicated in generation of
energy with the use of renewable sources of energy and therefore, it has become the largest company in
providing wind energy.
The business of Vestas Wind System provides wind energy solutions to the country in which the
business is operating. The business of Vestas Wind System effectively classifies the operations of the
business into two main business segments which are power solutions and services. The services
segments mainly comprise of sale of service contracts, spare parts and related services. The company
provides wide range of services to across equipment manufacturer platforms. The company is able to
generate revenue of E 1,522 million in 2017 which shows a significant increase in the revenue of the
business which is almost around 16.3%. On the other hand, the power solution segment mainly involves
sale of wind power plants, wind turbines and other related services. The company has been able to
record a revenue of E8,431 million which is significant, however, there has been a decline in the
percentage of sales which is achieved by the business (www.vestas.com, 2019). These activities help the
business to generate maximum revenue from operations of the business. In addition to this, the business
has also introduced certain products which are quite popular in the market and some of the products
which is offered by the business includes SiteHunt, SiteDesign, electrical pre-design, powerplant
controller and PowerPlus. The business would be focusing on enhancing the revenue of the business by
focusing on innovation and development of the business. Some of the services which is offered by the
business are installation and operations. Offshore wind project planning, service and maintenance and
several other services. On the basis of different operational segments of a business, the management is
able to generate appropriate revenue from operations.
The annual report of the business for the year 2018 shows that the management relies more on
power solution option for the purpose of generation of revenue while a minor portion is generated from
the services which is provided by a business (www.vestas.com, 2019). The business mainly earns
revenue from two main segments which are business power solutions and services which is provided by
the business. An effective representation of the revenue which is generated by the business from the
segments in the form of percentage is shown below:
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Power Solutions
85%
Service
15%
Vesta Wind Systems
The above chart effectively shows the percentage of revenue which is generated by a business
from operational process of the business. The management of the company is able to generate 85% of
the revenue from power solution services and only 15% of the total revenue is generated by a business
from the services which is provided by the business. The vestas wind systems have an effective
operational system which allows the business to effectively generate revenue from operations of a
business. The revenue earned by the business also contributes to enhancing the profits of the business.
43%
44%
14%
Region Wise Revenue Generation
Europe, Middle East, and
Africa
Americas
Asia Pacific
The above chart effectively shows region wise revenue generation for the business for Vestas Wind
System. The above figure shows that the maximum revenue is generated from America which amounts
to almost 45% of the total revenue which is generated by the business. In addition to this, the business
has also generated 42% revenue from Europe and Middle East nations. This shows that the overall
revenue which is generated by the business is mostly from America and Europe and Middle East
nations. The analysis also shows that the business is effectively operating and developing in the
countries which are shown in the chart above.
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1.2 Life-cycle analysis: where is your company and its product in the life cycle? Explain your answers
in detail.
Type your answers starting from here:
The analysis relating to lifecycle of a product is considered to be important as the same
effectively positions the business in a market and also shows how much developed is a
product in the market. The analysis of the business of Vestas Wind Power System
effectively shows that the business is well placed in the market and some of the products
which is offered by the business is quite popular in the market. The business is placed in
the high growth stage as the business is still expanding the operations of the business
(Zhang et al., 2017). The products of the business are quite popular in the market and
therefore, it would help the business to enhance the sales of the business. This is the stage
in which the business would looking to expand the operations of the business and make
use of the suitable position in the market for enhancing the market share of the business.
It is at this stage that the business undergoes rapid development and further expand the
revenue of the business (Soto-Acosta, Placer-Maruri & Perez-Gonzalez, 2016). The
stages of life cycle of the business show that the business would be able to achieve
maturity with an increase in the market share of the business. Therefore, in order to move
forward to the next stage in the lifecycle of the business, the management of Vestas Wind
System needs to focus on growth and development of the activities of the business. The
analysis for the company shows that the business would be aiming to enhance the
operations of the business. The analysis of the lifecycle of the business would be
providing valuable insights to the business to take appropriate decisions regarding the
operational process of the business and also regarding how to enhance the revenue of the
business.
2. PEST Analysis (A look at the overall environment)
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 Please note that you should discuss all factors that are relevant to your company and discuss how
each factor and its movement affect the company. You should also predict the future trend of the
factors in order to identify opportunities and threats.
 Since PEST are the factors at geographic level, you should focus on the key markets (or
countries) where your company operates, esp. if your company has a significant global operation.
2.1 Discuss all relevant political factors that may affect your company. Political factors include geo-
political conditions, tax policy, environmental policy, trade restrictions, labor law, health &
infrastructure policy, intellectual property regulation, privacy policy, consumer protection laws, and
political stability.
Type your answers starting from here:
The political factors which can have an impact on the decisions making process of a business and also
affect the revenue generation of the business are discussed below in details:
 Geo-Political Conditions: The political factors of a business include the political relation which
exist between the countries in which the business is operating. The trade relations between two
countries also affects the operations of the business (Gupta, 2013). The business operates in
America and Middle East and African nations. However, it is to be noted that the regulations
which are applicable on such countries and political environment need to be considered before
taking appropriate decision regarding the activities of the business.
 Tax Policies: The tax policies which are applicable on a business can affect the operations of the
business and thereby must be considered in taking important decisions of a business. The taxes
which a business needs to pay affects the profitability of the business and therefore must be
considered. The company needs to pay corporate taxes at the rate of 30% as per the regulations
which are set by the ATO.
 Environmental Policy: Every business needs to fulfill its own CSR policies and the same
includes environment protection regulations. This needs to be followed by the business and the
management needs to ensure that no policy of the business adversely impacts the surrounding
environment. Vestas made a joint venture for offshore wind turbines with Mitsubishi Heavy
Industries, including the 7-9 MW Vestas V164, the most powerful turbine on Earth. This shows
the commitment of the business for maintain environment balance in energy conservation
 Trade Restriction: The trade restriction in the country also affects the operations of the business.
The business needs to acquire trade license for other countries in order to ensure there is no trade
restriction on the business. These factors affect the smooth operations of the business and
therefore proper consideration should be placed on the same while taking major decisions
regarding the business.
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 Labor law, health & infrastructure policy: The labor law and health infrastructure policies are
important part of the code of conduct of the business. These policies need to be followed by the
management of the company for the welfare of the employee and also ensure that the employees
are satisfied with the operations of the business.
 Intellectual property regulation: The business of Vestas Wind System is engaged in the business
of using wind turbines and generation of power and therefore, it is imperative the business has its
own intellectual property which needs to be protected (Sammut‐Bonnici & Galea, 2015). In a
similar manner, the business also needs to adhere to regulations which is set for intellectual
properties. Furthermore, the business also needs to ensure that no such property is damaged or
copied from other businesses.
 Consumer protection laws: The business must also have a knowledge regarding the customer
protection and ensure that no activities is undertaken by the business which can affect the rights
of a consumer. In violation of any such rights heavy penalty is applicable on the business. The
consumer laws are universally applicable on all businesses and therefore decisions relating to the
same needs to be taken appropriately.
 Political Stability: The political environment of the country in which the business is operating is
also a vital factor which affects the revenue generation of a business. If a country is facing from
political instability than the business would not be able to generate appropriate amount of
revenues and it would also be difficult for such a business to survive in such an environment.
2.2 Discuss all relevant economic factors that may affect your company. You should discuss at least
four economic factors (1) economic growth, (2) interest rates, (3) exchange rates, and (4) inflation
rates. Note that you should put more effort if your company has a significant global operation.
Type your answers starting from here:
The economic factors which can have an impact on the operations of Vestas Wind System are provided
below in details:
 Economic Growth: Any business which is trying to enhance the revenue of the business would
be focusing on achieving economic growth from the operations of the business. The management
of Vestas Wind system is also looking for more revenue and the same can be achieved by
economic growth (Gerwick & Sparks, 2014). The business of Vestas Wind System would be
focusing on achieving economic growth for achieving more profits in the future.
 Interest Rate: The interest rate affects the business if the business utilizes debt capital in the
capital structure of the business. The increase in interest rate affects the operational costs of the
business and thereby can affect the profits which is generated by the business.
 Exchange Rate: The business of Vestas Wind system has operations different countries and
therefore fluctuations in exchange rates of currency also can affect the operations of a business
Any major fluctuation in the exchange rate can have an impact on the profits which is generated
by the business and also affect the operations of the business.
 Inflation rates: One of the major economic factors which can have an impact on the operations
of the business is the inflationary pressure in the economy. It can affect the costs of the business
as high inflation can increase the costs of inputs and thereby affecting the profits and the prices
which is charged by the business (Cadle, Paul & Turner, 2014). Therefore, it can be said that
inflationary pressure in an economy plays a vital role in the decisions which is taken by the
business.
2.3 Discuss all relevant social factors that may affect your company. Social factors include demographic
change and the related consumer habit, aging society & related problem, lifestyle trends, health
consciousness, career attitudes, and emphasis on safety.
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Type your answers starting from here:
The social factors which can have an impact on the operations of a business are listed below in details
and how the same can have an impact on the operations of the business:
 Demographic Change: The change in the demographic structure of a business also can affect the
operations of a business and the same needs to considered while taking major decisions for the
business. Any changes in the habits of the customers or changes in the utilization of energy
source can impact the operations of the business (Rakesh, 2014). The business of Vestas Wind
system produces renewable energy and any change in the preference of the customers can impact
the operations of the business. The demographic change can affect the impact the revenue and
also the presence of the business in the market.
 Aging society & related problem: The ageing and related problems does not impact the
operations of the business more. The most basic problem which the business can face is
transitioning the habits of the people to use renewable sources of energy instead of non-
renewable sources. The business needs to promote renewable sources and also sustainability
practices in the business. This can promote the revenue as well as sustainability practices in the
economy.
 Lifestyle trends: The lifestyle followed by the residents also place a vital role in the decisions
which is taken by the business relating to operations of the business. The lifestyles trends of a
business depend on the general use of energy by people and what source is used by the business.
The lifestyle of people also has an important role in the growth of the operations of Vestas Wind
Systems.
 Safety: The management of the company also needs to consider on factors such as safety of the
employees as well as the customers. The equipment and wind turbines which is used by a
business is an important factor which can have an impact on the revenue generation of the
business (Igliński et al., 2016). Therefore, it can be said that the safety of the employees and
customers are important factors which affects the decisions of the business.
2.4 Discuss all relevant technological factors that may affect your company. Technological factors
include technology advancement such as artificial intelligence (AI), machine learning (ML), financial
technology (FinTech), online retail, the Internet of Things (IoT), new manufacturing technology, and
etc..
Type your answers starting from here:
The technological factors which have an impact on the operations of the business and can led to the
development of the business:
 Artificial Intelligence: The development of technology in the market has reached new heights as
artificial intelligence has been introduced in the market which helps in controlling wind turbines
and also distribution of energy. The use of such technology can enhance the efficiency of the
business and increase the revenue which is generated by the business (Barbara et al., 2017). This
would also help the business to offer new and efficient wind turbines for generation of power.
 Manufacturing Technology: The manufacturing technology is also a vital part of the operations
of the business (Boons et al., 2013). The use of better technology can help the business to
develop a better model of wind turbine which would help the business to generate more energy.
Better technology would be beneficial for the business and this would ensure better energy
generation in the business.
 Access through Internet: The management of the company needs to develop such a technology
so that the government and other private institutions can utilize such an energy by the internet to
enhance the revenue and efficiency of the business (Yi, 2014). The revenue which is generated
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by the business would be enhanced significantly if such a process is followed by the
management of the company.
3. Industry analysis
3.1 Industry overview: focus on the main industry your company operates on:
 Discuss the current size of the industry and its future: whether there is growth or decline, is there
a ceiling on growth? Use numbers to support your argument. (I suggest that you do a Google
search, or look it up in your company’s annual report).
 Discuss your company’s market share in the industry.
Type your answers starting from here:
The application of renewable energy as a source of power is becoming more and more eminent as the
nations realize the threats of using non-renewable source of energy. The energy industry in Australia is
already enormous in size and with further growth in the population of the nation the same would be
increasing several folds. In such a market, the need for an alternative and cleaner source of energy is
required. The year 2018 has been one of the best years for clean energy development in Australia and
has witnessed significant growth in the generation of power. As per the cleanliness report in energy
sector, more than 2.3 GW of new renewable energy capacity entered the market in 2018 as 38 projects
were completed throughout the year (Engelken et al, 2016). This shows significant growth in the energy
sector in Australia and further it was estimated that Australia generated around 21% of the total power
needed from renewable sources of energy generation which speaks a great deal regarding the
government of Australia.
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The percentage of energy which is generated by Australia is clearly demonstrated in the above figure
and the same speaks lengths about the energy and power industry operating in Australia. The above
figure also shows that wind energy contributes around 33.7% to the total power which is generated by
the wind turbines. The business of Vestas Wind Systems contributes most to the generation of wind
energy in the economy and also in generation of power (Taran, Boer & Lindgren, 2015). The business
has generated 11.9 MW of power through wind energy and also started several projects which involved
installation of wind turbines. One of the largest and most successful project of the business was MHI
Vestas Offshore Wind which received 950 MW order in the UK. This shows the efficiency level of the
business in generation of energy. The company aims to become global leaders in generation of
sustainable energy and thereby also contribute to the revenue which is generated by the business
(Strupeit & Palm, 2016).
The market share of the business is also impressive as the business is considered to be a leading business
in generation of power and utilization of wind energy. In terms of market share, the business is
considered to be leaders in generation of power globally (Masini & Menichetti, 2013). The same can be
shown in the chart which is provided below:
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The company has produced more wind turbines in 2018 and this shows the emphasis of the company in
development of wind energy as a source of power. It is estimated that the business would be able to
achieve more growth in the years to come and thereby increase their generation of power in the country.
3.2 Competitive Strategy: Position your company in the matrix below. Briefly discuss your answer:
Type your answers starting from here:
As per the strategies which was devised in Porter’s Generic strategies, the business of Vestas Wind
Solutions can be placed in the product differentiation quarter. The business is known for its innovative
style for generation of power more efficiently. The company is trying to keep the prices of energy as low
as possible and also making the same available easily in the market. The renewable source of energy is
still at its infancy stage and therefore the same is not as used as non-renewable sources and therefore
differentiation strategy is followed by the business (Yildiz, 2014). The company also considers that the
costs of wind energy in future would fall significantly considering the growth level in technology. The
company also has operations in several other countries which makes the reach of the business significant
and also allows the business to access resources of different countries. Therefore, it can be said that the
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company is trying to differentiate the products which is offered by the business so that the business is
able to maintain and further built its dominance in the market.
3.3 Competition details: list the company’s top 2-3 main competitors. Comment on the company’s
competitive advantage, focus on what the company does better than its competitors and how long you
think the company will keep the competitive advantage (core competence). Or if the company is not
doing better than its competitors, discuss the situation and whether you see the potential for your
company to improve.
Type your answers starting from here:
The business of Vestas Wind Solutions also faces competition in the market of generation of wind
energy and some of the major competitors of Vestas Wind Solutions is Xinjiang Gold Wind Energy and
General electric. These companies are also global leaders in production of wind energy globally. The
Company of Vestas Wind Solutions effectively faces competitive pressures due to the number of
turbines which has been installed by the business and also due to the offshore projects which is
undertaken by the business. The business has an excellent distribution network of energy which makes
the distribution effective. The business is able to generate more MW of energy than its competitors and
thereby the business is able to generated more revenue in comparison to its competitors from primary
business activities. In addition to this, the company also follows an innovative model for generation and
execution of different projects. The business follows a differentiation strategy for getting a competitive
advantage over the competitors. However, the business derives the main advantage from the numerous
wind turbines which are already established by the business in different regions. In this manner, the
business is able to generate significant amount of energy from the market. The competitors are closely
follows the techniques of the business and therefore would eventually reach the position of Vestas Wind
Solutions for providing more competition. The business of Vestas Wind Solutions needs to improve the
cost structure which is followed for providing the energy to the public. The management of the company
needs to take steps to reduce the costs and therefore offer energy at a lower price so that the same is
affordable by all. Therefore, at current situation, the business of Vestas Wind Solutions is at a much
beneficial position in the market being the global leaders in supply of energy.
Part 2: Financial Analysis (10 points each)
Note
 First of all, get the financial statement of your company from the last 4 years, copy & paste balance
sheet and income statement to an excel sheet. Then do all your calculations on the excel sheet for the
past 3 years. Also find your company’s closest 2 competitors and download their last 4 years’
financial statement and calculate ratios for the last 3 years. This is to ensure that you track your
company throughout the years and also compare with competitors.
 You should calculate all the ratios based on our lecture slides. You should not look for other
formula from online sources.
 For stock price, just find the price at the financial statement report day. For instance, if the financial
statement report day is July 31, 2018, use the stock price (closing price) on July 31, 2018.
 For each ratio, you have to do the following:
1. List the ratio of your company for the three years, with your competitors’ 3 years, such as:
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Your company name Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Current Ratio 1.24 1.23 1.16 0.09 0.26 0.19 1.92 1.81 1.81
2. Describe what it measures and what it says about your company,
3. Explain any trends that you have noticed in your company’s financial ratios over the past 3
years,
4. Explain how well the company is doing with the ratios compared to industry averages,
5. Explain what the company needs to do if they are underperforming with a given ratio.
6. You should also discuss certain aspects of your company by considering several related ratios
together.
7. It should take approximately one or two paragraphs per ratio to cover these items.
8. You should calculate all the ratios based on my lecture, and you should not take the ratios
directly from any online sources.
1. Short-Term Solvency:
1.1 Current and quick ratios:
1) Current Ratio
2) Quick Ratio
Comment on the ratios above and discuss your company’s general ability to pay off its current liabilities.
Type your answers starting from here:
Current Ratios
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Current Ratio 1.24 1.23 1.16 0.09 0.26 0.19 1.92 1.81 1.81
The above table shows the estimates of current ratio which is considered to be one of the important part
of liquidity ratios. The current ratios show the ability of the business to meet the current obligations of
the business and also maintain the liquidity position of the business. The current ratio of the business
also shows the cash reserves which is maintained by the business for managing the operations of the
business (Palepu & Healy, 2013). The ratio estimate of Vestas Wind Systems shows that the liquidity
position of the business has declined which means that the management of the company needs to pay
special attention. The current ratio of Vestas Ltd is shown to be 1.16 in 2017 but the same was 1.25 in
2016 therefore a decline is apparent. The estimate of General electric is much better in comparison to
Vestas Wind Systems which shows that the business of General electric has a better current liquidity
position in comparison to other competitors. The company of general electric can pay off its current
liabilities better than its competitors.
The management of Vestas Wind Systems needs to maintain its liquidity position and ensure that the
cash inflows of the business is much more than the cash outflows of the business. The management of
Vestas Wind Systems also needs to control the expenses of the business so that the management is able
to maintain its cash reserve.
Quick Ratios
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Quick Ratio 0.76 0.67 0.58 0.95 0.93 0.77 1.56 1.44 1.41
The above table shows the quick ratio of all the three businesses which is engaged in the energy sector
and the ratio is closely related to liquidity position of the business. The calculation of such type of ratio
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considers more liquid assets in nature. The estimates also show the ability of the business to meet the
current obligations of the business which are most urgent. The estimate of quick ratio considers quick
assets and liabilities which is used by the business (Williams & Dobelman, 2017). There is a decline in
the estimates of quick ratio for the business of Vestas Wind Systems which needs to be improved by the
business so that the business has better cash position in the business. The estimate for quick ratio is
known to be the best for General electric in comparison to its competitors and also industry average
which shows that the general electric is much more superior in terms of liquidity position in the business
(Delen, Kuzey & Uyar, 2013). The estimate for General electric is shown to have declined to 1.41 in
2017 from 1.44 in 2016, but still the same is higher than both Vestas and Xinjiang estimates. The
management of Vestas Wind Systems needs to maintain its liquidity position and ensure that the cash
inflows of the business is much more than the cash outflows of the business.
1.2 Turnover ratios:
1) Inventory Turnover
2) Account Receivable Turnover (Assuming 100% Sales Are Credit Sale)
3) Account Payable Turnover
4) Cash Cycle
5) Defensive Interval Ratio (DIR)
Comment on the ratios above and discuss your company’s cash cycle in general and compare cash cycle
with its DIR.
Type your answers starting from here:
Inventory Turnover
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Inventory
Turnover
4.18 3.41 2.99 5.99 4.82 4.69 4.08 4.50 4.94
The above table shows the inventory turnover ratio of the business which forms part of the efficiency
ratio of the business. The inventory turnover ratio measures the ability of the business to maintain the
inventory of the business in an efficient manner. The analysis shows that the estimate is declining for
Vestas Wind Systems which shows a positive result and the same suggest that the management of the
company is efficiently managing the inventory of the business (Carraher & Van Auken, 2013. The
analysis of the estimate shows that Vestas Wind Systems has better performance in this area in
comparison to its competitors and therefore it can be said that the business of Vestas Wind Systems is
much more efficient. The management of the company needs to maintain the estimate in the long run so
that the business is able to generate more profits.
Account Receivable Turnover
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Account
Receivable
Turnover
11.17 9.12 9.60 1.88 1.70 1.93 3.17 3.34 3.92
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The account receivable ratios of a business represent the ability of the business to maintain the credit
sales of the business and also collect the dues from the debtors of the business. The estimate is closely
related to the cash flow of the business and therefore is considered to be an important estimate. The
account receivable estimate for Vestas Wind System is shown to be high but the management of the
company is trying to reduce the estimate further and bring about more efficiency in the operations of the
business. The estimate for Vestas Wind Systems is shown to be perfect which shows that the business
has an efficient debtor’s policy. The estimate for 2017 is shown to be 9.60 which is better than previous
years estimates and the same is also better than the competitors. The management of the company needs
to maintain the same and promote more efficiency of the business. The business of Vestas Wind
Systems is much more efficient than its competitors and also in comparison to industry average.
Account Payable Turnover
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Account
Payable
Turnover
1.24 0.91 0.64 2.77 2.49 2.36 8.50 7.99 7.52
The account payable ratio also forms part of the efficiency ratio of the business and the same represents
the ability of the business to manage the credit purchases. The estimate for account payable ratio for
Vestas Wind System is shown to be perfect which shows that the management of the company
efficiently manages the creditors of the business. The business also has a better account payable estimate
in comparison to its competitors which shows that the business has efficiency in managing the
operational process of the business. The management of Vestas Wind System needs to maintain such
efficiency in operations and should maintain the credit purchases of the business.
Cash Cycle
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Cash Cycle
-174.03 -255.26
-
408.10 123.39 143.74 112.55 161.77 144.76 118.53
The cash cycle of the business also represents the efficiency ratio of the business and the same needs to
be maintained by all businesses. The cash cycle of a business represents the cash flows in the business
and the same is also associated with liquidity of a business. The cash cycle of Vestas Wind System is
shown to be negative which is an adverse sign for the business and the management of the company
needs to take appropriate steps for ensuring that the cash flow is positive. The cash estimates for General
electric is shown to be better than its competitors. The management of the company needs to make
improvements in the same so that the estimates can be improved and the cash inflows of the business
can be improved.
Defensive Interval Ratio (DIR)
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Defensive 172.20 176.98 169.61 345.23 437.63 372.60 401.47 301.54 289.93
P a g e 14 | 28

Interval
Ratio (DIR)
Defensive Interval Ratio is a ratio that measures the number of days a company can operate without
having access to non-current assets. The ratio forms part of the efficiency ratio of the business and the
estimates shows that Vestas Wind System is not performing well in this area in comparison to its
competitors. The business of Xinjiang Gold wind has better estimate in comparison to its competitors
which is clearly shown from the estimates which is represented in the table above.
1.3 Cash Cycle: Discuss at least 5 ways through which your company could reduce its cash cycle.
Please note that we discussed a complete list of ways to reduce cash cycle in class, but not all items
would be applied to your company—choose the ones that will work for your company and discuss in
details how each way could be achieved.
Type your answers starting from here:
The five different ways which can be applied by the management of the company for reducing the cash
cycle of Vestas Wind system are listed below in details:
 Monitoring the cash inflows and Outflows: One of the major steps which can be taken by the
management of the company is to ensure that the cash inflows and cash outflows of the business
are monitored. The cash outflows need to be controlled and it also needs to be ensured that there
are no unnecessary cash outflows in the operations of the business. In addition to this, the
business also need to enhance the cash inflows of the business.
 Account Payables: The business can shorten the cash cycle by lengthening the account payable
period which help the business to maintain cash and it would also allow the business the
opportunity to maintain cash.
 Inventory management: The ratio analysis shows that the business of Vestas Wind system has
an efficient inventory management system but the same can be improved further. If the inventory
can be sold off quickly then the same would bring in more cash and improve the cash cycle of
the business.
 Account Receivable: Another method of improving the cash cycle is by ensuring that the
collection period of accounting receivable is short which would help the business to collect
appropriate cash and also ensure that proper balance is maintained at all times.
 Cash Management: The business needs to focus on increasing the sales of the business and also
reducing the expenses which would help the business to enhance the cash reserve of the business
and thereby manage the liquidity position of the business. The business of Vestas Wind system
needs to make improvements in the same in order to further improve the liquidity position of the
business.
1.4 Cash position: Discuss the company’s cash position in general –is the company holding too much,
right just, or not enough cash?). Your answer should be based on the ratios you calculated above and
consider the company’s balance sheet, income statement, cash flow statement, and its business strategy.
(Cash = cash & equivalent + ST investments)
Type your answers starting from here:
The cash position of the business is measured considering the cash ratio of the business and the same is
not shown to be appropriate as there is constant decline in the estimate in comparison to 2015. This
shows that the cash position of the business is declining and therefore the management of the company
need to take appropriate steps for preventing the situation. The cash position of the business is not strong
P a g e 15 | 28

and therefore the management of the company need to control the cash outflow and ensure that the cash
inflow is more in the business (Weil, Schipper & Francis, 2013). The strategy which is formulated by
the business should be aiming to ensure reduction of expenses and also enhancement of sales of services
and projects. This would increase the revenue of the business and improve the cash position of the
business.
2. Long-Term Debt Policy:
2.1 Ratio:
1) Debt to Asset Ratio
2) Equity Multiplier
3) Interest Coverage Ratio
Comment on the ratios above and discuss your company’s overall financial leverage.
Type your answers starting from here:
Please note that you need to first list the ratios for your company and competitors for the past 3 years,
see my example for 1 Short-Term Solvency
Debt to Asset Ratio
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Debt to
Asset Ratio
67.88% 71.37% 74.01% 69.00% 68.83% 69.32% 79.24% 84.83% 89.98%
The above table shows the estimate of debt to assets ratio of all three businesses. The estimate makes
comparison regarding the total debt which is held by the business in comparison to the assets of the
business. The ratio also reveals the percentage of assets which is funded by creditors of the business
rather than the investors. The debt percentage of the business of Vestas is shown to be 74.01% which is
a significant increase from previous year 71.35%. The debt to asset ratio of Vestas wind system is
shown to have increased which shows that the business relies more on debt to finance assets of the
business. However, it can be seen that the business of general electric relies heavily on debt to finance
the assets of the business. The management of Vestas wind system need to take steps for the purpose of
reducing the debt capital of the business and also ensuring that the business relies more on the use of
equity capital.
Equity Multiplier
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Equity
Multiplier
3.11 3.49 3.85 3.14 3.23 3.21 4.82 6.59 9.98
Th above estimate reveals the portion of the assets which is financed by using equity capital and not debt
capital. The equity multiplier shows how much funds of the investors are used for financing the assets of
the business. The estimates for Vestas Wind system is shown to be on the rise which is a positive sign
for the business. While in case of the competitors, the business of general electric has the best estimates
in comparison to the other two companies which are considered.
P a g e 16 | 28

2.2 Based on Higgins 5-Factor Model of Financing Decisions, analyze your company against each of
the 5 factors, and weigh the relative importance of these five factors. Should the company use high or
low level of debt? (read Chapter 6)
Type your answers starting from here:
Higgin’s five factor model is based on important financing decisions which is taken by a business and
importance of the five factors are also considered for analysis:
 Tax Benefits: One of the major advantage of using debts in the capital structure of a business is
to ensure that the business can have tax advantage. Interest amount from debts which is taken by
the business can be claimed as deduction which also means that more part of the profit would be
available for the investors and debt holders.
 Distress Costs: One of the features of taking debts in excessive amount results in excessive
burden over the business. This also means that mild problems which the business is facing can
turn big situation in such a case.
 Assets: Debts in some cases also have a charge over the assets of the business and therefore, it is
difficult to ascertain whether some portion would be left for shareholders in case of bankruptcy
in such a case.
 Indirect costs: The business would be required to cut down the costs so that there is not a major
impact on the profitability of the business. In addition to this, there should not be any loss of
opportunity which can affect the operations of the business.
 Conflicts of Interest: In case the business is suffering from significant losses, the business can
always opt for Hail Mary pass which would be beneficial for the shareholders and would avert
bankruptcy.
The business needs to reduce the debts and ensure that a balance is attained between the debts and equity
of the business.
2.3 Give advice to the company in terms of its debt policy—should the company reduce its debt, issue
more debt, or stay in the current situation, explain your answers in details.
Type your answers starting from here:
The management of Vestas Wind System needs to reduce the debt capital which is used by the business
as the same is increasing the risks and is also creating a burden over the business in terms interest
payments which needs to be handled by the business. The business needs to attain a perfect balance
between debt and equity capital for ensuring they get capital structure advantage.
3. Asset Utilization:
3.1 Ratios:
1) Total Asset Turnover
2) Working Capital (WC) Turnover
3) Fixed Asset Turnover
Comment on the ratios above and discuss your company’s turnover ratios.
Type your answers starting from here:
Total Asset Turnover
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Total Asset
Turnover
1.11 0.96 0.89 0.90 0.71 0.65 0.45 0.55 0.60
P a g e 17 | 28

The total asset turnover ratio reflects how well a company is utilizing the assets of the business for the
purpose of generating profits for the business (P. Bauman, 2014).. The estimate for total asset turnover
ratio for Vestas Wind System is shown to be appropriate even if the same has declined. The analysis
also reveals that the Vestas Wind System is utilizing the assets of the business is a better manner. In
comparison to the competitors Xinjiang and General electric, the company has better asset management
policy. The management of Vestas Wind System needs to maintain and improve such efficiency as the
same would help the business to generate more profits.
Working Capital (WC) Turnover
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Working
Capital
(WC)
Turnover
41.20 43.65
-
4053.60 -2.41 -1.77 -1.42 -0.68 -0.80 -0.76
The above table shows the working capital turnover ratio which is related to the current assets and
liabilities which is owned by the business. In the year 2017, the working capital of Vestas Wind system
has significantly fallen and the same is shown in negative. Similarly, the competitors Xinjiang and
General electric also shows negative estimates which is a matter of concern for the companies. The
management of the company needs to manage the assets of the business in a more appropriate manner.
Fixed Asset Turnover
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Fixed Asset
Turnover
7.85 7.73 7.90 1.45 1.19 1.19 2.28 2.27 2.32
The above table shows the fixed assets of the business and how the same are used by the business for
earning profits from operations of the business. The analysis reveals that Vestas Wind system has the
best estimates in comparison to its competitors which suggest that the business is efficiently utilizing the
fixed assets of the business and also generating appropriate profits for the business.
3.2 If you see any problem with the company’s total asset turnover, WC turnover, or fixed asset
turnover, identify the problem and suggest two ways through which the company could improve its asset
utilization. If you do not see any problem, also suggest two ways through which the company could
maintain its current position.
Type your answers starting from here:
The working capital turnover ratio of Vestas Wind system is shown to be negative in 2017 which reveals
serious liquidity issues which needs to be solved by reducing the cash outflows and increasing the cash
inflows of the business. Another method is to diversify the business so that alternative revenue can be
earned and cash position can be maintained.
4. Profitability:
P a g e 18 | 28

4.1 Ratios:
1) Gross profit margin
2) Operating margin
3) Net profit margin
4) Effective tax rate
Comment on the ratios above and discuss on your company’s overall profitability.
Type your answers starting from here:
Gross profit margin
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Gross profit
margin
20.77% 19.72% 16.09% 29.27% 30.24% 25.96% 23.46% 20.48% 21.35%
The gross profit margin of the business shows that the profit has declined significantly over the years for
the business of Vestas Wind system. The best estimates which is shown in the table above is of Xinjiang
Gold Wind Energy which is better than others and the same suggest that the operations of the business is
much more effective in nature. The management of Vestas Wind Systems needs to consider such factors
and ensure that the profits of the business is maintained.
Operating margin
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Operating
margin
13.88% 12.36% 9.46% 13.70% 13.37% 11.27% 8.70% 6.97% 8.18%
The above table shows the operating margin of the business of Vestas ltd and its competitors. The
estimates are similar to gross profit margin and the same shows that the business is not earning well
enough as compared to the competitors of the business. The management of the company needs to
improve the operation process of the business for enhancing the profitability of the business.
Net profit margin
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Net profit
margin
9.43% 8.98% 6.75% 11.38% 12.16% 11.20% 6.28% -7.18%
-
18.38%
The net profit margin of the business for the year 2017 shows significant decline in comparison to
previous year which is not a positive sign for the business and the management of the company needs to
take steps for ensuring that such does not happen in future. The management needs to enhance the
revenue of the business and thereby also enhance the profits of the business.
Effective tax rate
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
P a g e 19 | 28

Effective tax
rate
25.02% 25.00% 24.95% 12.56% 9.80% 10.86%
-
16.11% 23.41% -2.90%
The table above shows the effective tax rate of the business of Vestas Wind system and its competitors.
The effective tax rate for Vestas Wind system is shown to be higher than that of its competitors which
suggest that the business of Vestas Wind system is paying more taxes than in competitors.
4.2 Are the company’s margins changing? Why and what are the underlying business cause—changes in
competition, changes in input costs, or poor overhead cost management?
Type your answers starting from here:
The profitability analysis of the companies shows that the profit margin of the companies is changing
and the same is due to increase in costs of operations of the business and also due to the competitive
pressure in the market which is affecting the business. The analysis also reveals that the management
needs to manage the costs of the business in a better manner for ensuring that there is a reduction in total
costs of the business.
4.3 Now look at the company’s SG&A: is the company managing its overhead and administrative costs
well? What are the business activities driving these costs? Are these activities necessary?
Type your answers starting from here:
The expenses relating to SG&A is increasing as shown in the income statement of the business and the
same is also affecting the profits of the business. The activities which are included in such area is related
to promotions and use of the services of sales men for distributing the products. The management of
Vestas wind system need to enhance the revenue and therefore more services need to provided for which
promotion is important. Therefore, it can be said that such activities are necessary.
4.4 Discuss the company’s tax planning strategies and whether it strategically locates certain operations
in tax havens, (hint: you can find the information on the company’s annual report). Is the company’s
effective tax rate affected by the US tax cut?
Type your answers starting from here:
The analysis of the tax strategies which is followed by the business reveals that the management of the
company is trying to use expenses and claim deductions for the same. Expenses like interest payment
can be used for such purposes. In addition to this, the business also plans to use specific deductions
which is applicable to the business and claim deductions relating to the same.
4.5 Suggest two ways through which the company could improve its net profit margin, if necessary; or if
you think the company’s current net profit margin is fine, you can also suggest two ways specifically to
keep it or even further increase it.
Type your answers starting from here:
The management of the company can enhance the net profit of the business by following the given
procedures:
 The business needs to focus on enhancing the sale of services and projects so that the revenue of
the business can be enhanced,
 The business need to reduce the costs which is associated with the business and ensure that the
profits of the business is not affected in any manner.
5. Return on Investment:
5.1 Ratios:
P a g e 20 | 28

1) ROA
2) ROE
Comment on the ratios above and discuss your company’s return on investment.
Type your answers starting from here:
ROA
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
ROA
10.42% 8.60% 6.01% 5.13% 4.45% 4.17% 1.75% -2.31% -6.59%
The return on asset estimate forms part of the profitability ratios of the business and the same is shown
to have declined for all three companies. The business of Vestas wind system shows a better estimate in
comparison to its competitors and therefore the company can be said to be performing well. However, it
can also be said that the ratio suggest that the all the companies are not using the ratios considering the
requirement of the business.
ROE
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
ROE
31.70% 28.37% 22.05% 16.35% 14.32% 13.50% 8.62%
-
12.87%
-
51.38%
The return on equity estimate of a business shows the ability of the business to earn profits by using the
equity share of the business. The estimate is shown to be better for Vestas Wind Systems in comparison
to other companies and industry averages. However, the same can be improved further by the
management of the company.
5.2 Conduct the DuPont analysis by breaking ROE into profit margin, asset utilization, and equity
multiplier, comment on it throughout time and compare with competitors. Suggest two ways through
which the company could improve its ROE, if necessary; or if you think the company’s current ROE is
fine, you can also suggest two ways specifically to keep it or even further increase it.
Type your answers starting from here:
Vestas wind
system
Xinjiang Gold
Wind
General
Electric
Dupoint
Analysis 0.324 0.321 0.137
The analysis above shows dupoint analysis for the company. The return equity of the business can be
improved further by increasing the sales of the business and also better management of the internal
policies of the business.
6. Market ratios:
6.1 P/E Ratios:
1) P/E
2) Price to Sales
3) Market to Book
Comment on the ratios above and discuss your company’s overall market valuation.
Type your answers starting from here:
P a g e 21 | 28

P/E
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
P/E
14.81 16.33 22.21 11.71 15.76 7.29 33.79 -16.67 -2.82
The price earnings ratio depicts the dollar amount which an investor expects to invest in a business and
also ensure that the efficiency of the business is maintained in the operations of the business. The price
earning ratio of Vestas Wind system is shown to be on an increasing trend and the same is shown to be
better than the business of the general electric and other competitor. The estimate shows that the
business has effectively maintained its key financial ratios.
Price to Sales
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Price to
Sales
1.40 1.47 1.50 1.33 1.92 0.82 0.00 0.00 0.00
The price to sales ratio shows the relationship between the prices of the business to the market price of
the shares. The business of Vestas Wind system has the most appropriate estimate and the management
of the company need to further ensure that operations of the business can be made more efficient in
nature. In comparison to other competitors, the business of Vestas has the most appropriate estimates.
Market to Book
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Market to
Book 4.48 4.69 4.91 1.76 2.12 0.94 0.00 0.00 0.00
The market to book value estimate effectively shows comparison between the market value and book
value of the estimates. The market to book value also is used for comparing the volatility of the business
in terms of different competitors. The estimate shows that the business has better market value which is
clearly a positive sign for the business.
6.2 Growth Ratios:
1) EPS Growth Rate
2) PEG Ratio
3) Dividend Payout Ratio
4) Sustainable Growth Rate
Comment on the ratios above and discuss your company’s overall growth.
Type your answers starting from here:
EPS Growth Rate
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
P a g e 22 | 28

2015 2016 2017 2015 2016 2017 2015 2016 2017
EPS
Growth
Rate
42.26% -4.08%
-
19.39% 2.70% 0.00% 15.79%
-
222.58
%
-
235.53% 154.37%
The above table shows the EPS growth ratio of all the three companies and the estimates for all three
companies are not shown effectively. The estimates show significant decline in the profits which is
available for the shareholders. The business needs to formulate strategies for ensuring that the needs of
the shareholders are considered and properly addressed so that the market valuation of the business can
be initiated.
PEG Ratio
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
PEG Ratio
0.35 -4.00 -1.15 4.33 0.00 0.46 -0.15 0.07 -0.02
The PEG ratio suggests whether a particular stock is overvalued or undervalued depending on the
situation of the market. The analysis of the PEG ratio of Vestas Wind Systems is shown in negative
which represents that the stocks prices of the business might be undervalued. The analysis shows that
the business of Xinjiang has the best estimates in terms of PEG ratio and the same shows efficiency of
the business in maintaining the operations of the business.
Dividend Payout Ratio
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Dividend
Payout
Ratio
20.83% 31.10% 36.55% 65.93% 46.51% 58.59%
117.41
%
-
101.96% -20.01%
The dividend payout ratio of a business effectively represents the ability of the business to pay out
dividends to meet the expectations of the shareholders and also ensure that the shareholders are happy
with the success of the business. The analysis shows that Vestas has growing dividend payout ratio
which is a positive sign for the company. In comparison to its competitors, Xinjiang has the best
estimate for dividend payout ratio which is significantly high and the same shows that the business
considers the need of the shareholders more than maintaining its own profits.
Sustainable Growth Rate
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Sustainable
Growth
Rate
25.09% 19.55% 13.99% 5.57% 7.66% 5.59% -1.50% -25.99% -61.67%
P a g e 23 | 28

The above table shows sustainable growth rate of the business and how the same has an impact on the
overall revenue generation of the business. The business of Vestas Wind system is doing considerably
well in this area which suggest that the business is one of global leaders in sustainable development of
the company. The company generates revenue by following sustainable practices in the operations of the
business.
6.3 Based on your company’s sustainable growth rate, revenue growth rate, EPS growth rate, stock price
growth rate, PEG, and P/E ratio; look at your company and its competitors, is your company’s stock
overvalued, undervalued, or correctly valued?
Type your answers starting from here:
The analysis of the different market related ratios shows that the business needs to value the share value
of the business in a more effective manner. The analysis shows that the value of the asset might be
undervalued considering the PEG ratio and EPS growth rate. In addition to this, the market share
valuation for the competitors are also undervalued considering the negative estimates which are shown
in the table which is provided above.
7. Creditors’ decision:
If you work for a bank and the company approaches you for debt financing. Which ratios are important
considerations? Will you issue loans to the company? Why?
Type your answers starting from here:
In the case which is provided above, a bank would be looking to provide loans to businesses which are
performing well and has maintained an appropriate ratio in terms of profitability and solvency. One of
the key ratio which the bank would be considering is the current ratio which shows the liquidity position
of the business and the ability of the business to meet the current obligations of the business in an
effective manner. The bank also needs to take into account the profitability ratios of the business and
how well the business is achieving growth in the same. The business also needs to check the debt to
equity ratio as this would provide an information regarding the serviceability of the business for the
debts which is taken by the business. If the ratios which are discussed above are appropriate and the
business has a good credit history than the loan amount would be issued against some collateral security.
This is because the bank would have confidence on the performance of the business and would be
considering that the business would be able to pay off the loan easily.
8. Weighted Average Cost of Capital (WACC)
8.1
1) Beta
2) Cost of equity
3) Credit rating (if credit rating not available, show synthetic rating)
4) Weighted average cost of capital
Comment on the numbers above and discuss your company’s overall cost of capital.
Please note that you need calculate and discuss above numbers of your company, and its two
competitors.
Vestas wind system
Xinjiang Gold
Wind
General
Electric
2018 2018 2018
Particulars
Beta 0.86 1.05 1.02
P a g e 24 | 28

Cost of Equity 1.65% 8.04% 7.09%
Cost of Debt 3.09% 1.51% 1.97%
Cost of
Capital 1.85% 5.25% 3.21%
8.2 Where do you see the company’s WACC going, increasing, decreasing, or remaining at the same
level? Why?
Type your answers starting from here:
The WACC of the business is computed in the above table and the same shows that the cost of capital of
the business is on a decreasing trend which also suggest that the business is appropriately managing the
risks which is associated with the business. In addition to this, it also means that the business is
performing well in managing an appropriate capital structure.
8.2 Discuss two ways to improve the company’s WACC, your answers should relay to the general
market condition, as well as the company’s debt structure & policy.
Type your answers starting from here:
The management of the company can reduce the WACC of the business by reducing the equity costs of
the business and also the costs of debts of the business which contribute to the overall cost of capital of
the business. The management of Vestas Wind system needs to ensure that the capital structure of the
business is effective and ensure that proper balance is maintained in the operations of the business.
9. Others
Discuss one more thing that’s not discussed above but you find worth noticing from the company’s
income statement, balance sheet, or cash flow statement.
Type your answers starting from here:
The costs of the business are considerably high which is directly affecting the profits of the business and
therefore appropriate steps needs to taken by the management of the company for ensuring that
performance of the business is appropriate. The management of the company also needs to take into
account the unproductive expenses which have a significant impact on the enhancing the revenue of the
business. This would help the management of the company to ensure that the efficiency and productivity
of the business is maintained.
Part 3: Managers’ Perspectives & Actions (20 points each)
1. From a CEO/CFO’s perspective, summarize the company’s overall strengths and weaknesses in (1)
operation, (2) investment, and (3) financing. What is your company’s overall core competence? Does it
have a wide or narrow economic moat?
Type your answers starting from here:
The operational structure of the business is efficient and the cash flow which is generated from operating
activities of the business is shown to be positive which suggest that the business is effectively handling
the operations of the business. In addition to this, the business of Vestas Wind systems are global leaders
in the market and therefore a certain level of efficiency needs to be maintained by the business. The
weakness for the business is the high costs of operations which is faced by the business. The investment
activities of the business show that the management of the company has made investments in property,
plant and equipment, intangibles and also in shares. The cash flow from investing activities is shown to
P a g e 25 | 28

be negative which is due to purchases which is made by the business. The financing activities of the
business needs to be positive so that the equity and debt capital can be measured appropriately. The core
competencies of the business are the innovative approach and sustainability practices which allows the
management of Vestas Wind system to gain competitive advantage in the business.
2. From a CEO/CFO’s perspective, understand your value drivers and various ratios and suggest how
the company could increase its value. Your analysis here should be based on both your ratio analysis and
valuation.
Type your answers starting from here:
The analysis of different ratios show that the management of Vestas Wind solutions need to focus on
enhancing the operations of the business and ensure that the profitability and solvency ratios of the
business are maintained. The management of the company also needs to ensure that the debt capital
which is used by the business is also appropriate and proper structure is maintained in the operations of
the business. The risks of the business are maintained by the business well but the can be further reduced
significantly.
3. What are some ways that your company can further its growth? (hint: you can read Chapter 4 but
please apply it to your company specifically; you can also draw on your analysis above on PEST,
industry trend, and firm-specific factors)
Type your answers starting from here:
Some of the method by which the company can further the growth of the business is listed below
in details:
 The management of the company needs to enhance the operations of the business and thereby
ensure that there is growth and stability in the operations of the business. This would allow the
business to generate more profits in the long run.
 The management of the company also needs to consider the reducing the costs of operations
which would further contribute to growth in profits and also enhance the value of the
shareholders.
 The management of the company needs to consider the liquidity position of the business so that
the business is able to meet the current obligations of the business in an effective manner.
 In addition to this, the business needs to engage more in technological development and enhance
the operational efficiency of the business.
Reference
Afuah, A. (2014). Business model innovation: concepts, analysis, and cases. Routledge.
Barbara, C., Cortis, D., Perotti, R., Sammut, C., & Vella, A. (2017). The european insurance industry: A
PEST analysis. International Journal of Financial Studies, 5(2), 14.
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