Investment Decision Report: Quartz Company - Analysis & Evaluation

The report focuses on an investment decision concerning Quartz Company, advocating for investment in its shares based on a comprehensive financial analysis. The analysis highlights the company's strong liquidity, profitability, and solvency, supported by favorable ratios. The price-to-earnings ratio suggests the shares are undervalued, offering potential for future profit. The report details the company's ability to meet current liabilities, manage accounts receivable efficiently, and maintain a low debt ratio. Furthermore, it emphasizes the increasing net profit margin, indicating effective cost control and reinvestment capabilities. The decreasing accounts receivable turnover suggests efficient credit management, while the rising return on equity and assets reflect effective utilization of resources, supporting the investment recommendation. References to Beyene (2019) and Giordano (2019) are included to support the analysis.

Running Head: INVESTMENT DECISION 1
Investment Decision
Name
Institution

INVESTMENT DECISION 2
I would invest in the shares of Quartz Company because financial statements indicate that
the Company has good liquidity, profitability, asset management and solvency. The price to
earnings ratio indicates that the shares are undervalued and their value can increase with time.
Therefore, I can later resell the shares at a profit. Additionally, liquidity ratio indicates that the
Company has good liquidity to settle current liabilities using existing assets (Beyene, 2019). It
has sufficient accounts receivables, cash at hand, inventory and cash at bank to offset current
liabilities, such as loans, debt and bank overdraft.
Solvency ratio indicates that Quartz Company has a low debt ratio suggesting that the
Company has a low financial risk. The net profit margin ratio has been increasing for the past
three years indicating that the Company is profitable and has the capacity to control the cost of
production, administration and operation cost to generate profits which can be re-invested in the
Company.
The financial statements also show that the Company’s accounts receivable turnover has
been decreasing for the past three years (Giordano, 2019). The decreasing turnover suggests that
the Company issues credit efficiently and collects funds on time to eliminate the cash flow
problem. For the past five years, the return on equity has been increasing because a higher
efficiency in utilizing equity finances to generate returns. The increase is attributed to a greater
improvement in asset turnover. Return on assets has also increased for the past five years
because Quartz Company has greater efficiency in generating profits from assets.

INVESTMENT DECISION 3
References
Beyene, F. (2019). Factors Affecting The Buying Behaviour Of Leather Foot Wear
Manufactures; The Case Of Anbessa Shoes Share Company (Doctoral dissertation, Addis
Ababa University).
Giordano, G. (2019). Buying Power: As Industry 4.0 continues to influence the plastics industry,
manufacturers must consider connectivity and other factors when purchasing equipment.
Plastics Engineering, 75(1), 28-35.