Techniques in Financial Analysis Essay Example | Topics and Well Written Essays - 2500 words

Techniques in Financial Analysis - Essay Example Naked DSL was named the product of the year by the Australian PC Magazine. IIN has grown both organically through innovative product development and inorganically by merging with many smaller ISPs. (b) The company has experienced strong growth through the launch of telephony products and deployment of DSLAM infrastructure. With a range of telephony services that include add-on voice and broadband services, IIN offers their own telephone service resulting in a lower line rental price for its customers. In 2006, IIN introduced its DSLAM infrastructure into telephone exchanges across Australia. DSLAM allowed a speed of over 1.5 Mbit/s with a maximum download of 24 Mbit/s. The potential risk with the product development strategy is the possibility of changes in product line and pricing owing to close competition from other major players such as the regulatory conflict with Telstra. Another medium term growth strategy is the inorganic route of acquisitions. In the early 2000s, IIN expande d nationwide by acquiring RuralNet Tas Access, Granite Internet and so on. In 2003, the biggest acquisition of ihug Ltd. followed. Residential ISP business and trademarks of rival OzEmail followed in 2005. After a hiatus, IIN recommenced its acquisition strategy to acquire Perth-based ISPs, Up’n’away and Westnet. Potential risks for acquisition include synergy and funding risks. When IIN acquired OzEmail, the business side remained with its US-parent, MCI but the retail business was neglected. OzEmail moved very late into ADSL and by 2006, IIN had abandoned the OzEmail brand. Fund-raising for acquisitions is a major concern. In 2006, IIN requested a share trading halt after its share value slid by 50%. There was uncertainty from IIN’s bankers as the company had capital raising issues and thus, unable to honour the bank’s covenants. As the third largest ISP, IIN has utilised its brand for strategic purposes. To increase its market share in metros and regio nal Australia, the company has invested in the â€Å"Hallelujah† and the â€Å"Humanology† brand campaigns. A new hi-tech wireless home gateway, ‘BoB’, is featured in its â€Å"Hallelujah† campaign. The increased brand investment has led to increased sales across its businesses. The company has launched its next phase in brand expansion. A potential risk to the brand strategy of IIN is the existing competition in the ISP segment. There are over 600 ISPs in Australia with Telstra leading the market with 43% market share. The second largest player, Optus holds 11% market share. IIN with its 8% share will need to increase its footprint in Australia to compete with the large players and aid its brand recall with customers. Question 2: Liquidity (136/150 words) (a) 2009 Current Ratio = Current Assets/Current Liabilities ($’000) = 46,939/81,763 = 0.6 2008 Current Ratio = 34,494/77,511 = 0.4 2009 Acid Test Ratio = Current Assets–Inventories-P repayments/Current ($’000) Liabilities-Bank Overdraft = 46,939–1,078-13,981/81,763-501 = 0.4 2008 Acid Test Ratio = 34,494-1,073-8,922/77,511-2,846 = 0.3 (b) IIN’s availability of cash and other current assets to cover accounts payable, short-term debt and other liabilities stands at 0.6 in 2009. The current ratio has improved from 0.4 in 2008 to 0.6 There is an increase in the acid-test ratio from 0.3 in 2008 to 0.4 in 2009. The acid test ratio is a more stringent test, incorporating only those assets that can be converted to cash quickly. Current and