Business Finance Case Solution
In order to perform liquidity analysis and to perform bond valuation,Proctor and Gamble is selected as it is a public listed company.
Liquidity Position
By performing ratio analysis over the last 3 years performance of the company it is expected that the liquidity position of the company is not up to the marks as the current ratio of the company is just 0.995 times. However,it is also clear that three years ago it was 0.880, therefore the current ratio of the company is improving continuously and it is expected that a lot of improvement is needed in this segment in order to meet the short term obligations of the company and in order to increase the investors’ confidence upon the liquidity position of the company.
In case of quick ratio, it was just 0.569 times at the end of the year 2013 however,it reached to 0.812 times by the end of the year 2015, hence the company’s liquidity position is improving in order to meet the current obligations of the company immediately.
Working capital ratio and cash flow ratios are very low as compared to other competitors and as compared to industry norms which could be the reason of competitive disadvantage as mostly investors pursue liquidity ratios while investing in a company.
Along with the current ratio and quick ratio, cash ratio and working capital ratio is also improving continuously, however the management of the company should pay more attention with this respect as it could help the company in order to retain potential investors and in order to attract greater number of investors.
Overview of bonds of company
Corporate market of the bonds is considered as non-transparent as it trades over the counters and it is always difficult for investors to view prices and volume of the bonds.It is expected that number of bonds are outstanding in the current stock of the company and value of each bond is different which varies from $1.4 billion to $1 million and the type of the bonds is mostly fixed with both annual and semiannual frequency.
Moreover, the coupon rate of each bond is also different which ranges from 5.5% to 2%.Furthermore, the coupon rate is considered as the started rate of the bond and it is also considered as the interest rate which bonds pays annually and semiannually.
In addition to this, the yield to maturity of each bond is also different. Yield to maturity is considered as annual return and marker rate which investors receive upon maturity of the bond, it is also considered as fixed income security.The calculation of the yield to maturity is based upon the coupon rate, length of the bond and market price...................
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