Dora Co, Dora Co, a listed company, manufactures parts and medical equipment for hospital industry. In 2011, a new Chief Executive Officer (CEO) took over of running of the company. The CEO was very impressed with growth in the financial performance. In particular, he stated that increase in share prices over the three years will significantly increase the shareholder wealth, suggesting that Dora Co has been a successful company. In addition to that the CEO expressed a desire to make the company a leading manufacturer of parts and equipments for hospital industry via the acquisition of a major rival manufacturer in 2015, and financing the acquisition through issuance of debts.
Given below are extracts from key information for both Dora and the industry over the three recent years. Dora Co Key Ratios Year ending 31 Dec 2012 2013 2014 Share prices $ 1.69, 2.01, 2.69 EPS 15.4c, 16.3c, 20.7c Operating profit margin 19.0%, 20.2%, 21.0% Asset turnover 1.01, 0.85, 0.79 ROA 11.9%, 8%, 7.2% Dividend cover 3.3, 3.6, 4.1 Debt /(debt + equity) ratio 40%, 46%, 54% Industry average 9.2:1, 12.1:1, 15.3:1
Required: Prepare a report for the Board of Directors of Dora Co, which: Critically assesses Dora’s financial performance and conclude whether or not the Chief Executive Officer's assertions has greater validity. Suggests which areas of the firm need further analysis. State clearly any limitations and assumptions that you made in your calculations. Professional marks will be awarded for the format, structure and presentation of the report.