The CEO of ABC Inc. was very impressed with company financial performance and conditions. In particular, he stated that the company profitability as measured by return on equity increase significantly as compared to industry, suggesting that this will lead to the maximization of the shareholder wealth. However, the managers of ABC Inc. were surprise at a recent newspaper article which suggested that ABC Inc., was at risk. You are hired by ABC management to critically assess the company's financial performance and conditions and conclude whether or not the CEO's assertions have greater validity. Given below are extracts from key information for both ABC Inc and the industry average.

ABC Inc. Co and Industry average key ratios ABC Inc. Industry Average

Year ending 31 Dec 2014 2014

Total Asset turnover 0.82 0.83 Debt ratio 78.95% 60%

Net profit margin 17.95% 18% ROA 14.80% 14.94%

Capital Structure Leverage ? ? Return on common Equity 70.31% 52.29%

Required: Prepared a report for the Board of Directors of ABC Inc. in your report you should:

 Critically assesses the company's financial performance and conditions and draw a sound conclusion on whether or not the chief executive officer's assertions has greater validity and reconcile his statement with the newspaper articles.

 Suggest which areas of the firm need further analysis. State clearly any limitations and assumptions that you made in your calculations.

 Marks will be awarded for professional format, structure and presentation of the report.