Financial Analysis

 Company = Ashtead Group

Competitors = United Rentals & Herc Holdings

Part 1

1. Assess your company’s utilization of long-term assets.

Required:

a.   Comment on your company’s asset-replacement policy

b.   How is your company’s asset-replacement policy impacting its return on assets ratio?

c.   Compare your company’s asset utilization ratio with that of its two competitors.

d.   What method of depreciation does your company use?

e.   What depreciation method do your company’s two competitors use? 

2. Disclosure of investments and intangibles.

Required:

a.   Review the financial statements for your company to determine if they disclose any of the following:

i.    Trading securities

ii.   Available-for-sale securities

iii. Held-to-maturity securities

iv. Investments accounted for by the equity method

v.   Intangibles

b.   Perform a similar analysis for your two competitor companies.

Part 2

1. Evaluate the use of debt. 

Required:

a.   Calculate the following ratios:

i.    Long-term debt-to-assets ratio

ii.   Interest coverage ratio

iii. Debt service coverage ratio

b.   Calculate the same ratios for your competitor companies and comment on your company’s relative solvency and use of leverage

c.   Review Item 7a in your company’s and its two competitors’ 10-K reports and summarize the companies’ disclosure of information on market risk.

d.   Comment on your company’s comparative use of derivatives. 

2. Analyze income tax expense and income taxes payable. 

Required:

a.  Analyze your company’s provision for income taxes and income taxes payable including:

i.    The amount of income taxes that would have been paid at the statutory rate and the amount actually paid

ii.   Changes in the deferred tax asset and liability accounts

iii. Changes (if any) in the amounts of income tax carrybacks and carryforwards

b.   Conduct a similar analysis for your two competitor companies and discuss any differences you find.

3. Use of leases

Required:

a.   Review the financial statements of your company and its two competitors to determine if they are using leases as a part of their financing activities strategy.

b.   Contrast your company’s leasing strategy with those of its competitors.