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Genesis Energy’s newly established operations management team decided to seek outside assistance in developing a long-term
Genesis Energy’s newly established operations management team decided to seek outside assistance in developing a long-term operating plan that also addresses the financial issues identified. A major consideration for Genesis Energy is assessing those short-term and long-term economic factors, which will greatly enhance the company’s ability to successfully transition to a viable international business. Grasping and correctly prioritizing these economic factors, supply and demand, interest rates, inflation, unemployment, and exchange rates are pivotal, thereby requiring expert guidance. Therefore, their first major decision was to hire a respected strategy-consulting firm, Sensible Essentials. After meeting with the client team, Sensible Essentials concluded that the operations management team would significantly benefit from a more in-depth understanding of the financial environment at Genesis Energy. This understanding needed to encompass not only sales, costs, and profitability forecast under the new strategic plan, but also the way expansion would highlight the need to manage working capital and cash flow in order to try to minimize the need for external financing.As the lead consultant for Sensible Essentials, do the following:
- Describe and evaluate the financial environment at Genesis Energy by using ratio analysis of the company.
- Choose one ratio from each of the five categories listed in the table on page 103 of your textbook, Brigham and Ehrhardt, and do a 3-year ratio trend analysis. Compare these results to the industry averages. What do the results tell you?
- Name three specific options that are available to Genesis Energy for obtaining needed capital.
- Identify and explain two ways Genesis Energy can improve its strategy.
- Explain what specific macroeconomic factors are likely to affect genesis, i.e., inflation, interest rates, exchange rates etc. Please do a brief country risk assessment and discuss the most likely problems a company like Genesis Energy is likely going to confront when contemplating an international expansion. What would be the least risky avenue for them to get their product/service to the country you have chosen? Which entry mode is the riskiest? Explain.
Write a 3–4-page paper in Word format. Apply APA standards to citation of sources. Then, create a 6–8-slide PowerPoint with Speaker’s notes and references (including research) presenting your findings to the Genesis Energy operations management team.
TABLE 3-2 MicroDrive Inc.: Summary of Financial Ratios (Millions of Dollars)
RATIO
FORMULA
CALCULATION
RATIO
INDUSTRY AVERAGE
COMMENT
Liquidity
3.2
4.2
Poor
Quick
1.2
2.1
Poor
Asset Management
Inventory turnover
4.9
9.0
Poor
Days sales outstanding (DSO)
45.6
36.0
Poor
Fixed assets turnover
3.0
3.0
OK
Total assets turnover
1.5
1.8
Poor
Debt Management
Debt ratio
53.2%
40.0%
High (risky)
Times-interest-earned (TIE)
3.2
6.0
Low (risky)
EBITDA coverage
3.0
4.3
Low (risky)
Profitability
Profit margin on sales
3.8%
5.0%
Poor
Basic earning power (BEP)
14.2%
17.2%
Poor
Return on total assets (ROA)
5.7%
9.0%
Poor
Return on common equity (ROE)
12.7%
15.0%
Poor
Market Value
Price/earnings (P/E)
10.1
12.5
Low
Price/cash flow
5.4
6.8
Low
Market/book (M/B)
1.3
1.7
Low
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***** ******** to its ********* earnings * **** *** ******** **** ********* *** ********* higher ******** ****** ** *** ****** ******** ** companies **** * ***** *********** ***** ****** ******* ******* ***** ** **** ** **** 951 ** 2012 ***** **** ** 2011 This ** showing company’s ****** share ***** ** **** ***** ******** ************** ****** can ******** ***** ************ ** ********** from financial institutionsPublic *************** of shares:Company *** ******** ***** **** ******* ****** ** **** method liability ** shareholders ** ******* ** *** ********* *********** from ********* institutions:Long **** *** medium **** ***** *** ** ******** **** ********* ************ These financial ************ ***** loan ** ******** ***** These **** **** ********** ******** ** property ****** **** *********** ****************** *** raise ***** **** shareholders ********* *** the ******* public ***** act ****** ***** ****** ******** *** ** ****** *** ***** **** ********* needsGenesis Energy ** 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********* ******** **** Regulations• ******** – ****** ****** – SEBI• *** ** ** 600 *********** *** ******** ************** of Foreign Investment ********* ***** ****** ******** *************** 4-6 ***************** *** ********** in Power ********* New ***** ******* Electricity *** 2003 • *** *** ******** **** ******** Buyer Model Independent ********** Body **** ****** Power Trading ** ** *********** ******** ** ********* ** *************** **** FDI ********* ***** in:– ************** power plants;– ************ ***** ******* power ******** Oil/gas based ******* ***** ************ *** ***** mentioned rule approval ***** ** *** riskiest route ************ ** ******* ** not **** ** *** ********** **** business ****** ** ** started· Approval ***** ** **** ***** ********** **** ** put ************ ********* these ************ ****** cash flow ** *** *************************** ****** ****** ****** -2013http://wwwgenesisenergycom/assets/_Investors/Annual_Reports/2013/Annual-13pdf Methods 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