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Managerial Finance - Case Study

This case study analyzes the financial performance of Fawry, an Egyptian e-payments company, over a three year period from 2020-2022. A time series analysis of the company's financial statements and ratios found that liquidity ratios improved due to increases in current and total assets. However, returns on assets and equity declined despite higher sales, indicating room for improved asset utilization. While the company has low debt levels, taking on more leverage could help lower the cost of capital. Overall, the analysis recommends better management of assets to support growth as well as optimizing the capital structure.

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Ahmed Nasr
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96 views

Managerial Finance - Case Study

This case study analyzes the financial performance of Fawry, an Egyptian e-payments company, over a three year period from 2020-2022. A time series analysis of the company's financial statements and ratios found that liquidity ratios improved due to increases in current and total assets. However, returns on assets and equity declined despite higher sales, indicating room for improved asset utilization. While the company has low debt levels, taking on more leverage could help lower the cost of capital. Overall, the analysis recommends better management of assets to support growth as well as optimizing the capital structure.

Uploaded by

Ahmed Nasr
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Managerial Finance Course MBA

Midterm Exam – Case Study


Presented to: Dr. Yasser El Gamal

DONE BY:
Ahmed nasr
Shawky Khaled
Engy magdy
Morouj
Nourhan sameh
*Combany overview:

Fawry is an Egyptian joint - stock firm considered as a leading provider


of e-payments and digital finance solutions, Fawry spearheads
accessible, reliable, and high-value propositions for the benefit of
millions of banked and unbanked users across the nation.

.financial statements:
.financial ratios:

Ratios 2022 2021 2020


Liquidity ratios:
current ratios 1.27 1.12 1.02
quick ratio 1.27 1.12 1.02
cash ratio 1.06 0.91 0.70
Activity ratios:
activity ratio 189.57 1,652.18 3,837.21
inventory turnover 346.82 2,454.09 7,674.43
avg collection period 2.00 12.29 9.20
avg payment period 37.15 52.19 26.51
total assets turnover 0.26 0.30 0.37
Debt ratios:
debt ratio 59% 64% 68%
time interest earned ratio 7.67 6.03 16.07
debt to equity ratio 3% 3% -
Profitability ratios:
gross profit margin 59% 56% 56%
operating profit margin 18% 17% 28%
net profit margin 12% 11% 21%
earnings per share 6% 8% 8%
ROA 3% 3% 8%
ROE 11% 14% 53%
Market ratios:
earnings per share 0.11 0.14 0.53
price / earnings ratio 51.99 48.63 15.01
book value per share 0.50 0.50 0.50
market to book value 11.18 13.72 15.84
The report :

The financial analysis is Time series analysis and based on


the following prospective:

Liquidity:
As per the analysis of the financial statements of Fawry company for the year ended in 31th December
2022, the research revealed that fixed assets of 2022 increased by 41% Compared with year 2021 , also
the current asset of this year increased by 58% compared with 2021 consequently the total assets
increased by 53% which is Good sign for the Running business

On the other hand ,the current liabilities of year 2022 increased by 39% compared with 2021, moreover
the total liabilities increased by 40% respectively.

Also, the cash account increased by 98% and marketable securities increased by 28% both compared
with 2021

After digging in details of the liquidity ratios { current ratios , quick ratios , cash ratios } we found out
that all of them increased compared with the previous year which means that the firm is able to satisfy
its short term obligations.

Nevertheless, the inventory value increased significantly and COGS increased by 23% both compared
with 2021.

As result, the accounts receivable decreased by 78% showing a very good sign indicating high claiming
reimbursement performance.

Regarding analysis of sales we found out that, sales increased over the last year by around 33% .

At the opposite side, the accounts payable decreased by 12%.

Activity:
Average payment period has decreased may be due a new policy by the management but still in a good
range, But the average collection period has significantly improved over the past three years.

Total asset turnover is decreasing due to increasing in the total assets compared to the sales.
While trying to match the inventory with the activity of the firm we found that the inventory turnover is
irrelevant to the activity, Further investigation is necessary to determine the cause of the variances.

Debt ratio:
Fawry has now less debt ratio than the previous year and started to depend on equity thus the firm
is subjected to less financial risk and has more capacity to cover the interest payments
Profitability:
There is a slightly growth in the gross profit margin, but we cannot ignore the instability in the
operating profit margin and in the net profit margin

Fawry has a very low return on assets which conclude that Fawry’s the assets are not fully used. The
cause of declining of the ROA such be investigated.

The same situation to the return on equity, the equity of the firm has increased which conclude that
there is dependency on equity to avoid the financial risk

Market ratio
Earnings per share has declined due to increase in equity and stability in operating profit. but on the
other hand, price per earnings ratio increased because there is confidence in Fawry

Market to book value is declining due to decrease in the market price opposing a fixed book value
caused by the company policy

Recommendations

Fawry has good liquidity position but needs a good assets management because it is not fully used.

The firm needs to bring back past years credit policies in the average payment period and find
suppliers with more payment period.

There is a trend on more dependency on equity rather than debt which cause a very low financial
risk but cause the firm to face a high cost of capital.

Also. Debt is merely used causing the debt to equity ratio to be very low, thus the firm needs to use
more financial leverage to decrease cost of capital.

References:

https://www.fawry.com/financials-and-earning-releases/

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