Analyzing the financial position of a marketing consultancy firm: a comprehensive financial analysis of Unitrend Limited

Abstract

UnitrendLimitedisoneofpioneersinadvertisingindustryinBangladesh.Advertisingindustry is one of the very lucrative sectors now for the investors. A lot of investors nowadays are willing to invest in this industry for a potential good return. However, advertising companies seem to be not that much focused on the finance aspects of their business. Therefore, the financial reporting is not up to the standard and not a lot of analysis has been done about the financial prospects of these companies. Investors seem to get no financial information about the financial scenario of advertising industry. This report tries to mitigate this dilemma for the investors. In this report, the market value of Unitrend Limited was determined through discounted cash flow method. The free cash flow of the company was forecasted for the upcoming six years and it was then discounted by the company’s weighted average cost of capital to get the market value of the company. The cost of equity was much higher than a publiclytradedcompanybutitisnormalsinceforaprivatelimitedcompany,theriskis higher for the investors. Then, the intrinsic stock value of the company was determined. To do that, earnings per share was multiplied by price-to-earnings ratio. Price-to-earnings ratio of a similarlypubliclytradedcompanywasusedtodeterminethestockpricebuttheparticularratio was converted to match the share price of Unitrend Limited. After that, a comprehensive financialratioanalysiswasdonetofindoutthefinancialperformanceofthecompanyandhow the working capital management is affecting the profitability of the company. A correlation betweentheworkingcapitalmanagementandprofitabilityratiowasindeedthere.Itwasfound outthat,thelowworkingcapitalturnoverwasresultinginlowprofitabilityratio.Itmeansthere was a positive relationship between the working capital turnover and the profitability ratio which was gross profit margin. A regression analysis was done to find out the extent the working capital turnover was impacting the gross profit margin and also to find out the significance of the analysis of these two variables.