ABC HEALTHCARE

CORPORATION FINANCIAL
ANALYSIS REPORT
FINANCIAL ENGINEERING
TO ENHANCE
SHAREHOLDER VALUE
Lashawndra Arceo
School of Business, Technology, and Health Care Administration,
Capella University
MBA-FPX5014 Applied Managerial Finance
Professor Henry Weber
May 16, 2023
AGENDA
■ Introduction: ABC Healthcare
Corporation’s Financial Status
■ Financial Analysis: Tools & Rationale
■ Financial Decision
■ Recommendation: Maximizing
stakeholder value
■ Tactical Objectives
■ Financial Tools for Progress
Monitoring
 INTRODUCTION:
ABC Healthcare Corp.’s Financial Situation

ABC Healthcare has a strong P/E ratio performance but weak

earnings per share.

ABC Healthcare’s stock is undervalued

ABC Healthcare has three viable expansion opportunities to

pursue, with varying levels of risk and returns.
FINANCIAL ANALYSIS:
Ratio Analysis
■ Price-earnings (P/E) ratio
 Measurement of $$ shareholders are willing
to pay for $1 of earnings
 P/E ratio is best used for industry comparison
■ Price-to-Book (P/B)
 Ratio of the equity to outstanding common
shares
 Financial management efficacy indicator
 FINANCIAL ANALYSIS:
Decision Recommendation

Boost revenue performance

Control stock repurchases

Maintain low debt-to-equity structure

 FINANCIAL ANALYSIS:
Capital Budgeting Analysis
Net Present • Discounting of future cash flows including the
Value (NPV) cost of investment

Payback • N years to recover the cost of investment

Period (PBP)

Profitability • Ratio of future cash flow PV to cost of investment

Index (PI)
Internal Rate
of Return • Discount rate where NPV cash flow = zero
(IRR)
 FINANCIAL ANALYSIS:
Decision Recommendation (Investment Ranking)
Internal Rate
Net Present Payback Profitability
of Return
Value (NPV) Period (PBP) Index (PI)
(IRR)

Project A (8 yrs.): Project B: Project A: Project B:

$44.22 million 1.14 years 5.43 91.48%

Project C (6
Project C: Project C: Project C:
yrs.): $33.4
million
1.23 years 4.84 90.36%

Project B (5 yrs.): Project A: Project B: Project A:

$22.2 million 1.36 years 3.78 79.79%
 RECOMMENDATIONS
FOR MAXIMIZING
SHAREHOLDER VALUE
Strategic Monitoring and
Financial Tools
 RECOMMENDATION 1:
Exploit digital marketing

Digital Improved Focus on Customer

relationship customer
marketing with customers experience satisfaction

Increased
Improved Shareholder
demand & Brand equity
cash flow value
revenue
 KPIs to measure digital
marketing success

Strategic Brand recognition &

Monitoring Tool: equity
KPI
Monitoring Demand for product

Inquiries and sales traffic

 RECOMMENDATION 2:
Information Sharing

Business
knowledge

Value Risk
analysis analysis
Informatio
n sharing

Cash flow Volatility

analysis analysis
 Strategic Monitoring:
Use of Financial Ratios
Liquidity • Current, Quick, Days Sales Outstanding (DSO)
ratios
Efficiency • Asset turnover, accounts receivable, accounts
ratios payable, inventory turnover
• Debt-to-equity, Debt-to-asset, Debt-to-capital,
Leverage Degree of financial leverage (DFL), Interest
coverage
• Gross margin, Profit margin, Return on assets
Profitability (ROA), Return on equity (ROE)

Market • Book value per share (BVPS), Dividend yield,

value Earnings per share, Price-earnings (P/E)
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