Accounting for Managers
Coursework Assignment
Dimitrakopoulou PelagiaKotitsa Eleni
Lazaridou DimitraPapadopoulos Grigorios
ACEA Group:Located in Rome, Italy
Founded in 1907Stock market listed since 1997
ACEA Group operates in:
Electricity chain
Public lighting
Gas
Integrated water cycle
Financial Ratio AnalysisRatios were used to measure:
•Profitability
•Liquidity
•Cash Flow Indicators
•Activity
•Financial Structure
Profitability Ratios
2010-2011 2011-2012
ACEA A2A ACEA A2A
Gross Profit Margin
31% 16% 20% 16%
Net ProfitMargin
3.3% -6% 2.6% -6%
Return on Equity
7.4% -8.6% 7.2% -8.9%
Return on Assets
8.4% 3.5% 4.4% 3.5%
Liquidity Ratios
2010-2011 2011-2012
ACEA A2A ACEA A2A
Current Ratio 1.12 1.22 0.97 1.26
Quick Ratio 1.09 1.11 0.94 1.14
Cash Flow Indicators
2010-2011 2011-2012
ACEA A2A ACEA A2A
OperatingCash
Flow/Sales13% 10% 12% 11%
Short-term Debt
Coverage21% 25% 17% 27%
Activity Ratios
2010-2011 2011-2012
ACEA A2A ACEA A2A
DIO 11 days 18 days 7 days 21 days
DSO 171 days 125 days 162 days 115 days
DPO -204 days -63 days -175 days -92 days
Operating Cycle
-22 days 80 days -6 days 44 days
Fixed Asset Turnover
1.48 1.28 1.68 1.14
Financial Structure
2010-2011 2011-2012
ACEA A2A ACEA A2A
Debt Ratio 75% 63% 80% 68%
Debt toEquity
3.61 1.70 4.09 1.48
Capitalization Ratio
69% 53% 58% 59%
Debt/EBITDA 5.31 7.30 7.67 7.76
InterestCoverage
Ratio5.03 3.69 2.43 2.81
Threat of new entrants
-Capital intensive
-High entrance barriers
-Established in geographical
network and profitability areas
Threat of Substitute Products
-Many sectors and various
production methods
-Remarkable numbers of
substitutes
Bargaining power of buyers
-Large number of customers
-Necessity of product
Bargaining Power of Suppliers
- Distributors of energy are more affected
-Producers of energy are not manipulated by suppliers
Rivalry among existing firms
Government regulations and policies affect competition
Liberalization in the Italian
energy industry since 1969
HIGH
LOW
LOW
LOW to MEDIUM
MEDIUM to HIGH
Analysis of the Competitive EnvironmentPorter’s Five Forces
SWOT Analysis
s•Brand Name•Investment Plans •Domestic leadership in water segment •Use of technologies with a low environmental impact
w•Geographically limitation•Increase of electricity prices
T•Economic crisis •Government regulations
O•Photovoltaic development•Development of energy production from renewable sources
Conclusions
ACEA’s position
High Profitability
Excellent Cash Flow Management
Consistency of the firm
Key role in the Italian energy market
Conclusions
Alerts
Demand is affected by weather conditions
Gap between demand and supply was expanded after
economic crisis
Working capital trends need improvement
Overdue receivables related to public entities are observed
Macro-economic environment is negative (negative Italian
Government ratings)
Thank you for your attention
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