To: Head of Investment Analysis
Re: Basic Industries Analysis

With the exception of the strike years of 1989 and 1990, Basic Industries (BI) has maintained steady EPS growth since 1985. However, from 1993 to 1994, ROA and ROCE both dropped from 8.55% to 8.41% and 17.35% to 16.42% respectively. Dissecting ROA further, the fall comes from a reduced profit margin which appears to be from higher material costs. Breaking down the ROCE confirms the rise in material costs and also shows a higher interest expense to revenue ratio suggesting new debt has been issued. The capital structure ratio also increased from 2.47 to 2.53 over the period showing BI is more leveraged. Examining the balance sheet, long-term debt has increased by $278 million and PP&E has increased by about $255 million suggesting the new debt BI issued was to acquire new PP&E.
Looking at the evolution of BI from 1985 to 1994 through ROA and ROCE shows some continuing trends. First, the capital structure ratio......

Join Now to view the rest of this term paper!
Members: Login to view this research paper.

Title: First Investments Case
Approximate Word Count: 400
Approximate Pages: 2 (250 words per double-spaced page)

With the Term Papers Lab Membership Pass, you get instant access to every essay on this site, including this essay on First Investments Case, for as long as you remain a member.

Other essays sites charge almost $100 for a single term paper. At Term Papers Lab, you can get instant access to over 100,000 research papers for as little as $29.95!