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Accounting for
Managers
Coursework Assignment
Dimitrakopoulou Pelagia
Kotitsa Eleni
Lazaridou Dimitra
Papadopoulos Grigorios
ACEA Group:
Located in Rome, Italy
Founded in 1907
Stock market listed since 1997
ACEA Group operates
in:
Electricity chain
Public lighting
Gas
Integrated water cycle
Financial Ratio Analysis
Ratios 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 Profit
Margin
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
Operating
Cash
Flow/Sales
13% 10% 12% 11%
Short-term
Debt
Coverage
21% 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 to
Equity
3.61 1.70 4.09 1.48
Capitalization
Ratio
69% 53% 58% 59%
Debt/EBITDA 5.31 7.30 7.67 7.76
Interest
Coverage
Ratio
5.03 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 Environment
Porter’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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Financial Analysis of ACEA group

  • 1. Accounting for Managers Coursework Assignment Dimitrakopoulou Pelagia Kotitsa Eleni Lazaridou Dimitra Papadopoulos Grigorios
  • 2. ACEA Group: Located in Rome, Italy Founded in 1907 Stock market listed since 1997
  • 3. ACEA Group operates in: Electricity chain Public lighting Gas Integrated water cycle
  • 4. Financial Ratio Analysis Ratios were used to measure: •Profitability •Liquidity •Cash Flow Indicators •Activity •Financial Structure
  • 5. Profitability Ratios 2010-2011 2011-2012 ACEA A2A ACEA A2A Gross Profit Margin 31% 16% 20% 16% Net Profit Margin 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%
  • 6. 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
  • 7. Cash Flow Indicators 2010-2011 2011-2012 ACEA A2A ACEA A2A Operating Cash Flow/Sales 13% 10% 12% 11% Short-term Debt Coverage 21% 25% 17% 27%
  • 8. 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
  • 9. Financial Structure 2010-2011 2011-2012 ACEA A2A ACEA A2A Debt Ratio 75% 63% 80% 68% Debt to Equity 3.61 1.70 4.09 1.48 Capitalization Ratio 69% 53% 58% 59% Debt/EBITDA 5.31 7.30 7.67 7.76 Interest Coverage Ratio 5.03 3.69 2.43 2.81
  • 10. 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 Environment Porter’s Five Forces
  • 11. 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
  • 12. Conclusions ACEA’s position  High Profitability  Excellent Cash Flow Management  Consistency of the firm  Key role in the Italian energy market
  • 13. 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)
  • 14. Thank you for your attention