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The CEO attributes

The CEO attributes the success of the company in shareholders wealth creation to the high revenue growth coupled with the high levels of return on invested capital (ROIC) which were achieved by rapid expansion to new market, acquiring other companies, enhancing the core business and continued development of the international business. All these have ensured tremendous growth in revenue and the increased shareholders wealth which is important to any company. The sales and operating income of each of the company’s six business segments is as follows;

It is this segment only that the restructuring cost was not allocated but the figures (2006) shows improved performance. The above segment information shows clearly that the operating income would have been higher save for the restructuring cost that reduced it. It also indicates that the operating income is a big part of the cash flow of the company of $ 3839 million as compared to cash flows from financing and investing operation which were ($2061m) and ($1460m) respectively.

Therefore the cash from operating activities shows a direct relationship with the cash flows of the company. The sales of the company have been growing at the same pace in 2005 and 2004 but with the increased investment in R & D in 2006 from $ 1274 million in 2005 to $1522 million in 2006, it is generally expected that the sales would have increased. This indicated that the increase in R& D in 2006 did not bring in much revenue. The investors should not be worried because the company’s new products may have not penetrated the market.

It is only when a continued investment in R & D does not bring in increase in revenues that the investors should be worried. BRADY CORPORATION a) The stock’s current price as of 23/11/2007 1:02 pm EST was $ 36:22 with highs of $ 36. 39 and lows of $35. 34. The highest price that the stock reached is $43. 78 with the lowest price being $ 30. 91. This shows that the current price of $ 36. 22 is well below the highest price that the stock attained in the year. The price change is in fact -10. 6 %.

The above figures show that the stock has been somewhat erratic and volatile. Given the volume trading (329,000 as compared to total outstanding of 50,402,000 shares) the share price should be high due to low supply. b) The ratio definitions are the same as those in the text book only that the figures used are trailing i. e. for the last 12 months in some ratio. c) The valuation ratios (P/E =17. 1, price to revenue =1. 38, price to book =2. 58, price to cash flows = 10. 7 and book value per share =0. 00) are strong except for the book value per share which is 0.

This means that the company did not create much wealth to the shareholders. The efficiency ratio (return on assets =8. 3%, assets turnover=0. 8, receivable turnover =6. 4 and inventory turnover =5. 2) are high save for return on assets =8. 3% which leads to low assets turnover. The low return on assets means that the company is not utilizing efficiently its assets. Profitability ratios (current ratio= 2. 1, quick ratio =1. 4, debt to equity =56. 12%, and leverage ratio =1. 9) shows that the company’s is liquid and is able to meet its current and long term obligations.

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