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Running head: AURORA CASE ANALYSIS
Question 1: Performance of Aurora between 1999 and 2002
Its financial performance from 1999 to 2002 was weak and non-attractive. Investors were
not attracted to invest in Aurora Company. Different factors may have caused the poor financial
performance. One of the main factors that may have caused the poor economic performance was
the risks associated with the competition that existed in the market where Aurora Company
operated. To gauge the financial performance of Aurora Company, trend analysis was conducted
ranging from 1999 to 2002. Since the trend analysis was done starting from 1999, this year was
used as a reference point. From the trend analysis, it is evident that the profitability measures
have wholly worsened. From the analysis, it is clear that the ROA and profit margins are on the
negative side indicating a decline in performance. It is also evident from the analysis that the rate
of sales made was reducing by 15 percent per year (Graham, 1998).
Another evidence of a decline in financial performance was the decline of the raw
materials. This was calculated by comparing the costs of the raw materials as a percentage of the
Total Sales made. If Aurora Company wanted to generate profits from the sales made, managing
the expenses made is recommended.
The liquidity measures of the Company have improved. Meeting the financial obligations
of the Company with the cash at hand will be possible. The reasons behind this are that the
current assets of the company are mostly inventories and account receivables. For Aurora to
remain sustainable, there is a need for them to come up with a strategy that will enable them to
manage inventories and account receivables while reducing the operational costs to increase the
profit margins (New York Times, 2000).
Question 2: The cash flows of Zinser investment and the Present Net Value of the project
