UNIVERSITY OF CENTRAL PUNJAB
Faculty of Management Sciences
SPRING-2024
Course Title: Business Finance
Course Code: BAAC2233
Assignment No.2
Course Instructor: Dr. Amina Rizwan
Section: B Program: BBA Date:
Submission Date: 27/04/2024 Maximum Marks: 10
Program Objective: Course Learning Objective: CLO3,
Course Objective: CO3
PEO3 CLO4
TO BE FILLED IN BY THE STUDENT
Student Name: Registration No: Sr. No:
Cargo Company is a medium-sized manufacturing company that produces electronic components for
various industries. The company has been in operation for the past 10 years and has seen steady growth
in its revenues and profits. However, in recent years, the company has been facing some financial
challenges due to increased competition and rising costs. In the past three years, Cargo Company's
revenues have been growing at an average rate of 5% per year. However, the company's profits have
been declining due to higher operating expenses and increased competition in the market. The
company's profit margin has decreased from 10% to 5% in the past three years. To assess the financial
health of Cargo Company, we can look at some key financial ratios. The current ratio measures the
company's ability to meet its short-term obligations. Cargo Company's current ratio has been declining
in the past three years, from 2.0 to 1.5. This indicates that the company may have difficulty meeting its
short-term liabilities. Debt-to-Equity Ratio: The debt-to-equity ratio measures the company's leverage or
the amount of debt used to finance its operations. CARGO Company's debt-to-equity ratio has been
increasing in the past three years, from 0.5 to 0.8. This indicates that the company is becoming more
leveraged and may face financial risks in the future. Return on Assets (ROA): The return on assets ratio
measures the company's efficiency in generating profits from its assets. CARGO Company's ROA has
been declining in the past three years, from 8% to 5%. This indicates that the company's profitability is
decreasing and its assets are not being utilized efficiently. To improve its financial performance, CARGO
Company should consider the following recommendations: Cost Reduction: The company should focus
Page 1 of 2 Assignment
on reducing its operating expenses to improve its profit margins. This can be achieved through
streamlining operations, negotiating better terms with suppliers, and implementing cost-saving
measures. Diversification: CARGO Company should consider diversifying its product offerings to reduce
its dependence on a single market or industry. This can help the company mitigate risks and generate
additional revenue streams. Debt Management: The Company should carefully manage its debt levels to
avoid financial risks. CARGO Company should consider refinancing its existing debt at lower interest
rates or negotiating better terms with creditors. By implementing these recommendations, CARGO
Company can improve its financial performance and ensure long-term sustainability in the competitive
market.
Questions:
1. What has been the trend in CARGO Company's revenues over the past three years? How
has this impacted the company's profits?
2. How has CARGO Company's profit margin changed over the past three years? What
factors may have contributed to this change?
3. Analyze CARGO Company's current ratio over the past three years. What does the
declining current ratio indicate about the company's financial health?
4. What recommendations would you provide to CARGO Company to improve its financial
performance and mitigate financial risks?
5. In your opinion, what are the key challenges facing CARGO Company in the current
competitive market environment, and how can the company address these challenges to
ensure long-term sustainability?
Page 2 of 2 Assignment
