Financial figures and concepts

Apix Printing, Inc. is a private, domestic United States printer of periodicals, newspaper inserts, and advertising
materials that accompany distributions of Sunday and weekday circulations of large metropolitan newspapers.
The company, headed by chief executive officer (CEO) John Matthews, generates $450 million in revenues
from three product lines (periodicals, inserts, and advertising) and has long-term contracts with several large
U.S. retailers to produce weekly sales flyer inserts as well as metropolitan newspapers to produce Sunday
magazine inserts and coupons. Its printing presses are characterized by offset print technology and are
capable of high-capacity output; in addition, the company recently migrated to water-soluble inks, which
considerably reduces manufacturing emissions.
The company’s executive team, employees, and above all, its vice president (VP) of Production, Luke Stewart,
are committed to environmentally-sustainable manufacturing practices. Presently, the only substrate Apix uses
is paper, specifically newsprint of various weights. Trim and waste are recycled in accordance with the
company’s sustainability commitment. Manufacturing divisions are geographically aligned with customers’
locations to minimize logistics costs and response time to customer requirements; however, a centralized
corporate entity administers functions such as human resources, information technology, and financial
reporting. The VP of sales and administration, James Simeon, oversees administration and quality compliance
among the various divisions. There are presently five manufacturing divisions: Northwest, Southwest,
Northeast, Southeast, and Midwest.
Currently, Apix is only marginally profitable, and as such, the chief financial officer (CFO), Mary Francis, has
indicated that external financing will be required to support a company expansion into a new segment of the
printing sector: food packaging. This endeavor will require new investments in equipment as well as substrate
inventory; promotional costs will also increase. In addition, Timothy Russell, the new Audit Committee Chair,
has pointed out that the company’s compliance with the requirements of the Sarbanes-Oxley Act (SOX) will
also cause administrative costs to increase. Following the requirements is paramount to successfully file a
registration statement and to issue equity to shareholders in an initial public offering (IPO).
As the newly hired VP of finance, you report to the CFO. In this capacity, your responsibilities include
preparation of financial statements, comparative analysis and benchmarking to sector performance, and the
assessment of new business investment opportunities to grow Apix’s expansion endeavors in a challenging
market.
Respond to the following scenario with your thoughts, ideas, and comments. Be substantive and clear, and use
research to reinforce your ideas.
In anticipation of Mary’s request for comparative analysis, it will be useful at this time to do some research. You
know that you can obtain the financials of companies within the same sector or Standard Industry Code as
Apix Printing (e.g., commercial printing), and that the North American Industry Classification System (NAICS)
Standard Industry 2012 code for Apix Printing is presently 323111. Search for two other companies in the same
industry as Apix Printing.
When you get to work the next day, you see the following e-mail from Mary:
Here is the list of financial ratios you asked for. I need you to explain the computation of each and compute
these for Apix’s results for the financial statements you are using for the PowerPoint presentation. Also,
compare Apix’s 2-year trend results to that of two other firms in the sector. Indicate how each of Apix’s ratios
differ, and indicate whether the two other companies’ ratios or Apix’s ratios are indicative of better
performance.
Explain the computation for each of the following, and compute each for Apix and two other companies in the
same industry as Apix Printing:
Current ratio
(Long-term) debt to equity ratio
Gross margin percentage
Net profit margin percentage
Return on equity percentage
Present your findings of the above data in a table. Add a paragraph that summarizes your results, indicating
whether investors would find the financial analysis results of Apix competitive as compared to rivals in the
sector. Be sure to include both positive and negative trends in your analysis.