Chum Limited Financial Analysis

1816 words - 7 pages

Having evolved immensely from the single AM radio station it was in 1954, Chum Limited has developed into a multi-million dollar cooperation with a very unique place in the broadcasting industry. Chum reflects the many voices and views of the communities it serves as one of Canada's leading media companies and content providers. Currently, Chum owns and operates 33 radio stations, 12 local television stations and 21 specialty channels as well as an environmental music distribution division. Each week, more than 20 million Canadians tune in to a Chum radio station or television channel, and its original content is seen in over 130 countries worldwide. Through popular stations like 104.5 CHUM FM, MuchMusic, and CityTV, Chum Limited strives to inform, enlighten and entertain its audiences by delivering the strongest, most targeted brands, and original, innovative, content across Canadian and international television, radio, and new media platforms.Thorough analysis of the company places Chum Ltd in a very reasonable financial position clearly showing fiscal 2005's successful operating performance as well as excellent prospects for continued growth in the future. Record level revenues of $628 million and net earnings of 41 million were achieved due to strong performance in both television and radio - both with an increase of 12% from the previous year. (See trend analysis charts, Appendix p.3). Intracompany vertical analysis of the balance sheet shows the relative size of each category presented (See Chart, Appendix p.6). Current assets decreased from 26.8% -20.5% even though the absolute dollar amount increased. Retained earnings increased to 8% more of total liabilities and shareholder's equity reinforcing Chum's excellent dividend paying record as well as its growth through debt financing. Chum's current ratio is 1.43:1 (see ratios, Appendix, p.1) and proves that the company is in a strong position to pay off short-term debt, however there are no actual cash assets disclosed on the balance sheet because the company chose to invest all cash from operations back into the business with purchases of leaseholds and new broadcasting equipment, buying shares of other companies, and making huge renovations to the ChumCity Building in downtown Toronto. Chum still has a large amount of receivables coming in (see financial statements, Appendix p.6), and the lack of cash is compensated by a hefty five-year, $500 million dollar revolving credit agreement signed December 1st 2004. Profitability ratios show that the company's potential to earn money is respectable (See ratios, Appendix p.2). An asset turnover figure of 7.3 times and a return on assets figure of 4.8 prove that Chum has an excellent ability to turn assets into sales and income. This year's acquisition of many new assets will benefit the company's financial position in the future. One of Chum's most impressive ratios is its earnings per share. (See ratios, Appendix, p.2) Its magnitude in comparison...

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