Equity Analysis and Valuation Analysis Team Oscar Aguilar Bayle Butler Bryan Fetterman Reece Macdonald Jonathan Warren Joshua Yueng

Equity Analysis and Valuation Analysis Team Oscar Aguilar Bayle Butler Bryan Fetterman Reece Macdonald Jonathan Warren Joshua Yueng 1 Contents Executive Summary .................................................................................................................................... 6 Industry Analysis ........................................................................................................................................ 7 Firm Overview ........................................................................................................................................... 14 FIVE FORCES MODEL ........................................................................................................................... 18 Rivalry among existing firms ............................................................................................................... 18 Threat of New Entrants ....................................................................................................................... 31 Threat of Substitute Products ............................................................................................................. 35 Bargaining Power of Customers ......................................................................................................... 38 Bargaining Power of Suppliers ............................................................................................................ 41 Accounting Analysis .................................................................................................................................. 55 Key Accounting Policies ....................................................................................................................... 55 Research and Development ................................................................................................................ 56 Currency Risk ........................................................................................................................................ 57 Operating and Capital Leases ............................................................................................................. 59 Goodwill .................................................................................................................................................. 60 Warranties ............................................................................................................................................. 62 Accounting Flexibility ................................................................................................................................ 62 Research and Development ................................................................................................................ 63 Operating Leases .................................................................................................................................. 64 Goodwill .................................................................................................................................................. 64 Warranties ............................................................................................................................................. 66 2 Evaluate Accounting Strategy ................................................................................................................. 67 Research and Development ................................................................................................................ 67 Currency Risk ........................................................................................................................................ 68 Operating Leases .................................................................................................................................. 69 Goodwill .................................................................................................................................................. 70 Warranties ............................................................................................................................................. 72 Quality of Disclosure ................................................................................................................................ 75 Research and Development ................................................................................................................ 75 Operating Leases .................................................................................................................................. 76 Goodwill .................................................................................................................................................. 76 Warranties ............................................................................................................................................. 78 Quantitative Analysis ................................................................................................................................ 78 Sales Manipulation Diagnostics ........................................................................................................... 79 Net Sales/Cash from Sales .................................................................................................................. 79 Net Sales/Net Accounts Receivable ................................................................................................... 80 Net Sales/Warranty Liabilities ............................................................................................................. 81 Net Sales/Deferred Revenue ............................................................................................................... 82 Net Sales/Inventory .............................................................................................................................. 83 Sales Diagnostics Conclusion .............................................................................................................. 84 Expense Manipulation Diagnostics ......................................................................................................... 86 CFFO/OI ................................................................................................................................................. 87 CFFO/NOA .............................................................................................................................................. 89 Total Accruals/Sales ............................................................................................................................. 90 Expense Diagnostics Conclusion ......................................................................................................... 91 Potential Red Flags ................................................................................................................................... 92 3 Operating Leases .................................................................................................................................. 93 Goodwill .................................................................................................................................................. 93 Sales and Expense Manipulation Ratios ............................................................................................ 94 Undo Distortions ................................................................................................................................... 94 Goodwill .................................................................................................................................................. 97 Appendices .............................................................................................................................................. 178 Sales Manipulation Diagnostics ......................................................................................................... 178 Expense Manipulation Diagnostics ................................................................................................... 179 Liquidity Ratios .................................................................................................................................... 180 Profitability Ratios ............................................................................................................................... 182 Capital Structure Ratios ..................................................................................................................... 183 Weighted Average Cost of Debt ....................................................................................................... 185 Weighted Average Cost of Capital ................................................................................................... 185 Forecasted Income Statement .......................................................................................................... 187 Common Size Income Statement ..................................................................................................... 188 Forecasted Income Statement .......................................................................................................... 189 Common Size Income Statement ..................................................................................................... 190 Forecasted Balance Sheet ................................................................................................................

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