GENESIS ENERGY LIMITED 5
Theratio analysis for has revealed impressiveresults. The liquidity of the company as depicted by the trend of thecurrent ratio has experienced minute changes from the year 2013. Theratio dropped in 2014 and later started assuming an upward trend inthe year 2015 and the first quarter of 2016. Overall, the currentratio of the company is above the industry average of 0.49 (Financialstrength information and trends, n.d).
Regardingasset management, the company’s fixed assets to turn over ratiohave experienced a declining trend from the year 2013. The ratio wasinitially at 4.88 and later dropped to 2.79 in 2014, 0.81 in 2015 and0.72 in 2016. In overall, the ratio is above the industry average of0.56 (Financial times, n.d).
The company has an increasing debt as indicated bythe growing trend of the debt ratio. Besides, the debt ratio in thefirst quarter of 2016, 2.8, is above the industry average of 1.29.The analysis has further revealed that the company has a decliningprofitability. The profit margin on sales has assumed a decreasingtrend in the past three years. The company’s profit margin in theyear 2016-2.1 is below the industry average of 3.02. Finally, theanalysis of profitability has revealed an increasing trend from .03in 2013 to4.2 in 2016. The final price earnings ratio in the firstquarter of 2016 is above the industry average of 1.85 (Financialstrength information and trends, n.d).
Fromthe above observations, it is clear that the company can enhance itscash flow management program to create enough funds for the expansionprogram without external financing. The company has more currentassets than most companies do in the industry. Current assets such ascash are viable sources of investing in the expansion program. Thesecond alternative is through the receivables. The ratios indicatethat Genesis can evaluate its receivables in the current assets andform a better collection program to fund its expansion program(Financial strength information and trends, n.d).
Third,the company can use its revenues to finance the development agenda.The declining trend in the company’s fixed assets to turn overratio indicates that either the fixed assets are declining, or therevenues of the enterprise are on the rise. It is imperative for thecompany to manage its operational costs to increase its profitabilitythat can be channeled to the program (Financial strength informationand trends, n.d).
Concerningtaxation, the US corporate tax has assumed a downward trend since theyear 2006. US corporate tax has declined from 39.3 in the year 2006to38.9 in the year 2016. Concerning country risk, the US economiccondition is favorable for doing business. The probability ofcorporate risk is very low. The business environment is favorablesince there is adequate corporate financial information. Besides, thecountry has an efficient debt collection process, and intercompanytransactions are effected smoothly (Financial times, n.d).
Concerninginterest rates, the US economy has favorable borrowing rates afterthe Fed lowered rates since the 2007- 2009 depression. According topolicy makers, the interest rates are expected to remain low withlittle increases. Consequently, many corporations have takenadvantage of the low-interest rates to expand their businessesthrough loans and the bond markets. The US dollar is projected tomaintain its value and experience minimal variations due to thelow-interest rates (Financial times, n.d).
Thekey challenge expected in the implementation of the expansion programis the complexity of the United States tax system. The taxes affectthe company decisions and operations. The company is bound toexperience challenges in navigating through the state, federal andlocal level of taxation. Besides, the company is obliged to facevarious risks in managing the administrative processes associatedwith taxes. It is imperative for the company to instill vigilance asa strategy of avoiding various tax pitfalls. Precisely, GenesisEnergy should allocate enough resources to ensure compliance with theUS tax laws (PricewaterhouseCoopers, 2013).
First,in the US, contingent liabilities are not allowable on income unlessthey are identified as fixed and determinable. Other laws related tocosts indicate that expenditure on entertainment is bound by stricttests before it is deductible. The law also places limitations on thedeductibility of international and local business travels. Besides,there are limits to the deduction of development and othermiscellaneous costs. The law also requires companies to apply theiraccounting methods consistently to allow for the deductibility ofresearch and development costs (PricewaterhouseCoopers, 2013).
Interms of inbound investment incentives, the US law places limits onnon-US companies. Specifically, the taxation law does not provideincentives to inbound investments apart from specific portfolios suchas bank deposits. Consequently, foreign companies can only invest inobligations necessary to qualify as portfolio debt. Due to thecomplex nature of the US tax system, a majority of non-US companiesare forced to create other non-US businesses to finance and holdshares as well as conduct insurance and treasury operations (Doingbusiness in the United States: The unique challenges andopportunities of doing business in the United States, 2013).
Thecompany is also bound to face other problems such asmulticulturalism, individualism, and low context culture. TheAmerican culture is defined by their tendency to communicateexplicitly. The society is task-centered and uses communication toexchange facts, opinions and information. Americans are not hesitantto say ‘no’. Besides, they are more likely to criticize others inpublic. Such a culture may sound rude to foreigners who are notaccustomed to explicit communication (MacLachlan, 2010).
PricewaterhouseCoopers,(2013). Doing business in the United States: The unique challengesand opportunities of doing business in the United States.PriceWaterhouseCoopersUS.Retrieved on 07 July 2016, fromhttp://www.pwc.com/us/en/tax-services-multinationals/newsletters/tax-and-investment-us/doing-business-us-aug-2013.html
Financialstrength information and trends, (n.d). CSI Market. Retrieved on 07July , 2016, fromhttp://csimarket.com/Industry/industry_Financial_Strength_Ratios.php?
Financialtimes, (n.d). Indepth: US interest rates. Retrieved on 07 July ,2016, from https://ig.ft.com/sites/when-rates-rise/
Fleming,S. (2016, March 11). US economy. FinancialTimes.Retrieved on 07 July 2016 fromhttp://www.ft.com/cms/s/2ee0a002-ef90-11e5-aff5-19b4e253664a,Authorised=false.html?siteedition=intl&_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F2ee0a002-ef90-11e5-aff5-19b4e253664a.html%3Fsiteedition%3Dintl&_i_referer=&classification=conditional_standard&iab=barrier-app#axzz4DgEKuVr9
MacLachlan,M. (2010, March 15). Challenges of doing business in the US.Communicaid.Retrieved on 07 July 2016 fromhttps://www.communicaid.com/cross-cultural-training/blog/challenges-of-doing-business-in-the-us/