Call IV 27 07 20 with SOL

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ACCOUNTING, FINANCE AND CONTROL WRITTEN TEST CALL 4 _ 27th July 2020 1. ELC Co. is evaluating the performance of one of its controlled companies, Liam Co, through relative valuation . Liam Co. is an innovative company founded in 2001. Its business is specialized in the development, design, production and sale of all -electric vehicles. Additionally, the company manufactures, installs and maintains solar and energy storage systems. Two-thirds of Liam’s revenues are from vehicles and one-third of Liam’s revenues is from energy systems. Liam Co. operates all over the world. Its headquarter is in California, and its two major manufacturing plants are in China and the USA. D espite its sales are growing rapidly , Liam’s production costs are still relatively hi gh and its income has not turned into positive yet. One of the main reasons is the fact that Liam purchases the majority of the components for its production from third-party vendors. The vehicle market is facing a negative trend, with an overall reduction in sales of around 15%. The energy systems market is, instead, constantly growing by 5% per year. As follow, you can find some financial data of Liam Co: • Total revenues: 23,128 k$ • Operating costs (NOT including D&A): 23,455 k$ • Depreciation and Amortization (D&A): 8,233 k$ • Bank debt: 10,000 k$ • Cash: 1,714 k$ • # shares: 171,600 Liam’s stock price has shown a 20-times increase since its IPO, even though the firm has been generating negative cash flows and so far has paid no dividends. Based on the available financial data reported in the table, and rounding the calculation at the second digit, which one of the following statements is TRUE? Data in k$ EV Revenue EBITDA EV/Revenue EV/EBITDA Vehicle manufacturers FMC 160,385 145,460 14,639 1.10 10.96 VAG…