Economic Analysis of Chosen Machine Building Enterprise

Liliia Malkova

Bachelor's thesis

Abstract:

SummaryThe bachelor thesis is dedicated to the economic analysis of Ukrainian machine-building enterprise Magma during the 2013-2017 time period. The thesis is divided into theoretical and practical implementation parts.Theoretical part consists description of the Ukrainian economy and machine-building industry in particular. The practical part is dedicated to Magma machine-building enterprise and starts with an overview of its history, services and products. Then it continues with the implementation of both economic and financial analyses tools in order to evaluate the company`s economic performance. Ratio, SWOT, and PEST analyses followed by Altman Z-score model are performed with interpreted results.Finally, the recommendations regarding possible performance improvements are given. Keywords: economic analysis, financial analysis, SWOT, PEST, machine-building industry, ratio analysisObjectives and MethodologyThe aim of this thesis is to analyze, how much the war with Russia affected the Ukrainian economy and machine building industry on the example of Magma enterprise. Both Ukrstat and Magma`s databases made it possible to observe changes and give quantitative answers to what happened and how the situation is developing since then. As for Ukrainian, raised in the east of the country, it was important for the author to select the topic touching the edgy social issue of Donbass occupation and Russian military aggression.The paper is divided into two main sections, theoretical and practical parts. Theoretical part starts with the description of Ukrainian economy since the Soviet Union fall till the current times with the reasons for its` poor condition. Then the economic consequences of the war with Russia and its influence on Ukrainian exports are explained. Finalizing the section follows the state of Ukrainian machine building industry and its subsector of hard machine building. The main methods of this part are description and extraction.Practical part starts with the review of the chosen enterprise`s history, services and product range. Then follows the implementation of the economic analysis techniques, mentioned in the theoretical part. Analysis of financial ratios is followed by bankruptcy Altman Z-score model both implemented and explained. Then, SWOT and PEST analyses are performed. General methods for the practical part are analytical, deductive, comparative.In the end, the conclusion and recommendation for further activities are given.Conclusion The company has successfully overcome economic default, caused by the 2014 steel market crisis, the war in Donbass and invasion of Russia. Moreover, from an alternative point of view, the war was advantageous for Magma as it liquidated some of the key competitors who didn't survive through, thus allowed the company to expand. New manufacturing departments had opened, the number of employees increased, new trade partnerships were made. However, the machine-building market has intensified due to the low demand, and in such conditions, the company still has to fight for the customers. My improvement suggestion is to move towards direct marketing, which means building a long-lasting partnership with clients. The company should approach the clients not through tenders, but directly, offering services, diagnostics, being up-and-coming in providing solutions for problems. After sales follow up and support approach should be changed from “upon request” to pro-active which can help to build closer cooperation and increase chances for further orders.In order to increase profitability and particularly return on assets, I could suggest the company`s marketing department to add prepayment requirements into the contracts. At the moment the company takes the projects without any payment in advance which increases costs of materials and inventory`s along with invested capital. It generates risks, considering the time of the production cycle (3-6 months) each delayed receivables is slow

Abstract:

ing down development dynamics. In general, having a bigger amount of current assets would allow the company to invest in the new, more innovative equipment, expand production range, thus increase potential revenue by entering into the wider market. Even though prepayments look like a key to growth, I will not recommend implementing it, because it will significantly decrease the enterprise`s competitiveness. The market demand is way less than supply, which makes the company agree on the conditions required by customers. As well the company has to focus on improving working conditions to keep quality employees from seeking jobs on the EU market. This can be done by education programs, newer equipment, competitive salary, personal approach.Bibliography1.ROBINSON, Thomas S.; HENRY, Elaine; PIRIE, Wendy L.; BROIHAHN, Michael A.; COPE, Anthony T. International Financial Statement Analysis (3 ed). Wiley 2015, ISBN- 1118999479, 97811189994792.HELFERT, Erich. Financial Analysis tools and techniques. Mcgraw-Hill (Tx) 2001, ISBN- 00713954153.WARREN, Carl S; REEVE, James M; DUHAC, Jonathan E. Corporate financial accounting. South-Western Cenage Learning, 2013. ISBN- 1285078586, 9781285078588, 9781133952411, 1133952410Internet resources 1.KINTSURASHVILI, Konstantin; KRESIC, Anna. Ukraine diagnostics. European bank of reconstruction and development report. Kyiv 2018 Available at: https://www.ebrd.com/publications/country-diagnostics2.Ukraine sharply raises interest rates to 30%. Available at: https://www.ft.com/content/e6570d34-c1b0-11e4-8b74-00144feab7de3.Magma production cycle, services, products. Available at: http://new.magma.ua/

Keywords

development, machine building industry, strategy, enterprise, PEST-analysis, SWOT-analysis, economic analysis, ratio analysis

Language used: English

Date on which the thesis was submitted / produced: 15. 3. 2019

Thesis defence

• Supervisor: Ing. Tomáš Maier, Ph.D.

Czech University of Life Sciences Prague

Faculty of Economics and Management

Bachelor programme / field:
Economics Policy and Administration / Business Administration