ENVY RIDES CASE Study Example | Topics and Well Written Essays - 1250 words

ENVY RIDES - Case Study Example The working capital loan will even bring more revenue to the company. Hence, it will even help increase the gross margin even higher. The business has really been working well on its expenses by cutting down on most of the recurrent expenditure, apart from salaries, to ensure that the expenses reduce from 40.3% to 17.2% from 2007 to 2009 respectively. This is more than two times reduction in percentage expenses. It is, therefore, easy to make a projection of further reduction in expenses that might be realized in the next two years to be at less than 5%. With this tremendous reduction in expenditure, the business is, therefore, expected to have more revenue on the retained earnings section to be used to reinvest in the working capital. The business therefore has no reason to go for a loan for the working capital as it can be obtained from the retained earnings. However, the position of the business through its expenses support more loan to be obtained since it can be repaid easily given the level of the recurrent expenses in the business is also expected to reduce further for the next two years. The net income has also experienced some increase from 2.6% to 4.9% from 2008 to 2009. The increase in the net income may also show that the business is using too little to finance its expenses, and it is increasing its volume of sales. Therefore, with an increase in the net income, there is a possibility of further increase in the next two years. Envy can, therefore, go for further loan to renovate and add working capital since such attempts will only increase the net income, and the company will be in a better position to repay the loans. This is a profitability ratio that gauges whether the far that a firm can generate profits from the investments of the shareholders in the company. The return on equity ratio here has increased from 28.6% to 45.5% from 2008 to 2009. This shows that, currently, from every dollar that the