Illumina Company Inc.

IlluminaCompany Inc.

TheIllumina Company makes money on its sale because it is able todispose its products at better prices due to good advertisementstrategies. It also brands it products different from hercompetitors’ products so as to stand out in the industry. TheIllumina Company is involved with Biotechnological products. TheIllumina Company stands out because it is smart in developing andmanufacturing comprehensive structures for exploration of the geneticvariations and biological functions among various organisms.Utilizing its technology it creates a network of a range of productsand services that supply the sequencing, genotyping and geneexpression markets the technology has reduced the cost of sequencingthe human genome to USD 4,000 down from a price of USD 1,000,000(ILLUMINA Inc.).

Thecompany is more profitable as it deals with living systems in theworld. By doing genotyping and gene expression, it gets a readymarket in chemical research organizations, Biotechnology companies,genomic research centers and pharmaceutical companies. By doinggenomic research in plants the company comes up with high resistantand high yielding crops, therefore, it gets a ready market in manycountries in the world (ILLUMINA Inc.).

TheIllumina Company utilizes the financial ratios to explain itsprofitability, liquidity, changes in its assets, leverages and itsefficiency in the production process. The profitability ratios suchas return on capital employed gross profit margin and return onequity help the company to examine and exploit the viability of themanagement as clearly indicated by the returns generated on sales andinvestment. It also articulates the cost production and how itsregulation vis-à-vis the distribution and administrative cost. Theseare key markers of the management’s success in profits return. Ifthe return on capital employed is high, the company is making profitson the employed assets (YAHOOFINANCE. Illumina Inc.).

Grossprofit margin influences the manager’s decision for increasing theprices of the sales or suppressing the production of the product.Illumina Company is relying on current soft skills. Therefore, it isable to suppress some of its products that are outdated and replacethem with the new products that are efficient and can stand out inthe market. The return on sales of the company is weak, so thecompany is supposed to invest more in advertising and marketingskills. It also has to increase its production to increase its salesreturns due to fewer returns on current sales ratio in the market(YAHOOFINANCE. Illumina Inc.).

Theinventory turnover is lower, so the managers have to make sure thatresearch is done very fast, and products are produced at a verysufficient and sustainable rate to curb the other markets in theworld. It has to invest more in the research skills to reduce theproduction cost and increase its inventory turnover. By investing inresearch, the company will be able to produce high-quality productsthat will be able to compete in the market and improve the company’sinventory turnover (YAHOOFINANCE. Illumina Inc.).

Thecompany is more liquid because the current ratio shows that thecurrent assets in the company are higher than current liabilities.These shows that the company can sustain its working capital cyclebecause the liquidity is high. It can invest in current projects anddo all its technological applications and research in livingorganisms. Since the company’s liquidity is high, it will be ableto invest in projects that bring high returns thus improving itsprofitability and suppressing its competitors. Debtors’ turnoveralso helps the company to explain the liquidity state of the company.Debt collection period explains how the company manages its debts. Ifthe debts collection period is high or greater than a year, then theliquidity of the company is in trouble (YAHOOFINANCE. Illumina Inc.).

Thereis less risk of insolvency of the company because the debt ratios andthe liquidity ratios are high. The ratio of long-term debts andcapital employed is more than one, this shows that the insolvency isnot at risk, it also shows that the company uses the assets employedby non-owners in a more efficient manner that’s why the company’sliquidity is not at risk. The company should increase its debts fromless expensive sources because the earning per share is high. Thismeans that the shareholders wealth will be maximized, and that’sbetter for the company. The company should also evaluate the periodat which the debt should be borrowed to ensure that the fund areavailable at the right time and utilized in the most efficientmanner to ensure that the funds are made available for a correctlength of time to ensure that funds are obtained at the least cost(YAHOOFINANCE. Illumina Inc.).

Thecompany faces a problem in sales because the return on sales is weak(8.82% in the prior year and 18.98% in the current year) thisindicates a problem in the efficiency of production. This threatensthe going concern of the company in that the cost of production willgo high and the prices of the products will shoot up thus affectingthe overall market. The management has to research on best productionmethods to reduce the production cost to ensure that the company isable to get a potential market. The management also has to investmore in new projects, new branches, training and development of theskills of the staff, and also the projects have to be evaluated amongother factors on the basis of the risk to return to ensure that eachproject is profitable and efficient in fund creation (YAHOOFINANCE. Illumina Inc.).

Theefficiency of the company is good, this is shown by the debtors’turnover, the creditors’ turnover, and the inventories turnover.The inventories turnover serve to show the economic importance thatthe company makes through its sales it gives the impression thatstock is turned over into sales in a year period. The stock turnoverof the company (2.67 times) showing the turnover is very slow.Account receivables turnover indicate the number of times debtors paywithin the year. It indicates how proficient the firm manages itscredit. So, the higher the ratio, the more effective the companymanages its credit policy (YAHOOFINANCE. Illumina Inc.).

Thecompany faces a problem of polluting environment where the issuemight bring collusion in the surrounding communities where theprocess of genotyping and gene expression produces a high percentageof pollution. The company might spend more in compensating affectedparties which may cause an increase in production cost. The risk ofpollution can be reduced by increasing the company’s efficiencyproduction. The risk will reduce the company’s sales thus reducingthe return on sales (ILLUMINA Inc.).

Inconclusion, Ilummina Company will make supernormal profits if itimproves the efficiency of production to increase the returns andsales. The company also has to increase its debt ratio from lessexpensive sources to improve its capital base and manage its workingcapital.

Irecommend that wealthy people should invest in the company becauseit’s a high-profit making company according to the profitabilityratios. I also recommend that the management should invest more inthe research projects to improve the company’s efficiency and itsproducts quality.

Reference

ILLUMINAInc. Retrieved 23rdNov, 2015 from https://www.illumina.com

YAHOOFINANCE. Illumina Inc. (ILMN)Retrieved23rdNov 2015, fromhttps://finance.yahoo.com/q/bs?s=ILMN+Balance+Sheet&ampannual