Financial Analysis of Tangoe

Company Dimension and Financing

This analysis examines the economic and financial structure of Tangoe, a company that has experienced continuous growth over the past decade, despite a decrease in non-current assets in 2014. The increase in total assets has been primarily financed by current liabilities.

Current Assets

Current assets have increased by almost 20%, mainly driven by growth in both Cash and Accounts/Trade Receivables.

• Cash: Increased by 8,000 thousand dollars, representing 43% of total current assets and 23% of total assets in 2014.
• Accounts Receivable: Experienced significant growth/decrease (receivables).

Capital and Revenue

The company's capital has fluctuated in recent years. In terms of sales and revenues, Tangoe has seen a clear growth/decrease in the last year.

Cash Flow and Profitability

The Cash Flow Statement reveals a substantial percentage attributed to operating activities, which remained positive in both years.

Profitability Ratios

Several ratios have been calculated to assess Tangoe's profitability:

• Return on Equity (ROE): Measures financial profitability, indicating how much profit the company generates with shareholder investments. Tangoe's ROE is 2.84%.
• Return on Assets (ROA): Measures the effectiveness of asset management without considering financing methods.
• Return on Capital Employed (ROCE): Measures the returns achieved from capital employed (non-current operating assets and working capital less non-current operating liabilities). The ROCE percentage decreased from 2013 due to a decline in Earnings Before Taxes (EBT).

AECA Model

Given the high level of net operating assets, the AECA model could be suitable for evaluating Tangoe's profitability. This model calculates ROE by combining the company's economic and financial management. The economic management, represented by ROCE, is determined by multiplying the sales margin (operating results divided by sales).

Leverage and Risk

Leverage refers to the extent to which a company relies on external capital. Higher leverage increases risk and reduces the company's dependence on its own capital. In Tangoe's case, the year with the highest dependence on external capital and, consequently, the riskiest situation was 2013 (leverage 0.00).