Forestry Industry in Latvia

GROUP 8 REPORT

Term Project "FORESTRY"

Financial and Managerial Accounting, Spring 2010

Riga 2010

Contents

1. Summary 3

2. Industry 4

2.1. Forestry in Latvia 4

2.2. TOP 15 representatives of industry 5

2.3. Comparison the countries 6

3. Analysis 6

3.1. Profitability 6

3.2. Liquidity 10

3.3. Leverage 12

3.4. Turnover 13

4. Proposal 14

4.1. Alternatives for investment 14

4.2. Risks 14

4.3. Proposed company for the investment 15

4.4. Expected return on investment 16

APPENDIX 1 17

APPENDIX 2 20

1. Summary

This report presents the findings and analysis of forestry industry in Latvia from the perspective to sell idea of direct investing in this industry to foreign or local investors.

At the beginning there is defined the industry and found 15 companies as the top representative of the industry. As this industry is wide and the operating companies can be significantly different, the whole forestry industry has been divided in four sub categories. These categories are distinguished considering the offered products or services by the companies. In order to get the results of the research paper precise and valuable, the authors have chosen one sub industry for further analysis – logging. The 15 companies from the sub industry are selected basing on the annual turnover.

Further deep analysis of main financial indicators of the companies of industry is done. These indicators are separated in following groups of ratios – profitability, liquidity, leverage and turnover. Profitbility analysis includes such ratios as profit margin, gross margin, return on equity, return on assets, return on capital involved. Liquidity analysis includes liquidity ratio, current ratio and solvency ratio. To analyze leverage, authors used leverage ratio and gearing ratio. For further analysis the turnover ratio was used. Authors of the paper hold a strong view that all set of mentioned ratios should be analyzed and considered in order to understand financial situation in the industry. There are used average industry ratios in Latvia and border countries for comparative analysis. Top companies