The Xerox Company is one of the world’s most prominent haloid photographic companies. Founded in 1906, the company manufactures both photographic papers and equipment for photography. In the contemporary assessment, the company derives its name from the word Xerography, which is synonymous to dry writing. Xerography is the process of making a hard copy document using an electronic machine. The process is also known as dry writing since it does not involve the use of ink. The company has pride in production of equipment with electro-photographic credentials, which has increased its consumer bases and the consequent profitability for expansion .
Electro-photography is a slung that was put into practice by Chester Carlson, who argued in view of development of a photocopy machine that works on a plain paper. This unique device has since seen the revenue of the company grow in double digit margins from the conventional $60 million in 1961 to $500 million in four years. This implies that since its inception, the company acquired developmental criteria for increased revenue of over $440 million in four years, which represents an annual revenue growth of 85% per annum. This is because of the uniqueness in production, which was characterised by research in new modes of production and differentiation in production. Consequently, the company has been at the helm of cost leadership through formulating commodity prices for photography related components and software engineering tools.
Differentiation and cost leadership are the devices for describing the Xerox Company, where it has diversified production and consequent relay of goods and services to its consumers. For instance, in 1385, Xerox tested the market capabilities with the flat-plate, which is a device operated using hand. Seeing the viability of hand tools, the company invested in the development of prototype equipment, which was an automatic printer. The efficiency of this prototype equipment led to the realisationrealisation of profitability, which enabled the company to conduct a research in the development and use of copyflo. The copyflo operated on the basis of a microfilm, which produced a hard copy known as the positive print, while the stencil used for printing was called the negative print. This gave a clear resolution and a consequent reproduction feature since the stencil could be kept for future use.
In 1963, the higher management within the Xerox Company majored in research that aided in the production of the Xerox 813 component. This was a first step towards the development of a plain-paper copier using a hardware device operated by a desktop device. This was a development that saw a successful inception of a machine with official accommodative capabilities. This implies that the desktop copier was sizeable to fit into anyone’s office with ease, which gave the reality of achievement of its visions of differentiation in production.
An analysis of the cash flows within the Xerox Corporation is dated back to 1974, when the company resolved to the consent decree. This was as a result of the anti-trust resolution, which saw the company win a licensing portfolio. The portfolio was partly a setback to its operations and a boost to the profitability in the essence that as much as it resolved the anti-trust suit, it led to the decline in the US copier market. This implies that the Xerox Company was hit with anti-trust suit, in which there was a high echelon of competition from co-producers like the Japanese market. This implies that a forum for evaluation of the constraints to trade within the company was unavoidable.
In 1970, the company resolved to respond to the menace of competition through diversification in production of its goods and services. This led to the development of the Xerox Park, which was a coinage of the name of the then president Charles Peter McCullough. This device was literarily referred to as the Xerox Palo Alto Research Center, which was a facility for printing, using illumination. The facility operated on a laser beam in which the printout could be produced using the infrared spectroscopy. The laser beam illumination helped in the acquisition of improved resolution, which differed from the blurred images produced by conventional printers.
The essentiality of development of laser beam facility led to realisation of profitability as it led to expansion of the consumer base through increased quality production. This led to the increased acquisition of the market index share and consequent expansion of research into new forms of production. For instance, the sister of the laser beam facility was developed in 1973, which was known as the Xerox alto. This device operated on a computer interface program just like the contemporary workstation. The device operated on a principle of increased end-user benefits since it had multitasking properties. This implies that the Xerox Company has been moving from a one end-user consumer to a multitasked user consumer, which has increased its efficiency in production and consequent reach to consumers.
The cash flows within the company have increased tremendously since the inception of the company with a recent pre-tax margin of $485 million in 2012. This implies that the company has a negative cash flow, which is essential in protection against vulnerability to liquidation. This pretax margin was payable to the security holders in the debtors category, where there was an increased cost of production that led to the consequent fall of the profit margin. This margin is lower than the free cash flow margin for a previous two year business period. For instance, for the period ending the year 2010, the company recorded an annual free cash flow rate of $385, which is $100 less than the value recorded two years later. This value is on an increasing trend since the higher management within the company has resolved to the distribution of the cash generated to the payment of dividends to its security holders.
The trend of free cash flow within the company is expected to increase within a five year period from now since the cash generated is also expected to increase. This is due to the increased liabilities, increased preferred stock holders and increased amount of dividends payable. The increase is due to the expansion in production of programs within the company, in which the company is perceived to open up new hubs for information processing through system software engineering programs. For instance, the company has plans to invest in new properties including the setting up of a new plant to research into new modes of production.
The perspective within the Xerox Company has been to increase the shareholder values; the net free cash flow is also expected to increase. This is through the resolution to capitalise on settling down the dividends payable as securities to the debtors of the company. In real essence, the company has focused on increasing its profitability in order to reduce chances of liquidation through diversification in production, research in new modes of production and increasing employee training programs under the context of Human resource management. By consideration, the employees and suppliers form part of the debtors of the company, in which acquisition of security forms part of the agendum for reduction of chances of liquidation. To increase its efficiency in terms of diversification of production the company has relayed a program for training of both the existing employees and those to be employed in order to attain its visions of a viable resource management forum. This has also increased the index value of cash flows within the company since acquisition of knowledge is accompanied with an accommodative price.
The Xerox Company has a laid down platform and strategy for future growth, according to which it has intensified its position of winning the consumer base through cost leadership. For instance, the Newfield Information Technological platform that was created in May 2011 is a leading cost price enterprise for running on MPS programs. The platform is not only profitable to the company but also a hub for consultancy and generation of solutions to software services in the context of promotional computer engineering programs. The company prides itself in cost leadership in this context since it is the first company that set the prices of the MPS consultancy. This is also coupled with the designation of a price that is slightly higher than the cost price in order to achieve profitability without loss of consumers. This is a practice that has seen the company reach out to its goal of consumer retention through ensuring that the set prices are not only low but also within the reach of the consumer capabilities. Consequently, this practice has seen the company revolve in terms of low cost production without compromising the profitability.
On the other hand, the company has resolved to charity as a strategy for its future existence. This implies that the company does not only concentrate on the production of goods and services but also on the promotion of stability within the environment within its jurisdiction. For instance, the company uses an annual grant of $1,000 as a contribution to the learning programs within higher learning institutions. Such programs are not only geared towards attainment of the corporate social responsibility but also for promotion of its image to its existing environment. This has enhanced consumer confidence through promotion of the interrelationships with the environment. This is a prevalence strategy of ensuring that a cordial relationship exists between the company and its immediate environment, which is akin to promotion of peace and stability within the company.
Having a tangible assets value of $300,000, the Xerox Company has a platform for valuation after its liabilities. This mode is known as the book value method, which is calculated using the off-balance liabilities and assets. With assets worth over $4.2 billion, the company prides itself in the reflection of the fair market value of $200,000, which is a value lower than the intangible assets. The intangible assets include the human resources and the manpower, which is calculated in terms of discount rates.
On the other hand, the adjusted book value method is seen as the factor of reflection on the estimated valuation of the liabilities therein. For instance, adjustments made to the off-balance liabilities within the company give $200,000 as the tangible assets value, which is lower than the value acquired through the book value method. The adjusted book value charts for the Xerox Company come about as a result of display of the company in a high stock price index, with the omission of the intangible assets. The company is a victim of the “cook the books phenomenon.” This implies that the company adjusts its reflection of the assets and liabilities with a decrementing value of omission of the tangible assets to give the adjusted value. This mode is different from the conventional book value method in that it gives the company its reputable image of a company without liquidity.
The PE ratio method of evaluation for the Xerox Company gives a value of 22.9, which is a quotient of the stock price per share and the earnings per share. This implies that for the Xerox Company, the stock price per share is $67.44, while the earnings per share stand at $732.5. Since the PE method gives a ratio between the stock price per share and the earnings per share, the 22.8 figure is within the margin of definition of sustainability through increased market share without loss of the initial public offer share index. This shows that the company is within the margin of prosperity in its assessment of a five year period since the market share index is estimated to grow by an index margin of over 10%, which could lead to an increased PE ratio value.
The company has a defined forum for evaluation of its viability to investment opportunities through a method called discounted cash flow calculations. For instance, it considers its investment opportunities as being good if the discounted cash flow is higher than the current cost. The value of the discounted cash flow for investment in the PM platform for offering software solutions was higher than the current cost of the investment, which paved way for its launch. In real essence, this value was determined as being 11% lower than the current cost of the project, which proved its viability of investment. Such a mode of appraisal of the company has vastly affected the viability of the company towards projecting its investment programs through ensuring that it has a higher rate of investment without the loss of profitability.
Consequently, the company has a forum that has enabled it to assess its stock market share index through application of the stock valuation method. This method gives a price value index share of $4.8 as at the business period ending the year 2013, which is also projected to increase in the investment dues of the projects within the company. In breath of this, the company has aimed at increasing profitability through outsourcing as a mode of reaching out to lower labour market prospects. This is a mode of increasing the market asset value through lowering the costs of production. Moreover, this mode of investment is geared towards increasing the profitability of the company, in which this value is divergent on an annual basis.
The dividend growth method of valuation for the Xerox Company stands at $732.5%, which is a representation of the earnings per share, which are on an increasing trend. This value is expected to increase in the coming years, which is expected to cause a reduced PE ratio, which is elemental in the cause of divergence of the stock prices. The divergence in the stock prices brings about the asset value index of the company by a margin of 10%, which shows that the company has a negative divergence of the stock prices. This has caused an increase in earnings per share, a consequent reduction in the PE ratio.
Divergence of prices is an element controlling the asset value share index of the Xerox Company. This is from the fact that the company assets, index and other constraints of liabilities move in an opposite direction. This also implies that the discretion processes within the company are based on the identification of the situations of divergence. This shows that the jurisdiction within the Xerox Company lies within the mandate of negative diversions, while diversification in production forms the major non-financial reason for the divergence in the technical indicator. The company`s divergence chart shows a downward move in the technical indicators as the prices of assets increase. This gives an explanation why there is divergence in the stock prices within the Xerox Company.
The weighted average cost of capital within the Xerox Company stands at $4.2 billion, which is determined by the corporate spending and the margins of flat revenue. For instance, in 2011, the company set up a hub for software resolutions, which was estimated to cost $200,000, a value that was higher than the expected corporate spending. This brought about the infrequencies in raising the capital dues for expansion, which brought about the need for seeking other forms of capital sourcing. On the other hand, the flat revenue margin within the company is on an incrementing trend, which is due to the influence of need for new modes of research and consequent production.
The company responds to these forms of divergence in the stock prices through external sourcing of funding for its projects. For instance, the company is on a trend of borrowing from financial institutions like the central bank, which provides both grants and loans for expansion. On the other hand, the company benefits from the description of its initial public offers, through sale of the market shares. In this regard, the Xerox Company benefited from increased revenue of $0.5 billion from the sale of its shares, which enabled it to expand in its production by over 10% margins. This has led to the preference to the discounted free cash flow method of evaluation, in which the company uses this appraisal method to evaluate its investment ventures. By consideration, the free cash flows are discounted at each investment appraisal in order to give the right course of approach for determination of investment.
The risks bestowed within the mandate of the Xerox Company include that of protection of its copyright and that of competition from valuable produces of similar goods. This implies that forgery and competition are possible risks that the company faces in the market, while vulnerability to liquidation due to increased liability payouts also forms a constraint that is a probable risk. This also implies that the company is at risk of liquidation. Consequently, the company deals with diversification in production and consequent free cash flow evaluations in order to respond to the possible risk of liquidation, which has led to the definition of its vision of sustainability.
The interest rate costs for the Xerox Company have been on a fluctuating trend, in which they stood at 15% by the end of 2009. This value increased to 16% in 2010, while it dropped to 14% in 2011. This shows that an analysis of the average interest cost for the company depicts lack of rigidity, in which determinants like the commodity prices and fluctuations in the global economy clarify the presence of the most prevalent interest rate costs. Moreover, increased liabilities, poor investment infrastructure and federal regulations are the major factors that control the definition of the interest stock rates.
The weighted average cost of capital of the Xerox Company is calculated using either the book value method or the market value method. In the book value method, there is establishment of three structures. The first structure is the product of the discount rate and the percentage of down payment, and then the second structure is the product of pretax interest and the note percentage of the seller, while the third structure is the product of the business tax loan and the loan interest. Summing up of these three structures gives the weighted average cost of capital of the Xerox Company, which, in this case, is 17.8%. The rate is lower in calculation based on the market value method, which does not put into consideration the pretax interest.
Basing on this analysis, the company is said to have a strategy for future growth, which involves the construction of amenities like outsourcing for markets through reaching out to potential foreign markets so as to raise the market index share. Moreover, the company has a laid down structure for future expansion that could see it source for low labour prospective areas in order to achieve the vision of reaching out to low cost production. This is through research of the potential hubs for investment and apprenticeship mode of employment that is elemental in reaching out to the qualified but untutored employees, whose essence is to reduce the cost of hiring professional employees (Kimmel, Weygandt, & Kieso, 2010).
In six months, the Xerox Company should be at the helm of cost leadership in production of all goods and services within its jurisdiction since it is set to increase its market share index through diversification in production, research in greener goods for the warm markets and consequent reduced cost of production. The current research within the company is projected to bring about new branches for provision of goods and services, which could lead to the setting up of new branches across the world. For instance, the research facilities for providing software solutions to consumers are being set up as tributary companies in other regions of the world. Such facilities are projected to increase the production efficiency of the company with a consequent increase in productivity.
This implies that the company requires extra financing, which puts it at the need for acquisition of bank loans for expansion. In this regard the company is at the jurisdiction of borrowing financial advances through sourcing out for loans from banks for it to be able to finance its new hubs. Consequently, the new facilities to be set need an advanced research program in order to take care of the competitive advantage through ensuring that the company produces unique goods and services that are different from its close competitors. This puts the requirement that the company borrows loans and grants from banks. By consideration, the cost of production is also projected to increase due to fluctuations of global commodity prices. This puts the need to reach-out to the bank loans in order to increase the rate of cash flow and the consequent profitability.
On the other hand, the risk scenarios within the company include the vulnerability to liquidation, if the company increases the cash flow geared towards payment of liabilities and debtors. On the other hand, the company is at the risk of reduced profitability if it does not structure its forum for diversified production, and a consequent risk of competition from potential producers if it does not structure its new markets research. Consequently, the company is at the risk of loss of consumers if it does not acquire the platform for its copyright materials` protection.
The financial assessment of the Xerox Company depicts a growth in terms of the net free cash flow, production and profitability. This is from the fact that the company has a laid down structure for diversification in production, acquisition of the market index share and cost leadership. These devices have been essential in the growth and expansion of the company since its inception in 1906.
About the Author
Nancy Bauman is a financial analyst and accounting expert. She is also an expert on business ethics and is constantly participating in university conferences as a member of the Educated Youth Movement. She regularly contributes articles related to business and loans at advanced-writer.com