12/26/2019 0 Comments
Failure of Canadian Solar - Essay Example This research aims to evaluate and present North Mountain Engagements LLP, a Hedge fund company which invests in different companies to increase their capital however the company invests in only those companies of which it could improve the earnings significantly and increase the value of the firm by twice. This is the reason the company invests and analyses the company thoroughly before it makes any investment decision. The report analyses one of the companies in the Solar PV industry, Canadian Solar which has been suffering from losses from 2006 and this report investigates whether the company would be able to improve its earnings by changing their strategies. North Mountain Engagements has a higher debt to equity ratio which is defined as total debt of the company in comparison to total equity and higher debt to equity ratio reflects higher risk. Thus, with higher risks shareholders demand higher return so; this is the reason why the North Mountain Engagements LLP requires higher profits. Canadian Solar has been known over the years as CSI meaning Canadian Solar International is suffering from losses despite of the overall demand in the industry has been growing and growing revenues of the company. Canadian Solar has reported total growth of 135.7% in five years from 2004 to 2008 with revenues of the company growing from $9.7 million to $705 million. With several opportunities in the industry, North Mountain Engagements feels that the Canadian Solar can live up to the potential and become an important firm to invest.... Canadian Solar has reported total growth of 135.7% in five years from 2004 to 2008 with revenues of the company growing from $9.7 million to $705 million. There are several reasons which have led Canadian Solar to situation where the company is showing negative net income and one of the major reasons for Canadian Solar suffering from losses is the increasing competition and this report discusses different factors that have resulted Canadian Solar to be in loss. Industry Overview The world economy has been going through recession and this recession has made an impact on major economies of the world. However, there are other factors besides recession which have influenced the profitability of Canadian Solar though the demand of solar PV industry has been showing tremendous growth since 1998 globally. In addition to this, steps and measures taken by government have been fruitful for the firms in the industry as it encouraged people to use more solar photovoltaic (PV) technology. The following graph reflects the demand of solar PV in the international market and it can be seen that the demand slope has increased considerable in the last five years or so. (Source: Mitchell, 2010) Demand has increased at a much rapid pace than previous years since 2004. The demand has been growing in the range of 21% to 27% from 1998 to 2003 however since 2004, the global demand has reported much higher growth rate in the range of 31% to 38% till 2007. Demand in 2008 reported much higher growth as it reached over 60%. The increasing demand of solar PV internationally indicates that the demand would further increase in the years to come and it is the right time for firms in the industry
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