Analysis of solvency and loss of asset value in publicly traded shipping firms

• Main Author: Thinh, Vo Quoc
• Other Authors: Okan Duru
• Format: Final Year Project
• Language: English
• Published: 2018
• Subjects: DRNTU::Science
• Online Access: http://hdl.handle.net/10356/75134
• Institution: Nanyang Technological University

There was a significant amount of available cash at low interest rates during the economic boom period. In fact, investors, banks and shipping companies pumped hundreds of billions into the shipping business with the hope of yielding a high return in 2006 and 2007. Subsequently, many shipping companies have massively invested in new ships building during this period. However, it takes 3-5 years to deliver the new-built vessel. By then, the shipping industry was facing with an economic downturn whereby the demand for sea transportation dropped drastically, leaving the market with overcapacity of ships. The Hanjin collapse case in 2016 was a striking example of poor financial management when this giant liner company failed to pay for their liabilities and then had to declared bankruptcy. Hence, the purpose of this paper was to conduct a financial analysis of the shipping companies by focusing on their liquidity, solvency and ship asset impairment loss using ratio analysis. Data for the study covered the period 2006-2016 and was obtained from the annual reports of the publicly traded shipping firms. It also compared the financial ratios of the sampled shipping firms with the industry average provided by the PricewaterhouseCoopers (PwC). A model was also created to estimate the dry bulk sector average financial performance which is essential for benchmarking. The second part of our report examined the loss of asset values of the selected companies and investigate how it is affected by market situations.