A) CUI Global Inc.

Company background

CUI Global Incorporation is a publicly traded company which organized on 21 April

1998 and it is based in Tualatin, Oregon. The company currently is managed by
William Clough which is the president and CEO of CUI Global. CUI Global has
subsidiaries in four countries which located in United Kingdom, United States, Japan
and Canada. The subsidiaries of the company are namely Orbital Global Solutions,
Orbital Gas Systems Limited, Cui-Canada Incorporations, CUI properties and others.
CUI Global dedicated to maximizing shareholder value through its subsidiaries which
engages in acquisition, development and commercialization of new products and
innovative technologies (CUI Global, Inc. Common Stock (CUI) Quote & Summary
Data, 2019).

The company operates in two reportable segments, Energy segment and Power
and Electromechanical segment. First, energy segment provides advanced
technologies and natural gas infrastructure which includes a range of personalized gas
engineering solutions to automotive, manufacturing industries and etc. For the power
and electromechanical segment, the company offers power solutions that consist of
embedded and external power supplies and intelligent control of energy products.
Moreover, the company does offer components such as speakers, connectors and
control solutions comprising sensors to consumer electronics and medical industries
(S&P Global Market Intelligence, 2019).
 Segment Revenue (%)
90.00%
77.37% 78.98%
80.00% 70.56% 67.30% 67.55%
70.00% 64.01%
60.00%
50.00%
40.00% 35.99%
29.44% 32.70% 32.45%
30.00% 22.63% 21.02%
20.00%
10.00%
0.00%
2013 2014 2015 2016 2017 2018
Power and Electromechanical Energy

Figure 1: Shows the segmentation Revenue in (%) for CUI Global Inc.

The most contribution of the CUI Global’s revenue derived from the power and
electromechanical segment which is total 78.98% in 2018. The performance of the
dominant segment revenue is more than 50% every year from 2013 to 2018. On the
other hand, the energy and gas segment contributed lesser revenue compare to power
and electromechanical segment. The revenue from 2013 to 2018 was 29.44%, 35.99%,
32.70%, 32.45%, 22.63% and 21.02% respectively. The total segmented revenue was
$ 96,789,000 at 2018 which improved from year 2009 with $ 28,850,000.

As CUI Global is a manufacturing industry and its revenues were from the
dominant segment which is power and electromechanical, the company is exposed to
technology risk. If the technology used is out-dated and outmoded, it will affect the
productivity of its business. Furthermore, if the competitors use advanced technology,
customers may lose confidence to the company and goes to their competitors.
However, over-optimizing of machinery also will cause CUI Global a high
maintenance fee. To reduce such risk, the company need to keep trace and learn about
the innovation of technology.
 ROA & ROE
50%
0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-50%
-100%
-150%
-200%
-250%
-300%

ROA(%) ROE(%)

Figure 2: Shows the ROA & ROE in (%) for CUI Global Inc.

Based on the graph above, the return on assets and return on equity is in an upward
trend although the value is negative. The return on assets was -41.34% in 2009 and -
24.69% in 2018. The return on equity is lower than ROA which had a -270.22% in
2009 and improved to -41.71% in 2018. Throughout the 10 years period, both of the
ratios had obtained negative figure except year 2011 was positive ratio and year 2012
where the company did not disclose the value.

CUI Global facing accounting risk in the year 2012. The company did not
disclose and explain clearly its segments reporting in that particular year. Besides, the
company did not given any extra notes and explain for the reason of not disclosed. It
may loss customer’s confidence as they might think that the company is going into
bankrupt. Thus, the result will adversely affect the business of CUI Global and loss
market share. The company must mitigate the risk by reporting the actual results on
periodic basis.

Furthermore, the company also exposed to operational risk that related

organization structure. CUI Global was incurring direct and indirect loss every year in
which most of the ROA and ROE were in negative percentage. Meanwhile, the
company is failed to generate profit among the 10 years. In fact, the company must
reduce the risk by appointed a particular department to monitoring internal control
which helps reviewing and give advice to the company’s management for further
improvement.
 MARKET CAPITALIZATION
Millions $2,000

$1,500

$1,000

$500

$0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

MARKET CAPITALIZATION

Figure 3: Shows the market capitalization of CUI Global Inc.

CUI Global had the highest market capitalization at year 2010 at $ 1,700 million
which result that the company is issue more shares to raise capital during that year.
The market capitalization at $ 35 million was the lowest in year 2018. The movement
of graph is fluctuation in the 10 years period and is in a decreasing trend recently.

Board of director

Based on the 10 years analysis of 10-K report, there have two executive directors
from 2009 to 2018. William J. Clough, aged 67, is the Chief Executive Officer
(CEO) of CUI Global since 2006. He was also the CEO of the subsidiaries of CUI
Global. Mr. Clough was appointed as chairman of board of directors (BOD) from
2013 until now. However, his position is only effective until December 31, 2019. Mr.
Clough has hold dual position in the subsidiaries of CUI Global too but do not link to
politics. Matthew M. McKenzie is another executive director and Chief Operating
Officer (COO) of CUI Global. However, in the year 2018, Mr. Clough becomes the
only executive director of the company due to the resignation of Matthew M.
McKenzie. The executive directors had no much change in the company.
 CEO's Remuneration
$2,000,000

$1,500,000

$1,000,000

$500,000

$0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Salaries

Figure 4: Shows the CEO’s remuneration of CUI Global Inc.

The CEO Remuneration for year 2018 is $1.145 million. With the highest
were $1.569 million in 2012 and the lowest in year 2009 which is $0.264 million. In
the salaries in (%) to EBIT, the ratio was almost negative every year since the
company is failed to generate profit. The highest salaries ratio was 87% in 2011 and
the lowest was negative 111.38% in 2013. There was a high fluctuation throughout
the 10 years period. Over the 10 years, the CEO is holding a percentage of 2.25%
shares of CUI Global. However, the company did not declare the salaries of
employees.

In the year 2009 to 2013, there have four non-executive directors in the board
and Colton R. Melby is the chairman of BOD. During his tenure, the other three
directors are Sean P. Rooney, Corey A. Lambrecht and Thomas A. Price and their
positions are effective until 2018. After the resignation of Mr. Melby in 2014, the
chairman position is given to CEO and Paul D. White joined the board until now. In
the same year, Robert J. Evans also joined the board as an independent director but
resigned next year. After that, Joseph A. Mills replaced the position of Mr. Evans and
resigned in 2016. Therefore, the board remain four directors in the year 2016. The
next following year, C. Stephen Cochennet joined the board until now and Mr. Price
ceased from the position in 2017.

The average number of meeting held is 2.5 times per year. Throughout the 10
years period, the lowest number of meeting held is 1 times in 2014, 2017 and 2018
while the highest is 4 meetings in 2011 and 2012.
 BOD fees
$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

BOD fees

Figure 5: Shows the BOD fees of CUI Global Inc.

The BOD Fees for 2009 is $0.506 million and increase rapidly to $2.177
million in 2012 which also the highest amount throughout the 10 years. The BOD fees
were fluctuated from the year 2012 to 2018 due to the replacement and resignation of
non-executive directors. The averages of BOD fees were $1.511 million over the 10
years, includes 16.94% of executive directors’ fees which is $0.256 million and 83.06%
of non-executive directors’ fees which is $0.755 million. The company was not
disclosed the employees’ salaries.

CUI Global is also facing information risk. It is because the company does
not disclose clear information in annual report. For instance, the 10-k form of CUI
Global did not provide the information of employees’ salaries. This might confuse
investors or analysts and make them difficult to analyse the company. Therefore, the
management of the company should take action to disclose regular information on
every item in 10-k form for its stakeholders.

Auditor analysis

At the year 2009 and 2010, the internal auditor is only two persons which are Sean P.
Rooney and Thomas A. Price. For the year 2011 and 2012, Colton R. Melby joined as
a member of Audit Committee and ceased his position in 2012. As of 2017, the
internal auditors are Sean P. Rooney, Thomas A. Price and Corey A. Lambrecht. They
were the auditor committee since 2013. Due to the resignation of Mr. Price, C.
Stephen Cochennet took over his position as an internal auditor. The external auditor
of CUI Global from 2009 to 2011 was Webb & Company. Liggett, Vogt & Webb was
taken over the external auditor position for two years which is 2012 and 2013. After
that, from 2014 to 2018, the external auditor was Perkins & Company. All of the audit
firms not the Big Four Accounting Firm but are specialty and professional accounting
firm.

Audit Fees Audit Fees

$1,200 1.2000% $1,200 40.00%
$1,000 1.0000% $1,000
20.00%
$800 0.8000% $800
$600 0.6000% $600 0.00%
$400 0.4000% $400
-20.00%
$200 0.2000% $200
$0 0.0000% $0 -40.00%
201820162014 20122010 2018 2016 2014 2012 2010

Auditor Fee ($'000) Auditor Fee ($'000)

Audit Fee / Revenue Auditor Fee/EBIT

Figure 6&7: Shows the auditor fees to its revenue and EBIT for CUI Global Inc.

The auditor fee in 2009 was $0.078 million which is the lowest and peaked in
2016 with $0.961 million. The auditor fee in (%) to revenue was 0.27% in 2009 and
increased significantly to 1.13% in 2017. However, the percentage is dropped to 0.85%
in the year 2018. The auditor fee in (%) to EBIT for CUI Global is negative every
year except year 2011 which is 25.76%. The lowest percentage is negative 35.41% in
2013 and improved to negative 4.84% in 2018.

The company also exposed to compliance risk due to the business is bind with
legalization, government codes and regulations. For instance, a well-designed internal
control system has its inherent limitations on financial reporting and operational
process such as failed to prevent and detect errors. In fact, the degree of compliance
of the company unable to meets the criteria. CUI Global must ensure its product and
service meet the Government’s standard by integrated its internal control framework.

A) Napco Security Technologies Inc.

Company Background

Napco Security Technologies Incorporation was founded in 1969 and located in New
York, United States. It was formerly known as Napco Security Systems and changed
its name to Napco Security Technologies. The company currently is controlled by
their CEO, Richard L. Soloway. Furthermore, the company is only focus on one
strategic business unit which in security segment in which Napco Security
Technologies Inc. is a leading manufacturer that sells a wide array of security
products and software worldwide. The company developed and offered advanced
technologies for intrusion, access control systems, fire alarm systems, door locking
systems and others. Its products are sold and installed for commercial, institutional,
residential, industrial and government applications. The company usually sells its
products mainly to independent distributors, installers of security equipment and
dealers (S&P Global Market Intelligence, 2019). Napco Security Tech. also has long
heritage to provide reliable security solutions and developing innovative technology
to the professional security community which includes commercial fire
communicators, remote services, StarLink universal wireless intrusion, iBridge video
Wifi cameras and app. As the company only have one segment, the segment revenue
in % is 100 among the 10 years period. The segment revenue in 2018 was recorded
as$ 92 million which increase from $70 million in 2009.

As Napco Security Technology had only one dominant segment which is

security system, the company is faced diversification risk. The company should
explore to more segments to diversify risks. For instance, once an event such as
system breaks down take place, the company might loss its only income source which
its dominant segment incurred net loss. To reduce such risk, the company should
increase its business units as the company has sufficient capital to cover the costs.

Napco Security Technology is an industry which manufacturing and sells

security products. It is essential for company to keep its machinery up-to-date with a
latest version to manufactures products. Therefore, the company is exposed to
technology risk which a lousy technology would bring low efficiency, effectively and
productivity to the operation process. However, high-tech machinery also bring high
maintenance fee to the company. To reduce technology risk, the management need to
learn about new technology and keep trace its innovation.

Board of director

Based on the 10 years analysis of 10-K report, there have two executive directors
from 2009 to 2018. The Chief Executive Officer (CEO) for CUI Global is Richard L.
Soloway. As of 2018, he was 72 years old and holds the position for 20 years. He is
also the chairman of board of directors (BOD) but did not link to politics. Another
executive director is Kevin S. Buchel which holds the position of Chief Financial
Officer (CFO). From the year 2009 to 2018, the persons of executive director are the
same.

CEO's Remuneration
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Salaries

Figure 24: Shows the CEO’s remuneration of Napco Security Technology Inc.

The CEO Remuneration for year 2018 is $1.001 million which is the highest
amount and the lowest salary is $0.622 million in year 2009. The salaries of CEO
were increased significantly from 2009 to 2016 and dropped slightly in 2017 but
bounded back in 2018. In the salaries in (%) to EBIT, the ratio was negative in year
2009 and 2010 due to the negative value of EBIT. The highest salaries ratio was 25.03%
in 2011 and the lowest was negative 12.01% in 2010. From year 2011 to 2018, the
company was performing positive salaries ratio with an average of 12% throughout
the 10 years period. Over the 10 years, the CEO is holding a percentage of 33.50%
shares of Napco Security Technologies. However, the company did not declare the
salaries of employees.

There are five non-executive directors in the board which are Paul Stephen
Beeber, Randy B. Blaustein, Arnold Blumenthal, Andrew J. Wilder and Donna A.
Soloway. Donna A. Soloway is the wife of CEO of Napco Security Technologies. In
conclusion, there are a total of seven directors in the board and no changes on the
BOD members for 10 years.
 The average number of meetings held is 4.8 times per year. Throughout the 10
years period, the lowest number of meetings held is 4 times in year 2014, 2016 and
2017 while the most was 6 meetings during 2013.

BOD fees
$2,000,000

$1,500,000

$1,000,000

$500,000

$0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

BOD fees

Figure 35: Shows the BOD fees of Napco Security Technology Inc.

The lowest BOD Fees were $1.014 million in 2009 and increase slightly to the
highest which is $1.612 million in 2018. The BOD fees were stabled throughout the
10 years period due to no change of BOD positions. The averages of BOD fees were
$1.272 million, includes 13.13% of executive directors’ fees which is $0.167 million
and 86.87% of non-executive directors’ fees which is $1.105 million. The company
was not complied the employees’ salaries.

The company is exposed to the risk of less attractive for acquisition. As there
was no reappointment of CEO, it may cause the officer hold too much manpower and
monopoly the company. The CEO, Richard L. Soloway, beneficially own 33% of
outstanding shares of common stock in 2018. The concentration of ownership could
bring effects on the election of all directors. Therefore, it would make more difficult
or discourages a third party to acquire and control Napco Security Technology.

Auditor analysis

There are three internal auditors for Napco Security Tech. from year 2009 to 2018.
The audit committee members are Andrew J. Wilder, Paul Stephen Beeber and
Arnold Blumenthal. Mr. Wilder is the chairman of the audit committee. However,
there are no changes of the auditor’s position for 10 years. They usually held an
average of five meetings each year. In the other hand, Marcum & Kliegman LLP was
the external auditor for the company from 2009 to 2010. After that, HRR took over
the position for two years which is 2011 and 2012. From 2013 and onwards, Baker
Tilly became the external auditor of the company. All of them not a Big Four
Accounting Firm but provide audit, tax and advisory services.

Audit Fees Audit Fees

$400 0.50% $400 8.00%
0.40% 6.00%
$300 $300 4.00%
0.30% 2.00%
$200 $200
0.20% 0.00%
$100 $100 -2.00%
0.10% -4.00%
$0 0.00% $0 -6.00%
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009

2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
Auditor Fee ($'000) Auditor Fee ($'000)
Audit Fee / Revenue Auditor Fee/EBIT

Figure 46&17: Shows the audit fees to revenue and EBIT for Napco Security Technology Inc.

The auditor fees were decreased from 2009 to 2011 which is $ 0.21 million to
$ 0.165 million. After that, the auditor fee increased throughout the 8 years from
$ 0.165 million in 2011 to $ 0.35 million in 2018. The auditor fees in (%) to
revenue was peaked in year 2018 which is 0.38% and had a lowest percentage in year
2011 which is 0.23%. The percentage seems stable and less fluctuates because it
moves between 0.23% and 0.38%. The auditor fees in (%) to EBIT in year 2009 and
2010 are negative due to the poor performance of EBIT. After that, the percentage is
improving a lot from negative 3.84% in 2010 to the highest 6.57% in 2011. In the
following years, the percentage is maintaining an average of 4%.

Napco Security Techs is also facing information risk. It is because the

company does not declare clear information in annual report. For instance, the 10-k
form of Napco Security Techs did not provide the information of employees’ salaries
and its personal banker. These might misleading the investors or analysts and make
them difficult to analyse the company. Therefore, the management of the company
should take action to disclose regular information on every item in 10-k form for its
stakeholders.
 Moreover, the company have exposed to compliance risk. If Napco Security
Techs failed to remediate the weakness of its internal control, the company may
unable to maintain compliance with securities law requirements. For instance, the
securities law requirement is include the timely filing of periodic reports to applicable
listing requirements of stock exchange. The outcome is the company’s stock price
may decline materially if fail to meets compliance.

B) Non-financial risks of CUI Global Inc.

Key man risk

The risk is refers to shortage of talents and professionals in critical role within an
acceptable time frame. CUI Global Inc. is mainly depends on key members of its
senior management team like Daniel N. Ford (CFO) and Matthew M. McKenzie
(COO). The company is dependent upon their efforts to manage its company as well
as development of strategic direction, technologies and business culture. Therefore,
the resignation or loss of key personnel in management team could seriously harm the
operation and business of CUI Global. The recruitment of staffs those are highly
skilled in managerial, technical and marketing also difficult within an acceptable
timeframe. The company needs to retain its officers and key employees to continued
employment through contract.

Supplier risk

The company manufactures and sells its products by using the resources from
suppliers. If the suppliers failed to provide an adequate supply of components or raw
materials, it may harm the business and growth of company could be limited.
Furthermore, there are technical challenges to the suppliers for scaling up capacity
which require substantial additional funds. For instance, CUI Global Inc. is a small
company which also represent only a small portion to the business of its supplier. If
supplier’s capacity constrained, they may decide to allocate their available resources
to the customers that represent a larger portion which can generate large profits to
them. To minimize the risk, the company needs to increase the number of suppliers to
grow the business.

Competitive risk
CUI Global is exposed to competitive risk due to the new entrants and introduction of
new distribution models in the markets. This is because the new entrants would
introduce new products and technology to gain market share thus the products of CUI
Global are difficult to attract customers. Hence, the consequences are reduced profit
margins, create pricing pressure, loss of market share and increased sales and
marketing expense. Any of the consequence may significantly harm the financial
condition and operating results of the company. The company should update and
upgrade their technology and products to reduce the risk.

Reputation risk

The reputation of the company will be affected if found defects in its products. The
company’s products are complex which may contain undetected errors or defects. The
defect product will lead to product returns and implement design updates or changes.
Therefore, if an error found in its product will result loss of existing or potential
customers, negative publicity, warranty claims against the company, harm business
operations, lost revenue and other negative effects. The company should review the
manufacturing process to reduce errors in the products.

Economic risk

CUI Global is exposed to economic risk which the condition in the global economy
may significantly restrict the company’s ability to generate profits and obtain
financing. The fundamental soundness of domestic and international economies will
impact on the purchasing power of customers. For instance, the ability of the
company to obtain debt or equity financing will be influenced by the changes in
governmental banking, fiscal and monetary policies. Therefore, these macroeconomic
conditions could affect profitability, sales and performance of operations. The
company should employ a consultant to develop a good risk management plan to deal
with economic risk.

B) Non-financial risk of Napco Security Techs.

Succession risk
The risk is refers to the loss, retirement or death of the leader in a company. The
success of Napco Security Tech. is dependent upon the efforts of its Chief Executive
Officer (CEO) which is Richard L. Soloway. Mr. Soloway plays a critical role in the
development of security system, business culture and strategic direction. However,
the company currently also did not develop succession plan to address the loss of its
CEO’s services. Therefore, resignation, retirement or death of CEO could seriously
harm the operation and business of Napco Security Techs. The recruitment of capable
person is also difficult within an acceptable time frame. The company needs to retain
its officers through contract or develop succession plan to ensure the company
operates smoothly.

Competitive risk

Napco Security Technology is exposed to high competitive risk due and they may be
unable to compete it effectively. Furthermore, The Company need to compete
approximately 20 competitors that manufacture and sells security equipment to
control stations, distributors and dealers. Most of the competitors have substantially
greater financial and other resources than Napco Security Techs. For example, its
competitors may have advanced and innovative technology for manufacturing process
thus the better features, pricing, reliability and quality of the products. Therefore, if
the company unable to compete any one of the factors, could bring negative impacts
on the business of the company. Napco Security Technology must reduce the risk by
increasing its expertise on the particular segment, increase reputation and provide
products to customers on a timely basis.

Economic risk

Napco Security Technology is exposed to economic risk which the deterioration of

United States and international economic condition may significantly impact on the
company’s business. The bad economic condition will also decreased the profit,
revenue and cash flow levels in future periods. In fact, the event of such deterioration
will result the current or potential customers experience cash flow problems thus
delay or cancel purchases of security products. In addition, customers may be default
their payment to the company and result in high expenses in relation to company’s
cash flow and revenues. Therefore, the company should employ a consultant to
develop a good risk management plan to deal with economic risk.

Tax risk

The risk refers to the company’s business had adversely influenced by tax
consequences of offshore operations. Napco Security Technology operate on a global
basis which they are generating a portion of earnings outside the United States. To
eliminate the material incremental tax expense, the company intended to reinvest the
operating income in their foreign operations indefinitely. It will result that a portion of
assets will remain outside the United States. However, companies would be subject
additional withholding taxed if those reinvested incomes were repatriated into home
country which is the United States. Therefore, the company should set up a
department that expert in taxation to manage company’s tax risk.

Foreign currency risk

Napco Security Technology exposed to exchange risk due to their operations in the
Dominican Republic. The business of the company would be affected by a weakening
of US Dollar against the Dominican Peso as the company conducts certain
transactions in Dominican Pesos. Therefore, if the currency exchange rates fluctuate
significantly, the potential result is the business expenses of Napco Security Techs
would be increased. The company should take action to eliminate currency risk by
entering into derivatives market such as hedging and futures contracts.

C) Financial risk of CUI Global

Liquidity risk
 Current ratio, Quick ratio & Cash ratio
4.00
3.49
3.50
2.84 2.92
3.00
2.50 2.94
2.24 2.18
2.46 1.91
2.00
1.80 1.51 1.81 1.45
1.50 1.26 1.21
1.09
0.89 1.084
1.00 0.78 0.72 0.947 1.07
0.50 0.653 0.669
0.50 0.426
0.066 0.038 0.214
0.00 0.019 0.260
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Current Ratio Quick ratio Cash Ratio

Figure 8: Shows the current ratio, quick ratio & cash ratio for CUI Global Inc.

The current ratio is fluctuates greatly which move up and down in the 10
years period. At the first 6 years, the quick ratio is in an upward trend while the
remaining 4 years became downward trend. The ratio was 1.26x in 2009 then sharp
increase to 3.49x in 2014 but dropped to 1.91x in 2018. The movement of quick ratio
is identical with current ratio. The quick ratio was 0.78x in 2009 and peaked in 2014
with 2.94x then reduced to 1.21x in 2018. The cash ratio also followed the
movements of current ratio and quick ratio. It was 0.666x in 2009 and 0.214x in 2018.
The highest value was in 2013 which is 1.084x and the lowest is 0.019x in 2011. The
cash ratio refers to the ability of the company repaying its short-term debt by using
cash and cash equivalents; therefore the cash ratio is much lower than current ratio
and quick ratio.

These ratios are used to measure the liquidity of company. The higher the ratio,
the more liquid the CUI Global is. The acceptable benchmark of current ratio and
quick ratio for manufacturing industry is 1.5x and 1x respectively. The CUI Global
was exposed to liquidity risk because its current ratio and quick ratio is 1.91x and
1.21x which higher than the acceptable benchmark. However, high liquid is not
necessarily good due to the company may have a problem to collects its account
receivables. The cash ratio shows that CUI Global is unable to repay the short-term
obligations by using cash and cash equivalents as its ratio was 0.214x lower than
benchmark which is 0.5x to 1.0x.

Financial leverage risk

 Debt ratio & Debt-to-equity ratio
7.00
5.531
6.00
5.00
4.00
3.00 1.945
1.539
2.00
0.672 0.526 0.642 0.689
0.846 0.667 0.446 0.411 0.529
1.00 0.606
0.402 0.408
0.00 0.309 0.291 0.345 0.391 0.346
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Debt Ratio Debt-to-Equity Ratio

Figure 9: Shows the debt ratio & debt-to-equity for CUI Global Inc.

The ratio refers to how much the CUI Global rely on debts to finance its business and
assets. The debt ratio had a stable movement which no fluctuation in the 10 years
period. It was 0.846x in 2009 and 0.408x in 2018. The lowest value was 0.291x in
2014 and the highest in 2009. The debt-to-equity ratio is on a downward trend which
the ratio was 5.531x in 2009 and 0.689x in 2018.

Generally, the higher ratio will cause more risky of a company. The debt ratio
of CUI Global is 0.408x which lower than 0.5, means the company is not prefer debt
financing. Furthermore, different industry had its different debt-to-equity benchmarks,
but high ratio considered risky in creditors’ perspective. The ideal debt-to-equity ratio
is 1.0 to 1.5. As the debt-to-equity ratio of CUI Global is below 1.0, the company is
less attractive to investors.
 Capitalization Ratio
0.90
0.80 0.8101
0.70
0.60
0.50 0.5315
0.4499
0.40
0.30 0.3151 0.2169 0.1947
0.20
0.1825 0.1825 0.1935
0.10 0.1668
0.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Capitalization Ratio Linear (Capitalization Ratio)

Figure 50: Shows the capitalization ratio for CUI Global Inc.

The capitalization ratio is also known as financial leverage ratio which uses to
compare the long-term debt of CUI Global to total capitalization. The higher the ratio,
the more risk the company fail to repay its debt on time. Higher ratio may also
difficult to company to obtain debt financing. Based on the graph above, the
capitalization ratio was on a downward trend with the highest 0.8101 in 2009 to
0.1947 in 2018. The movement of the graph was also less fluctuating. Therefore, the
company is less risky as it’s obtained a low ratio in recent year.

Credit risk

Solvency Ratio
10.00%
2.78% -1.27%
0.00%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-10.00%
-7.44% -16.38%
-13.18%
-20.00% -20.32%
-30.00%
-29.38%
-40.00% -38.06%

-50.00% -47.60%

-60.00% -56.66%
Solvency Ratio Linear (Solvency Ratio)

Figure 61: Shows the solvency ratio for CUI Global Inc.
The solvency ratio of CUI Global is highly volatile. In 2009, the ratio was -47.60%
and peaked in 2011 with 2.78%. It was declined to the lowest value in 2018 which is -
56.66%. The benchmark of solvency ratio is the percentage must more than 20% to be
observed as financially sound. If the company unable to reach the benchmark, it
reflects that the company may default on their debt obligations to creditors, investors
and others. However, the company failed to achieve sound financial which most of
the solvency ratios were in negative value. The company is considered in a danger
zone and risky to its creditors.

Interest Coverage Ratio

5.00
0.5708
0.00 -2.0271
-5.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-4.6233 -3.3339 -5.9429
-10.00 -9.7049 -13.5011
-15.00 -14.4775
-20.00
-25.00 -27.3900
-30.00
-35.00
-33.9223
-40.00

Interest Coverage Ratio Linear (Interest Coverage Ratio)

Figure 72: Shows the interest coverage ratio for CUI Global Inc.

The interest coverage ratio refers to the ability of CUI Global to meet its interest
expenses. Based on the graph above, the ratio is on a downward trend. It was -9.7049
in 2009 and decrease dramatically to -33.9223 in 2018. The highest value was in 2011
which is 0.5708. The ratios lower than 1.0 resulting that the company had difficulties
to generating income to pay its interest payments. Among the 10 years period, CUI
Global failed to obtain the ratio more than 1, indicated that the company may face
bankruptcy due to the burden of debt.

Bankruptcy risk
 Altman Z-score
50.00

40.00 39.5902

30.00

20.00

10.00
2.3288 2.5205
4.9952 -0.7670 0.3868 -0.8718
0.00 0.7502 3.2675 2.0138
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-10.00

z-score Linear (z-score)

Figure 83: Shows the altman z-score for CUI Global Inc.

The Altman Z-score is used for the company to measure the bankruptcy risk.
The z-score for CUI Global is on a downward trend. Based on the graph above, it was
4.9952 in 2009 and reduced to -0.8714 in 2018, which is the lowest value out of the
10 years. The z-score had a minimal fluctuation in the 10 years period. However, that
is a sharp increase from 4.9952 to 39.5902 in 2010 which also the highest value out of
the 10 years.
If a company z-score is greater than 3.00, indicates that the company is safe
from bankruptcy. However, the company will go into bankruptcy if the z-score below
1.80. Since the z-score of CUI Global is on a downward trend and obtained negative
value in 2018, they might had a large chance go into bankruptcy within the next two
years.

C) Financial risk of Napco Security Techs.

Liquidity risk
 Current ratio, Quick ratio & Cash ratio
6.00
5.10 5.71
4.91 4.86 4.62 4.77
5.00
4.90
4.00
2.92 2.71 3.10
3.00 3.25 2.72
2.01
2.00 2.30 2.36 2.39
1.71
1.16 1.09
1.00 0.361 0.423 0.330
0.65 0.237 0.375 0.249 0.565
0.186 0.269
0.00 0.140
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Current Ratio Quick ratio Cash Ratio

Figure 98: Shows the current ratio, quick ratio & cash ratio for Napco Security Technology Inc.

The current ratio is on an upward trend which the ratio was 2.01x in 2009 then sharp
increase to the highest value of 5.71x in 2018. Moreover, the lowest ratio was 1.09x
in 2010. The movement of quick ratio is identical with current ratio. The quick ratio
was 1.16x in 2009 increase to the highest ratio of 3.10x in 2018. The lowest ratio is
also in year 2010 which is 0.65x. The cash ratio is on a stable movement that have
minimal changes within the 10 years period. It was 0.186x in 2009 and 0.565x in
2018 which also the highest value among 10 years. For the lowest ratio is 0.140x in
2010. The cash ratio refers to the ability of the company repaying its short-term debt
by using cash and cash equivalents; therefore the cash ratio is much lower than
current ratio and quick ratio.

These ratios are used to measure the liquidity of company. The higher the ratio,
the more liquid the Napco Security Techs is. The acceptable benchmark of current
ratio and quick ratio for manufacturing industry is 1.5x and 1x respectively. The
Napco Security Techs has low liquidity risk because its current ratio and quick ratio
is 5.71x and 3.10x which higher than the acceptable benchmark. However, high liquid
is not necessarily good due to the company may have a problem to collects its account
receivables. But high liquid also allows the company meets its financial obligations
with available funds on hand. There is no ideal figure for cash ratio, but the ratio
between 0.5x to 1x is preferred by investors. The cash ratio shows that Napco
Security Techs is able to repay the short-term obligations by using cash and cash
equivalents as its ratio was 0.565.
Financial leverage risk

Debt ratio & Debt-to-equity ratio

2.10 1.919
1.95
1.80
1.65
1.50
1.35
1.20
1.05 0.892 0.942
0.90 1.014
0.75 0.716
0.584 0.448
0.60 0.417
0.45 0.399
0.30 0.503 0.485 0.263 0.246
0.369 0.310 0.155
0.15 0.285
0.00 0.208 0.197 0.134
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Debt Ratio Debt-to-Equity Ratio

Figure 109: Shows the debt ratio & debt-to-equity ratio for Napco Security Technology Inc.

The ratio refers to how much the Napco Security Techs rely on debts to finance its
business and assets. The debt ratio had a downward trend in the 10 years period. It
was 0.0.503x in 2009 and 0.134x in 2018 which also the lowest value among the 10
years. There was a fluctuation during the year 2009 to 2011 which the ratio peaked at
0.892x then decrease to 0.942. The debt-to-equity ratio is also on a downward trend
and the movement is similar to debt ratio. The ratio was 1.014x in 2009 then peaked
at 1.919 next year and reduced to 0.155x in 2018.

Generally, the higher ratio will cause more risky of a company. The current
debt ratio of Napco Security Techs is 0.134x which lower than 0.5, means the
company is very unlikely raise capital by using debt. Furthermore, different industry
had its different debt-to-equity benchmarks, but high ratio considered risky in
creditors’ perspective. The ideal debt-to-equity ratio is 1.0 to 1.5. As the debt-to-
equity ratio of the company is below 1.0 which was only 0.155, the company is less
attractive to investors.
 Capitalization Ratio
0.5000
0.4353
0.4000 0.3651
0.3188 0.3324
0.3000 0.2705

0.2000 0.1916
0.1637
0.1000 0.0580
0.0807 0.0065
0.0000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Capitalization Ratio Linear (Capitalization Ratio)

Figure 20: Shows the capitalization ratio for Napco Security Technology Inc.

The capitalization ratio is also known as financial leverage ratio which uses to
compare the long-term debt of Napco Security Techs to total capitalization. The
higher the ratio, the more risk the company fail to repay its debt on time. Higher ratio
may also difficult to company to obtain debt financing. Based on the graph above, the
capitalization ratio was on a downward trend with the highest 0.4353 in 2010 to
0.0065 in 2018. Therefore, the company was improved and became less risky as it’s
obtained a low ratio year by year.

Credit risk

Solvency Ratio
100.00% 92.28%
80.00%

60.00% 53.30%
49.90%
40.00%
34.61%
16.88%
20.00% 10.29% 26.60%
-5.85% 21.19%
0.00%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-20.00%
-25.94%
-40.00%

Solvency Ratio Linear (Solvency Ratio)

Figure 21: Shows the solvency ratio for Napco Security Technology Inc.
The solvency ratio of Napco Security Technology was on an upward trend. In 2009,
the ratio was -25.94% and increase steadily to 92.28% in 2018 which also the highest
value among the 10 years. The benchmark of solvency ratio is the percentage must
more than 20% to be observed as financially sound. If the company unable to reach
the benchmark, it reflects that the company may default on their debt obligations to
creditors, investors and others. Based on the graph above, the result shows that the
company had high solvency in its business which obtained extremely high percentage
in 2018 which is 92.28%. The company is indicated as creditworthiness which able to
meets its debt obligations to their creditors.

Interest Coverage Ratio

120.00
103.8765
100.00
80.00
76.8434
60.00
40.00
35.3240
20.00 7.5091 14.6305
1.5139 3.3168 24.5628
-9.1124 -2.2025
0.00
-20.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

-40.00

Interest Coverage Ratio Linear (Interest Coverage Ratio)

Figure 22: Shows the interest coverage ratio for Napco Security Technology Inc.

The interest coverage ratio refers to the ability of Napco Security Technology to
meet its interest expenses. Based on the graph above, the ratio is on an upward trend.
It was -9.1124 which is the lowest value recorded in 2009 and increase dramatically
to 103.8765 in 2018 which also the highest value among the 10 years. The ratios
lower than 1.0 resulting that the company had difficulties to generating income to pay
its interest payments. Except the year 2009 and 2010, Napco had obtain the ratio more
than 1 in the remaining years, indicated that the company has adequate income to
meet its interest payments.

Altman Z-score
 Altman Z-score
30.00
23.9045
25.00

20.00

15.00
11.0214
10.00 10.4255
5.9224
7.1048
5.00 5.8944
1.6963 1.5566 4.1375
2.9881
0.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-5.00

z-score Linear (z-score)

Figure 23: Shows the Altman Z-score for Napco Security Technology Inc.

The Altman Z-score is used for the company to measure the bankruptcy risk. The z-
score for Napco Security Technology is on an upward trend. Based on the graph
above, it was 1.6963 in 2009 and increased to 23.9045 in 2018, which is the highest
value out of the 10 years. The z-score had a stable movement which increases slowly
in the 10 years period. However, that is a sharp increase from 10.4255 to 23.9045 in
2017 and 2018.
If a company z-score is greater than 3.00, indicates that the company is safe
from bankruptcy. On the other hand, the company will go into bankruptcy if the z-
score below 1.80. Although the z-score of Napco Security Techs in 2009 and 2010 is
below the benchmark and exposed to bankruptcy risk, but the movement is on an
upward trend and keep improving its business. Meanwhile, they might eliminate the
bankruptcy risk recently.
References
CUI Global, Inc. (2018, December 31). Retrieved July 14, 2019, from
Nasdaq:http://secfilings.nasdaq.com/edgar_conv_html%2f2019%2f03%2f18%
2f0001437749-19-005177.html#FIS_BUSINESS

CUI Global, Inc. (2018, December 31). Retrieved July 14, 2019, from Nasdaq:
http://secfilings.nasdaq.com/edgar_conv_html%2f2019%2f03%2f18%2f0001
437749-19-005177.html#FIS_BUSINESS

CUI Global, Inc. Common Stock (CUI) Quote & Summary Data. (2019, July 12).
Retrieved Jul 14, 2019, from NASDAQ: https://www.nasdaq.com/symbol/cui

S&P Global Market Intelligence. (2019, Jul 23). Bloomberg. Retrieved Jul 24, 2019,
from Company Overview of Napco Security Technologies, Inc.:
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=
289814

S&P Global Market Intelligence. (2019, Jul 14). Company Overview of CUI Global,
Inc. Retrieved Jul 14, 2019, from Bloomberg:
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=
676196