Business Report:
Open Text & PC DOCS


Part I

  1. This report will analyse Open Text Corporation and PC DOCS Group International,Inc.
  2. Both companies' primary business focus is the management of electronic documents.
  3. Open Text has its headquarters in Waterloo, Ontario and PC DOCS has itshead office in Toronto, Ontario. Both companies operate internationally.

Part II

  1. All the consolidated financial statements of Open Text were audited byPricewaterhouseCoopers and those of PC DOCS were audited by Deloitte &Touche.
  2. The financial statements of Open Text were prepared for a single legalentity but those of PC DOCS were prepared for its subsidiaries.
  3. The major source of revenue for Open Text is the market for network searching,collaboration, workflow, group calendaring & scheduling, and documentmanagement. The major sources of revenue for PC DOCS are enterprise document & knowledge management systems and financial & practice informationmanagement systems for professionals.
  4. Being software companies, neither Open Text nor PC DOCS has to deal withinventory.
  5. Open Text does not specify their expected consolidated capital expendituresfor the next fiscal year. PC DOCS expects to have capital expendituresof approximately $5 million to $6 million for the next fiscal year.
  6. The CEO of Open Text envisages strong revenue growth, improved profitability,increased market penetration & brand recognition and continued productinnovation for the company. The CEO of PC DOCS envisages capitalizing ontheir early lead in technology, market share & mind share for the knowledgemanagement market.

Part III

Comparative ratios & analysis:
Open Text PC DOCS
Current Ratio 2.4:1 1.82:1
Quick Ratio 2.3:1 1.72:1
Working Capital $38,640,000 $66,592,000
Inventory turnover N/A N/A
  1. Open Text has no outstanding lines of credit but they have a $6.5 millionline of unused credit. PC DOCS, however, has a $20 million loan outstanding.
  2. Taking into consideration the meanings of the above ratios and analysisfor each company:
    1. Open Text, with a pretty high Current Ratio and Quick Ratio should haveno trouble borrowing monies from the banks to meet short-term obligationsto pay a loan. PC DOCS has a somewhat lower Current Ratio and Quick Ratiobut they should not have much trouble borrowing either.
    2. Open Text earns an 'Outstanding' credit rating, based on its excellentratios and the fact that they have no unpaid lines of credit to contendwith. PC DOCS earns a 'Good' credit rating since its ratios are sound butit has $20 million in unpaid credit.

Part IV

Comparative ratios & percentages:
Open Text PC DOCS
P-E ratio N/A N/A
Dividend yield on common stock N/A N/A
Return on ave. total assets (10.9%) (50%)
Return on ave. shareholder's equity (5.58%) (59.7%)
Equity ratio @ end of fiscal year 74% 44%

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