1. Prepare a financial ratio analysis of Sino-Forest’s 2008-2010 financial statements. How would you assess the company’s operating performance and financial condition?

Introduction and background

1. Financial analysis

2. Reverse merger

One of the key words in this case is “reverse merger”. According to historical statistics, it is shown that the reverse merger one time had been a boom in the market all over the world. But, here comes the question, what is a reverse merger?

Generally speaking, a reverse merger, also known as a reverse takeover or reverse IPO, is a simpler and time-shorter method for private companies to go public than common IPO.
In a reverse merger, investors of the private company plan to purchase and obtain the major shares of a public shell company, which is then merged with their own investing private company. In order to consummate the deal, the acquirer often trades its own shares with the public shell company in exchange for the shell’s stock, transforming a private company into a public company.
Comparing to common IPO, reverse merger must have its own advantages and disadvantages that trigger some companies to use this method while some companies do not. Firstly, common IPO requires the company to raise capital from the public, but some private companies actually do not want to go public because they do not want someone from outside have the significant influence or control of their own companies, and reverse mergers give a private company the chance to become public without this kind of threat, which not only will considerably simplify the process and but also will obey company-owners’ intention. Secondly, common IPO usually takes several months or even over one year to materialize. What is worse is that this time-costly process does not guarantee the company will finish and succeed in the IPO at the end of the