Abstract This paper explains that RatioAnalysis is an early warning indicator that enables the business owner and manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. The author relates that RatioAnalysis is done by comparing the specific company's ratios with the average of similar businesses and comparing the business's own ratios for several successive years, watching especially for any unfavorable trends that may be starting. The paper states that the current ratio measures the ability of the firm to pay is current bills, while still allowing for a safety margin above the required amount needed to pay current obligations.
Table of Contents
Liquidity Ratios Current Ratio Quick Ratio Net Working Capital
Activity Ratios Days Sales Outstanding
Average Payment Period
Fixed Assets Turnover
Total Asset Turnover
Inventory Turnover
Debt Ratios Debt Ratio Debt to Equity Ratio Times Interest Earned
Fixed Payment Coverage Ratio Profitability Ratios Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Return on Investment
Return on Equity
Earnings per Share
From the Paper "The ROI is determined by multiplying the Total Asset turnover by the Net Profit Margin. The figure is meaningful because it shows how well a company uses its assets to generate profits,. The basic formula is as follows:
ROI = Total Asset Turnover x Net Profit Margin
The DuPont method allows the firm to break down its return on investment into a profit on sales component and an asset efficiency component. Typically, a firm with a low net profit margin would have a total asset turnover. The relationship between the net profit margin and Total Asset turnover is largely dependent on the industry the firm operates."
Abstract In this article, the writer analyses, compares and contrasts the financial performance and position of John Lewis Plc, and Marks & Spencer Plc, mainly through the process of the ratioanalysis of the financial statements of the two companies. The writer provides a brief introduction of the two companies under discussion, such as their background information, similarities and differences and their core business. The writer deals with calculations of important financial ratios of the two companies and then analyses these figures. The writer compares and discusses the ratios in detail, discussing possible causes of changes and fluctuations and coming to various conclusions about the performance of the two companies. In addition, the writer looks at certain limitations of the exercise of ratioanalysis, emphasising the fact, that even though ratioanalysis is a great means of understanding the financial position of a company better, there are still many other factors which can impact those numbers but are difficult to quantify. The writer concludes by highlighting the main findings of the report and presenting a personal opinion on the attractiveness of two companies from an investor's viewpoint.
Outline:
Introduction
Analysis of the Ratios Profitability Ratios Gross Profit Ratio Net Profit Ratio Return on Capital Employed
Liquidity Ratios Activity Ratios Net Asset Turnover Ratio Stock Holding Period
Debtor Days
Creditor Days
Gearing Ratios The Limitations of the Exercise
General Limitations
Company Specific Limitations
Conclusions
From the Paper "John Lewis, increased its net profit ratio from 4.31% to 4.49% which is an increase of 4.18%. In regard to turnover, JLP's turnover increased from L4169.1 in 2003 to L4499.5 in 2004, which is an increase of nearly 8%. This shows that in terms of volume, it did a good job, but in terms of efficiency it worsened, as even though there was a volume increase of 8%, the increase in net profit ratio was only 4.18%. Most probable reasons for this could be, there was in increase in administrative expenses, or other overhead expenses, which does reflect poor efficiency. However it is possible that the firm was looking to increase market share quickly and hence might have spent an above average expenditure on things like advertising, which helped increase volume, but affected the bottom line. In this case, the investment may not have shown immediate results, but may improve turnover, and margins in the longer run."
Abstract This paper focuses on two large retailers in the area of retail home improvements, Lowes and Home Depot, and compares and contrasts their financial ratios in a five-year trend table along with the most recent industry averages. The information presented in this report can be used to help determine the over-all financial status of these two companies.
Financial Ratios Used
Home Depot
Lowes
Efficiency RatioAnalysis Liquidity RatioAnalysis Leverage Analysis Profitability Analysis
From the Paper "The inventory turnover ratio shows how many times per year a business can turn-over its inventory. In other words, this number represents how many times the business sells out of its inventory in a given year. This ratio is calculated by taking the cost of goods sold and dividing it by the average amount of inventory the business carries. Notice that these ratios are determined by the cost of goods sold because the inventory figures are carried on the boots at cost, not the price the merchandise will eventually sell for (Brealey, pg. 142). When comparing Lowe's and Home Depot to the industry average, we see that both companies' ratios were 5.0 for the year 2003 and the industry average was 4.8. This means that for the year 2003, both Lowe's and Home Depot were able to turn over their inventory a bit faster than the industry as a whole. "
Abstract This paper presents a capital budgeting analysis of Johnson & Johnson who manufactures and markets pharmaceuticals for both the health care and consumer markets. The paper examines their solvency and liquidity, as well as their growth over the pasty five years. The paper then analyzes their consistently high margins and discuses a financial ratioanalysis of the company. The paper contains tables.
Table of Contents:
Executive Summary
Financial RatioAnalysis Estimate of Capital Structure
Weighted Average Cost of Capital
Cash Flow Estimation
Capital Budgeting Analysis
From the Paper "The time frame for profitability is also fairly long. On a machine with a life span of eight years, it takes almost 6 full years to realize a payback. Remember that the profitability is highly sensitive to shifts in unit cost and unit price. Six years is a long time for the cost structure of the investment to change. If price pressures are felt, the project would become unprofitable almost immediately if they are unable to squeeze a corresponding cost decrease from their suppliers. For example, if at year three the unit price is squeezed, down to $195, and the suppliers cannot or will not adjust their prices to JNJ accordingly, the project's NPV becomes -106.48. This illustrates the real risk that price pressures have, even halfway through the project's life span."
Abstract This paper presents a quantitative analysis of financial statements 2004-2002 for Delta Airlines. The paper presents a financial ratioanalysis, a cash flow analysis and a common size balance sheet analysis. The paper looks at revenue and profit trends and includes several tables.
From the Paper "This report analyses the financial statements of Delta Airlines Inc. Included in the analyses are the company's financial statements for ther eporting years ending ..."
Abstract This paper is an analysis of a 2002 case of Revlon, Inc. focusing on marketing and financial performance of the company. It looks at the company's strategic focus as a major problem, resulting in a net sales slide. The paper performs an internal analysis, a SWOT analysis, and recommends a new strategy.
From the Paper "The major problem facing Revlon was its strategic focus. The company's strategies appear to be focused on selling the wrong products to the wrong target market. The strategy focus appears to doom Revlon to a..."
Abstract This paper describe the South African Breweries and its 2002 acquisition of Miller Brewing Company. The author analyzes the period before the acquisition that describes the company at that time, identifies issues and problems and the company's performance, strategy and future. The investigation includes Five-Forces and SWOT analysis.
From the Paper "South African Breweries was a large firm operating as a multinational brewer in the time of this case. In, however, the status of the company in the industry changed with its acquisition of Miller Brewing Co in the United States. South African Breweries renamed itself SABMiller, PLC.. The acquisition of Miller Brewing boosted London-based SABMiller to the number two position in the global beer industry. The primary focus of this case analysis is on the company's strategy and performance prior to the acquisition.
Abstract This paper explores the financial condition of Target Stores by examining financial ratios. It describes financial ratioanalysis as a useful technique to measure, compare and evaluate financial conditions and performance. The author provides information on Target's liquidity ratios and leverage.
From the Paper "Target Corporation is a growth company focused exclusively on general merchandise retailing. Its principal strategy is to provide exceptional value to American consumers through multiple retail formats ranging ..."
Tags: Balance Sheet, income statement, cash flow, financial analysis, ratioanalysis, efficiency ratios, leverage ratios, liquidity ratios and profitability ratios, current ratio, quick ratio, times interest earned, debt to equity
Abstract The paper focuses on leverage ratios, liquidity ratios, efficiency ratios and profitability ratios as they relate to NutriSystem, Inc. (NTRI). The paper aims to determine some financial strengths and weaknesses of the firm and to suggest some changes to NTRI's future plans to improve the firm's financial performance. The paper provides the figures and shows how NTRI appears to be in sound financial health. According to the paper, a few minor adjustments to borrowing policies and credit policies may be in order.
From the Paper "Leverage ratios are used to measure the relationship between debt and equity within the firm, or how much financial leverage the firm has taken on. A common leverage ratio used is the total debt ratio, which is simply the total liabilities divided by the total assets. In the case of NTRI the total debt ration is 0.27, a pretty respectable figure. This ratio shows that for every 1 dollar in assets the firm is only carrying 27 cents in liabilities. Because this ratio is low NTRI has the opportunity to take on more debt should the need arise."
Abstract This paper presents a brief financial analysis of the Exxon Mobil Corporation, which ranks second on Fortune 500's list of America's largest corporations. The paper specifically conducts a ratioanalysis and trend analysis for Exxon Mobil in order to analyze statistics for a given period and to provide insight into the company's long-term financial situation.
Outline:
Current Ratio Quick (Acid-Test) Ratio Inventory Turnover
Average Collection Period
Total Asset Turnover
Debt to Equity Ratio Net Profit Margin
Price to Earnings Ratio
From the Paper "Inventory Turnover is an important ratio that reveals the number of times the average inventory is completely swapped-out, with a higher number indicating better efficiency at moving product. It is calculated by dividing cost of goods sold by average inventory (beginning + ending inventory divided by 2). Exxon Mobil reported, in millions, $284,334 and $281,658 for cost of goods sold; as well as 9404 and 10018 in average inventory, respectively, for the years 2005 and 2006.
"The resulting ratios are 30.24 for 2005 and 28.12 for 2006. This indicates a decrease in the rate of inventory turnover, but may not by itself indicate any particular problems; since many external factors may influence this ratio."
This paper defines the term accounting ratios and details why they are a significant tool applied by accountants when presenting accounting statements.
Abstract The writer of this paper examines the importance of accounting ratios in business. Accounting ratios illustrate the present as well as the prospective, so that shareholders can visualize how much gain a business attained, the total worth of the assets and the level of cash reserves available. This well-researched paper discusses the advantages and disadvantages of accounting ratios. One significant drawback of the accounting ratio is that it depends too heavily on the conventional costs that lead to twists in quantifying performance. Ratios are required to be represented meticulously. They can entail the evidences to the performance of the company or financial environment. However, they are unable to demonstrate whether the performance is good or bad out their own. The writer details the manner in which the final figures of accounting ratios are achieved, while discussing the fact that these ratios necessitate some quantitative information for an informed analysis to be made. The writer contends and clearly explains why accounting ratios are completely dependent on the supplied data which may or may not be accurate.
Table of Contents:
Introduction
Discussion
Conclusion
References
From the Paper "A markedly low accounts ratio may give rise to angry suppliers and remarkably high inventory turnover ratios may lead to supply shortages and angry customers. The one that is correct for one company may not be considered appropriate for another one. Besides, no two companies are found to be similar irrespective of the fact that they are competitors in the same industry or market. Application of ratios to evaluate one company with another provides misleading information. Businesses may be within the same industry but have distinguished financial and business risk. Ratios are completely dependent on the data that may or may not be accurate."
Abstract This paper compares the financial statement analysis of the Walt Disney Company. It compares information on the company to the industry medians/averages and calculates ratios. The author interprets how the company's ratios compare to those of the industry median.
From the Paper "The Walt Disney Company together with its subsidiaries is a diversified worldwide entertainment company with operations in four business segments Media Networks Parks and Resorts Studio Entertainment and Consumer Products. The Walt Disney Company is the second ..."
Tags: Financial statement, financial analysis, current ratio, quick ratio, debt to equity. ratioanalysis Disney company.
Abstract The paper discusses a comparison between ten important companies, taken from different fields of activities. The comparison tool represents various financial-accounting ratios that would be best highlighted in quantitative terms, as well as the specific characteristics and performance of the company. The paper notes that the comparison is based on financial and accounting ratios as the stakeholders in these companies need to be informed at all times about their investments.
Outline:
Introduction
Retailer Industry : Home Depot vs. Sears
Beer Industry
Computer Industry
Healthcare Johnson and Johnson
Books Industry
Conclusion
From the Paper "For example, a retailer conducts business in collaboration with a multitude of other types of enterprises, among which we can mention - logistics companies, manufacturers, shipment companies, and so on. If the retailer has a negative performance, or even worse goes bankrupt, it can influence in an unwanted manner the other corporations it does business with. The companies, which represent the subject of our analysis, are to be presented in a pair of two, and have different characteristics and attributes. "
This paper is a classical case analysis presenting alternative proposals to achieve cost reductions in savings bonds processing at the Federal Reserve Bank of Richmond.
Abstract This paper presents a managerial accounting case study. In 1977 all Federal Reserve Banks were being pressured by the Board of Governors to reduce costs by targeting the banks' savings bonds processing activities since cost ratios for the activity at the FRBR were inferior to Federal Reserve System averages. The author uses three methods of analysis, each with three alternatives: Payback Period Analysis, Net Present Value Analysis and Internal Rate of Return Analysis.
Table of Contents
Introduction
Case Background
Methodological Concerns
Results of the Analyses
Payback Period Analysis Alternatives
Net Present Value Analysis Alternatives
Internal Rate of Return Analysis Alternatives Comments and Recommendation
From the Paper "The typical approach to payback period analysis requires that the initial investment be divided by the mean positive annual cash flow or benefit (such as a cost reduction in this present case analysis). In the case of alternative initiative number one, however, the initial investment all occurs in a six-month period. Thus, the annual cost savings attributable to the initiative were converted to semi-annual periods for the payback period analysis of this alternative. Thus, instead of using the formula payback period = initial investment/annual cost savings, the formula payback period = (initial investment/semi-annual cost savings)/2 was applied. The derivations of the costs and benefits used in this analysis are detailed in the NPV analyses. "
Abstract This paper presents a comprehensive analysis of Spendless Supermarkets Ltd., based on detailed information of the company's revenue and expenses. The paper examines Spendless's profit and loss statement and balance sheet in order to thoroughly evaluate its financial situation and then makes a suggestion as to whether it is wise to invest in this company. The paper then looks at the advantages and disadvantages of ratioanalysis as a form of financial analysis, the effectiveness of overhead allocation based on labor hours, and the effectiveness of activity-based costing.
Outline
Financial Analysis of Spendless Supermarkets Ltd. Advice on Whether to
Invest or Not
RatioAnalysis ? Advantages and Limitations
Overhead Allocation Based on Labor Hours
Activity Based Costing Description - Overview
From the Paper "The net profit margin ratio tells the amount of net profit per $1 of turnover a business has earned. That is, after taking account of the cost of sales, the administration costs, the selling and distributions costs and all other costs, the net profit is the profit that is left, out of which they will pay interest, tax, dividends and so on. The formula is: Net Profit Margin = Net Profit / Turnover* 100 = Profit before Interest and Taxation / Turnover* 100 (Net Profit = Gross Profit ? Expenses)."
