Financial Statement Analysis

1320 words - 5 pages

Team E has evaluated current and quick liquidity ratios for AT&T, Target and Toyota. The current ratio, also known as the working capital ratio, shows the businesses ability to pay current liabilities by using current assets only. The quick ratio disregards inventory to spotlight immediate liquidity by focusing on how well one could pay current liabilities without the sale of inventory. Higher ratios imply a greater risk to creditors while a lower ratio implies that the business is financially stable. The information below tells us that Target is a greater risk to creditors than Toyota and AT&T. AT&T does not report inventory on the financial statement, therefore, the quick and current ratio are the same. The quick ratio shows that Target has more assets than liabilities, putting them in a stable financial situation even though they have the higher ratios.Current Ratio= Total Current Assets/Total Current LiabilitiesQuick Ratio= Cash + Accounts Receivable (+ any other quick assets)/Current LiabilitiesCurrent RatioQuick RatioToyota121,720.4/120,255.2=1.01121,720.4-18,386.8/120,255.2=.86Target17,488/10,512=1.717,488-6,705/10,512=1.03AT&T22,556/42,290=0.63522,556/42,290=0.635Dupont ratio (ROE) and Profit MarginThe Dupont analysis is a useful tool to predict future performance, develop investment strategies, and assess capital needs. Assets are measured at their gross book value rather than at net book value in order to produce a higher return on equity (ROE). The ROE is also known as "DuPont identity" and tells us that ROE is affected by three things: profitability, operating efficiency, and leverage (Investopedia, 2009).Measuring assets at gross book value removes the incentive to avoid investing in new asset (Isberg, 1998). The DuPont ratio can be broken down to solve other business problems by locating exactly where deficit begins. Profit Margin indicates what portion of sales contributes to the income of a company. For example, using the information below tells us that for each dollar of sales that Target generates, they are contributing almost .30 cents to its bottom line. Targets profit margin is much lower because of the heavy competition in retail. AT&T does not have much competition and can charge what they wish.ROE=Profit Margin*Total Asset Turnover (Sales/Assets)*Equity Multiplier (assets/equity)Gross Profit Margin=Gross Profit (Revenue-Costs of Goods Sold) / Revenue *100ROEProfit MarginToyota22.2%*(264,758.9/326,887.8)*(326,887.8/119,538)=.49(58,783.4/264,758.9)*100=22.2%Target29.53%*(64,948/44,106)*(44,106/13,712)=1.4(19,182/64,948)*100=29.53%AT&T59.77%*(124,028/265,245)*(265,245/96,347)=.77(74,133/124,028)*100=59.77%Asset Utilization and Financial LeverageAsset utilization measures a company's ability to make best use of its resources (Isberg, 1998). Inventory turnover is one way to measure asset utilization. Properly measured and understood, asset utilization can be used as a metric for how well the business is...

Find Another Essay On Financial Statement Analysis

Financial Statement and Ratio Analysis: Key Tools to Successful Financial Management

2633 words - 11 pages Financial Statement and Ratio Analysis: Key Tools to Successful Financial Management Executive SummaryHow do firms assess their own strengths and weaknesses? How does a firm measure management's performance? Finally, how do firms compare themselves against the competition? The answer to these questions lies in the fundamentals of financial management. A crucial element in the success of any business organization is understanding the fundamentals

Louis Vuitton 2009 Financial Analysis. Includes: Luxury market analysis, Competitors analysis, FInancial statement evaluation, Accounting ratios analysis.

8414 words - 34 pages Untitled ESCP-Europe School of Management Master in European Business Financial Accounting Project Analysis of LVMH 2009 Financial Position s Andrea Pierobon, Eric Paul Sadler, Carolin Rademacher, Marco MagnettoThe History of Louis Vuitton In 1835, at the age of 15, Louis Vuitton became an apprentice packer and trunk-maker under the famous Monsieur Maréchal in Paris

Financial Statement analysis

2680 words - 11 pages confirmed, theconfirming bank becomes liable for the payment in case the issuing bank refuses to payagainst the L/C.e) Transferable L/CTransferable L/C is a perfect financial tool for middlemen to secure their margin withoutinvolving any funds. It allows dealing with more than one beneficiary. When atransferable L/C is issued in one's favor, he can transfer it to any seller and use it as apayment.f) L/C payable at sight"Payable at sight" means

Financial Statement

765 words - 3 pages products. Employees will use it to see if the companies will layoff or if they will receive raises or bonuses. Managers use it to see how they have managed their business for at least a year.ReferencesCharles J. Woelfel ( 2006) Financial Statement Analysis: The Investor's Self-study Guide to Interpreting and Analyzing Financial Statement.Retrieved on September, 15 2007 fromhttp://books.google.com/books?id=5YmwcYwT7GgC&dq=how+is+financial+statement

Financial Statement

1229 words - 5 pages Examining Financial Statements PAGE \* MERGEFORMAT 1 Examining Financial Statements PaperTeam C PaperVictoria MartinezTiwana NeelyKaren WilsonChuma LewisI. Annette JohnsonUniversity of PhoenixACC/300: Principles of AccountingWH07BMA10Gene A. CooperNovember 03, 2008Examining Financial Statements PaperLandry Restaurant's net income is \$45,901. After reviewing the different statements we decided that the Cash Flow Statement sheet explained in

Financial statement paper

1255 words - 5 pages 2003 was at \$45,901,054, net income for the year 2002 was \$41,521,616 and for the year 2001 the net income was at \$26,919,569.The information about the net income and the earnings per share were found on the Landry's Restaurants Consolidated Statement of Income. Earnings per-share increase is a positive sign for shareholders and investors. Some of the components that make up this financial statement are listed in the income statement. Basic

Fundamentals of Financial Statement

841 words - 3 pages Fundamentals of Financial StatementStarting a business requires much time, commitment and patience. The ultimate goal of most businesses is to be professionally and financially successful. In order to show the progress of the business operations, meticulous financial statements must be kept. This statement communicates economic information about the business to individuals involved in making decisions and judgment. According to the University of

Impact of a Stock Split on a Financial Statement

1218 words - 5 pages Cap \$100M \$100M 3-for-1 # of Shares 10M 30M Share Price \$10 \$3.33 Market Cap \$100M \$100M 3-for-2 # of Shares 10M 15M Share Price \$10 \$6.66 Market Cap \$100M \$100M Why do companies issue splits if there is no increase or decrease to capitalization? What kind of financial impacts do the stock splits cause to the companies and investors? First, the stock splits have greater psychological impacts to the investors than

Finance: The Basis

878 words - 4 pages the lender if the person will be able to make their mortgage payments, car payments, utilities, etc. based on their present income. This is equivalent to a company's cash flow statement. Using this essential information, financial analysts can execute more comprehensive research on the numbers. Ratio analysis, The DuPont Analysis and Trend Analysis are three examples of how financial analysts can make use of numbers to establish strength of

Financial Analysis

1523 words - 6 pages future sales, cash flow and in turn, can determine how much to invest and or how much inventory to purchase for future periods of time.Common-sized AnalysisCommon sized financial statements display all items as percentages. Using this type of financial statement will allow for an analysis either between companies or between different periods of one company. By using common sized financial statements, management and investors can see directly

vanke analysis

1904 words - 8 pages income statement, balance sheet and financial ratio analysis. In process of financial statement data analysis, this knowledge will be used.I studied business culture and strategy, business marketing, so I also master some professional theories, such as Porter's five forces and macro and micro environment analysis. I can use this basic knowledge to analysis a company's industry environment and it is benefit to analysis of the company's financial

Similar Essays

Analysis Of Financial Statement

579 words - 2 pages leverage measures used to tell whether a company is using financial leverage. Debt ratio is the total liabilities to the total of liabilities and owners equity whereas the debt/equity ratio is the ratio of total liabilities to total owner’s equity. Both of these measures are the same concept but just stated in a different manner. In conclusion, from looking at Panorama’s financial statement and using some of the ratio analysis formulas, the company’s

Financial Statement Analysis

1164 words - 5 pages After establishing that Macy's and JCPenney have adequate internal controls and use an independent public accounting firm to confirm the accuracy of reports, the next step is to examine the relationship among financial statement numbers and the trends in those numbers over time. "Financial statement analysis is used to evaluate the performance of a company with an eye toward identifying problem areas and to use the past performance of a company

The Cellar Door Restaurant: Financial Statement Analysis.

1553 words - 6 pages I. Executive SummaryBy analyzing three years' financial statement of Cellar Door Restaurant Pty Ltd. including Balance sheets, income statements and cash flow to evaluate the company financial status. To avoid subjective point of view, this essay will respectively evaluate the company's performance and outlook from the perspective of a long-term lender, management based and trade creditor based using the Trend Analysis, Vertical analysis and

Financial Statement Analysis Of Mehmod Textile Mills

5707 words - 23 pages satisfactory shareholders as well as creditors.Working CapitalWC =Current Assets - Current Liabilities2008------- 1386908396 -1055824886 = 3310835102009------- 1750363845 -1384082252 = 3362815932010------- 2263757417 -1924504789 = 3392526282011------- 2441209096 -1972157401 = 4690516862012------- 2672950020 -1955831122 = 717118898Comments:Working Capital is an important measure of any management; it helps to prepare changes in financial statement