Analysis approach: In this report, five years (2007-2011) financial statements data and various financial ratios of these two companies are compared and analyzed. In order to evaluate the relative financial strength compared to the rest of the industry, financial ratios of these two companies are compared with the benchmark data of the Semiconductor Industry. Based on the above analysis, an investment recommendation is made. There are two ways common stock investors can benefit from investing in a specific company stock, i.e. dividend paid by the stock and the appreciation of stock price since the investment was made.
Discuss the advantages and the limitations of “ratio analysis” There are several advantages and limitations of accounting ratios, I will address some of the key ones in this section Advantages * Accounting ratios can be used by investors to make decisions on whether or not to invest in a company or sell existing shares. * Accounting ratios can be used by management to give an indication of a company’s financial health i.e. is the company profitable? Can they meet creditor obligations? Are stock levels being efficiently managed?
Determine the effect of several transactions on assets, liabilities, and owner’s equity. 4.27 Balance Sheet. Using accounting records prepare a balance sheet and determine the balance of the owner’s equity account. 4.28 Balance Sheet. Using accounting records prepare a balance sheet for a business and determine the balance of the cash and owner’s equity account.
Managerial Decision-making using Financial Ratios MGMT640 Managerial Decision-making using Financial Ratios Abstract: Background: Financial statements allow stockholders and management to determine the financial health of a business. Using ratio analysis businesses can gain a snapshot of their durability compared to other companies within their industry. Managerial decision-making skills are a direct correlation on the financial wealth of a business, and can identify strengths and weakness within an organization. Results: Quantitative results are shown though using financial ratios and financial statements. The financial ratios can be divided between five core categories.
(Horngren, 2012) Financial statements and their related disclosure notes provide information such as the results of operations, the financial position of the business, and cash flows. The most frequently provided financial statements for external users are the balance sheet or statement of financial position, the income statement or statement of operations, the statement of cash flows, and the statement of shareholders' equity. This paper will discuss financial accounting and how external stakeholders use financial information to make decisions. The balance sheet and the accompanying disclosures provide a lot of information to external users. The purpose of the balance sheet is to report a company's financial position on a particular day at the end of a period.
These ratios are most useful when compared to other ratios such as the comparable ratios of similar businesses or the historical trend of a single business over several business cycles. Horizontal analysis is a type of fundamental analysis in which certain financial data is used to assess a company’s performance over a period of time. Horizontal analysis can be assessed on a single company over a period of time, comparing the same items or ratios, or it can be performed on multiple companies in the same industry to assess a company’s performance relative to competitors. Vertical analysis is a method of analyzing financial statements in which each item in the statement is represented as a percentage of a single larger item. Vertical analysis makes comparisons between two or more companies in the same industry easier.
Ratios can tell if the business is using its assets appropriately, and if liabilities of the company are well-managed. It shows whether a business can invest in more capital, or if there is room for business growth. It shows whether a business will be able to pay off its debts or their short-term expenses or their daily expenses. It basically shows the strength and weaknesses of the business. It helps for forecasting on making certain financial decisions.
Financial Ratio Analysis 4. Accountability Assessment management reporting using financial and accounting reports is a proven resource for organizational leaders. The outcomes of the assessment should be used to help identify organizational needs as well as management inefficiency. This assessment will clarify how well management has done based upon the financial and accounting reports which are contained in the 2009 Annual Report. Management Assessment Report: Wal-Mart Stores, Inc.
Business Analysis The Donna Karan business analysis was conducted in the hope of deciding which part of the SWOTT analysis was most relevant to the decision of whether or not the company would prove beneficial to invest in. A Strengths, Weaknesses, Opportunities, Threats, and Trends (SWOTT) analysis was performed, and further identified Donna Karen’s internal and external stakeholders, and how the company is fulfilling their wants and needs; whether or not Donna Karan was succeeding in those areas. Donna Karan’s business analysis part two will identified and explores the company’s financial health. The information gathered will include the DKNY’s income statement, balance sheet, and statement of cash flow, which in turn will help the investor and management to use the financial information to make decisions to move forward. After reviewing Donna Karan of New York‘s financial information, this analysis will compare it to two of its main competitors, ANN Incorporation, along with Giorgio Armani.
Financial statements are simply the framework of a financial picture created over a given period of time. Through the use of such tools as ratio analysis, a financial manager is able to make the best possible decisions for the company Ratio uses and Benefits Ratios are used to take the information from the financial statements and make sense of them in such a way that is useful for a particular organization. “Financial ratios can be used to develop a set of statistics that can reveal key financial characteristics of a company “(Droms, & Wright, 2012, p. 88). Ratios allow managers to compare companies of unequal size, determine its rank within the industry, and compare performance of a single company from year to year. Before attempting to utilize ratios to analyze financial statements, managers must clearly understand the purpose of each financial statement and its content.