Longitudinal Analysis: When doing a longitudinal financial analysis on Costco, Costco’s profit margin has been slightly increasing between 1999 and 2008. It had a profit margin of 12.79% in 1999 to 13.29% in 2008. This gives the company an average profit margin of 13.16% compared to the industry average of 20.40%. This shows that even though Costco has been gradually increasing its profit margin, it is still below the industry average. The company needs to improve their financial performance by controlling cost to increase their profit margin.
Figure 1 Reported Company Profits (In billions of dollars) Average Self-esteem Scores 1. Summarize the information presented in Figure 1. According to the information the researcher collected from the employees through a self-esteem questionnaire, shows that the greater a companies profit the higher its employees self-esteem is. 2. The researcher conducting this study believes that employees are more productive when they have higher levels of self-esteem.
This week we learned that companies are required to prepare a statement of cash flows because it gives a more accurate snapshot of the actual cash flow of a company. Financial statements give an overall picture of how much revenue a company is reporting, but high revenue does not guarantee that the company has the ability to pay its bills. The statement of cash flows is a tool designed to help external users make sound economic decisions about the company. The statement of cash flows is divided into three sections: 1) operating activities, 2) investing activities, and financing activities. The operating activities section analyzes the company's flow of cash as it relates to a net loss or net income.
Being able to track sales compared to the previous years’ numbers is a valuable tool in being able to track business. They use this information to forecast on where they think the business will be heading in the next week, month, or year. If the debt percent gets to high then they need to adjust the amount of liabilities that they have to bring that number down. Knowing the times interest earned ratio allows the managers to know at what percent the company is earning interest on its net income. Investors find this information lucrative because the more expendable cash a company has the more likely they are to pay out in dividends for the stock holders..
Profit ratios are used to determine the overall efficiency of the firm in generating returns for its shareholders. Assets utilization ratios help managers to determine how the company is using its assets to generate sales and profits. Liquidity ratios measure the ability of the company to meet its debt obligation on a timely basis. The ratios used to determine liquidity are the current ratio and quick ratio. Capitalization ratios evaluate the financial leverage of a company.
Liquidity Ratio Calculations: Current Ratio = Current Assets / Current Liabilities $147,800 / $90,283 = $1.637:1 Acid-Test Ratio = (Cash + Short-Term Investments + Net Receivables) / Current Liabilities $89,664 + $0 + $51,869 / $90,283 = $1.567:1 Receivables Turnover = Net Credit Sales / Average Receivables ($1,109,295 - $89,664) / [($51,869 + $81,557) / 2] = 15.283 *Average Collection Period = 365 / 15.283 = 23.883 Days When evaluating Huffman Trucking’s ability to pay off short-term debt and maturing obligations, it’s imperative to analyze the company’s liquidity. Utilizing the current ratio to analyze liquidity, which compares all current assets to current liabilities,
Growth maximisation is where the firm’s main goal is to increase the size of the firm as much as possible. Some firms may have the objective to maximise revenue, this basically is when a firms aim is to achieve as high total revenue as possible and occurs when marginal revenue to equal to zero. Another objective of s firm may be a profit satisfaction, this is where a firm produces a profit which is deemed to be a reasonable level, which is satisfying to stake holders and is not maximising profit. The best example in a leisure market is a firm that has been recently set up and wants to survive so the first couple of years their target will be to make a profit and survive. If they try to maximise profit it would an unrealistic competition as
a) What are the company’s total revenues/sales for the current year? b) What is the company’s cost of sales/cost of goods sold for the current year? (for merchandising firms only) c) What is the company’s gross profit/gross margin for the current year? (for merchandising firms only) d) What are the company’s total operating costs/operating expenses for the current year? e) What is the company’s operating income for the current year?
Without proper cash management and regardless of how fast a firm’s sales or reported profits on the income statement are growing, a firm cannot survive without carefully ensuring that it takes in more cash than it sends out the door. When analyzing a company's cash flow statement, it is important to consider each of the various sections that contribute to the overall change in cash position. In many cases, a firm may have negative overall cash flow for a given quarter, but if the company can generate positive cash flow from its business operations, the negative overall cash flow is not necessarily a bad
In the short run firms may not increase their profits because the cuts in prices but if they achieve this in long run they may experience maxim profits. However the directors try to imply polices which do not always maximize the profits their objective is to satisfy the owners by getting some profit and growing the company in order to receive bigger market share to influence prices and quantity produced. I think that the managers should firstly try to grow the company and work for normal profit and maybe in long run obtain super normal profits. In short run they try to achieve lots of other objectives regardless profit