Comparative Ratio Analysis of Tootsie Roll Industries and Hershey Comapny A company’s general financial picture can be determined through a ratio analysis. Financial ratios have proved to be a useful tool for management, investors and creditors. Management uses financial ratios to develop ways to improve operating efficiency strategies for future growth and see how they stack up against the competition in their industry. Creditors and investors analyze ratios to determine a company’s financial strength and operating effectiveness in order to loan money or invest in them. Financial ratios have more impact when compared over several years to help identify trends.
Financial Statements ACC/280 May 01, 2012 Edward Vargas Financial Statements Accounting is extremely important by monitoring the functions of the companies, and allowing them to make appropriate financial transactions and decisions. Some areas of accounting can seem confusing and difficult but in the end the outcome is clear and concise. There are two basic forms of accounting known as; financial and managerial accounting. Financial accounting responsibilities are to follow the General Accepted Accounting Principles (GAAP) that is regulations for investor relations, creditors, and taxation purposes, whereas managerial accounting is for internal evaluation. There are different functions and categories that accounting
Financial Statement Paper The financial statements are prepared to show the financial performance of business organizations in respect of their operations, asset bases and profitability capacities, among other attributes (Alvarez & Fridson, 2011). The four major financial statements prepared by different entities are: The balance sheet It is prepared to highlight the financial position of a particular firm at a specific point in time mostly at the end of its financial/trading period (Taparia, 2004). The income statement This statement shows the profits or loss realized by a business entity in the course of purporting its operations at the end of its financial year (Taparia, 2004). Cash flow statement A cash flow statement reflects
Solvency ratios this is one of many ratios used to measure a company’s ability to meet long-term obligations. The solvency ratio measures the size of a company’s after-tax income, excluding non-cash depreciation expenses, as compared to the company’s total debt obligations. It provides a measurement of how likely a company will be to continue meeting its debt obligations. Users who may be interested in each type of ratio? Liquidity ratios are used by suppliers and other trade creditors.
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.
Balance Sheet 1) Similarities Both Companies uses the narrative format for balance sheet instead of the T-Format. This form, assets are first, followed by liabilities and then owner’s equity, this allows users to compare and identify the progress or the company between the financial positions of the previous and current period. Both balance sheets figures are presented in millions. Both balance sheets share very similar elements as well as the items within their assets, liabilities and equities. The reason could be that both Nestle and Unilever prepared the balance sheet in compliance of IFRS and they are from the same industry.
Pro forma financial information is generally used to illustrate the effects of transactions such as business combination, and change in capitalization. There are countless reasons on why companies use pro forma statement in their business, the most significant is the planning and control received when using pro forma. The process of using pro forma statements are less time consuming, they help businesses evaluate and make a better distinction between business plans (Scarborough, Wilson, & Zimmerer, 2009, p. 196). Pro forma statements are an excellent outlet for resources that will help a business forecast expected earnings should the company chose to merge with another company or even if the company wanted to sell off part of it operations (Scarborough, Wilson, & Zimmerer, 2009, p. 196). The pro forma statements are commonly used when applying for a business loan.
Cash Debt Coverage Ratio - Because it uses cash provided by operating activities, it may provide a better representation of liquidity. Calculate the ratio for Kellogg for 2007 and 2006 Is the coverage adequate? Probably so. Kellogg’s coverage is better than that of General Mills, and it approximates a commonly accepted threshold of .40. Receivables Turnover Ratio – Measures the number of times, on average, a company collects receivables during the period.
WESTERN GOVERNORS UNIVERSITY Financial Analysis RJET Task 1 Executive Summary An extremely crucial element to any business entity is the financial analysis process. So what exactly is financial analysis? The actual definition is The assessment of the (1) effectiveness with which funds (investment and debt) are employed in a firm, (2) efficiency and profitability of its operations, and (3) value and safety of debtors' claims against the firm's assets. It employs techniques such as 'funds flow analysis' and financial ratios to understand the problems and opportunities inherent in an investment or financing decision. (WebFinance, Inc, 2013) Simplified it is the process of evaluating the current business, let’s say their effectiveness, and their future in their industry.
Ratio, Vertical, and Horizontal Analyses The three most often used tools for evaluating financial statements are Horizontal analysis, Vertical analysis, and Ratio analysis. Horizontal (or trend) analysis is concentrated on evaluating financial statements for a certain time frame and is mainly used for the needs of the company. Vertical (or common-size) analysis is targeted on evaluating financial statements with assigning certain percent from the base amount to all the items in a financial statement, this is usually used for inter and intra company needs. Ratio analysis shows the correlation within certain figures of financial statements, for instance current assets and current liability, and this is used for three types of company needs within, intra, and inters company. Pepsi Co.