Module 1 Activity Template please grade this one.xlsx - RATIO ANALYSIS Note change the column names to your industry and selected companies 2013-2018

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Unformatted text preview: RATIO ANALYSIS Note: change the column names to your industry and selected companies 2013-2018 RATIOS 2018 Consumer Electronics 5yr Apple Inc.(AAPL) Profitability Ratios (%) Gross Margin EBITDA Margin 32.06 22.64 38.3 32.77 Operating Margin Pre-Tax Margin Effective Tax Rate 15.9 16.02 81.38 26.69 27.45 18.34 0.95 0.91 0.43 0.57 42.41 0.99 1.12 0.87 1.07 23.5 Price/Earnings Ratio 24.55 13.24 Price to Sales P/S Price to Book P/B Free Cash Flow per Share 1.9 3.65 6.76 2.97 6.96 11.52 Return On Assets 17.43 16.07 Return On Investment 13.44 24.41 Return On Equity 21.88 49.36 Receivable Turnover Inventory Turnover Total Asset Turnover 22.1 30.89 0.63 12.94 37.17 0.72 Free Cash Flow/Net Income 9.63 1.08 Financial Strength Quick Ratio Current Ratio LT Debt to Equity Total Debt to Equity Interest Coverage Valuation Ratios Management Effectiveness (%) Efficiency What is Ratio Analysis? Briefly explain and cite your resources: Ratio analysis is the powerful tool of financial statements analy related numbers or items. The absolute figures reported in the financial statement do not provide meaningful understanding o make qualitative judgment of the firm’s financial performance. Financial ratios are used by to determine how well their firm is performing in order to evaluate where the firm can improve. By comparing financial ratios Bragg, Steven. “Ratio Analysis.” AccountingTools, AccountingTool to determine how well their firm is performing in order to evaluate where the firm can improve. By comparing financial ratios Bragg, Steven. “Ratio Analysis.” AccountingTools, AccountingTool Based on the ratio analysis, in which company would you be willing to invest and why?The key financial ratios needs to be take 1. Earning per share - Basically the profit over last year divided by no of Common shares in market ( Higher the better) 2. P/E Ratio - showing how much stock investors are paying for each rupee of earning ( Higher the better) 3. P/S Ratio - price of company's stock against its annual sales, instead of earnings 4. Debt to equity - Total liabilities versus Shareholder's equity ( Lower the better) 5. Dividend yield - Annual dividend paid per share divided by current stock price 6. P/B Ratio - Comparing company stock's per share price to its Book value 7. Payout Ratio - showing how much profit goes out of dividend. 8. Current Ratio - Testing company liquidity ( Higher the better) ratios, it will be wise to invest in Apple since it has higher P/E ratio. 2018 Sony (SNE) 27.1 12.57 8.5 8.18 21.71 0.71 0.92 0.21 0.45 52.53 10.2 0.8 2 6.48 2.67 12.13 17.96 8.69 9.34 0.47 2.02 powerful tool of financial statements analysis. A ratio is the relationship between two or more things ie: Ratio is the numerical relationship do not provide meaningful understanding of the performance and financial position of the firm. Ratio helps to summarize large quantities Financial ratios are used by investors and management to assess firm performance and operational effectiveness. Manage can improve. By comparing financial ratios between companies and between industries, investors can better determine the best investmen Analysis.” AccountingTools, AccountingTools, 1 May 2018, . why?The key financial ratios needs to be taken into consideration while Investing are - hares in market ( Higher the better) ng ( Higher the better) On th ANALYSIS Apple is more efficient and has a greater profit and exceeds the 5 year average for both companies The operating expenses except depreciation is higher for Sony. Depreciation expense is much higher for Sony as compared to Apple since Sony's EBITDA margin is higher while operating margin is lower than that of Apple's. Apple is more profitable Higher tax rate for Sony will lower its profitablity Apple has higher percentage of assets in liquid form such as cash and receivables. Apple has higher percentage of assets in relatively liquid form which can be converted in cash relatively fast Higher ratio for Apple implies higher leverage resulting in higher interest cost which adversely impacts profitability. Higher ratio for Apple implies higher leverage resulting in higher interest cost which adversely impacts profitability. Sony has a higher ratio meaning that they can easily pay their interest expenses on outstanding debt Higher P/E ratio for Apple implies that the market is valuing apple more. Investors are willing to pay almost 13 times the earnings per share for apple while for Sony, they want to pay only 10 times the EPS value. P/S ratio is generally used when a company has negative net income. In this case, it implies that market is valuing Apple at 2.97 times the sales per share. Higher P/S ratio for Apple while lower P/E ratio might imply lower number of shares of Sony. Higher the P/B ratio, costlier is the stock. Higher ratio implies that the stock is costlier. Apple has more efficient assets as they are able to generate more income per unit of assets. Apple is managing its investment in the business in a much better way than Sony since Apple is able to earn more income per unit of investment made in the business. The ratios show that Apple uses its investments better to generate earnings growth and exceeding 5 yr averages for the two industries Higher ratio is desirable as it means that less cash is stuck with debtors in form of receivables. Higher ratio is desirable as it implies higher liquidty as the company is able to quickly sell its products. Higher ratio is desirable as it implies higher asset efficiency, i.e. each unit of asset is able to generate more sales. Both companies take in more cash than what they earn in profits. Both companies have had higher ratios in the previous four years before 2018 statements analysis. A ratio is the relationship between two or more things ie: Ratio is the numerical relationship between two interl understanding of the performance and financial position of the firm. Ratio helps to summarize large quantities of financial data and to atios are used by investors and management to assess firm performance and operational effectiveness. Management uses financial ratios g financial ratios between companies and between industries, investors can better determine the best investment. s, AccountingTools, 1 May 2018, . s needs to be taken into consideration while Investing are - e better) On the basis of the above ...
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