Example Halliburton

Example Halliburton - Halliburton Holdings Running Head...

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Halliburton Holdings Running Head: Financial Analysis Report on Halliburton Holdings Financial Analysis Report on Halliburton Holdings Name of Student Name of Subject Course Name of Professor 20 May 2008
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Halliburton Holdings 1. Introduction: This paper seeks to prepare a financial analysis report on Halliburton Holdings. This also seeks to diagnose the sources of company’s problems if there are any and make a critical evaluation of the actions taken that the company has takes and make proposals for alternative actions that the company could take with specific analysis on how it would affect the company’s value. 2.1 Internal Environment Analysis To analyze the company’s problems there is a need to look into the company’s profitability, asset management, liquidity, and solvency (Meigs and Meigs, 2005) to determine its strengths and weaknesses. For the purpose of this paper company’s problems may be defined as untapped or unused strengths or uncorrected unavoided weakness in relation to plans in achieving its objectives. The various analyses below will help in determining company’s strengths and weaknesses. 2.1.1 Profitability The company appears profitable as shown the following summary: 2003 2004 2005 2006 2007 average Revenue Growth 22% -49% 28% 18% 19% Operating Margin 4% 4% 21% 25% 23% 16% Net Profit Margin -5% -5% 23% 18% 23% 11% Return on Assets -5% -6% 16% 14% 27% 9% Return on Equity -32% -25% 37% 32% 51% 13% Source: MSN (2008) If one looks at the company’s history of return on equity of Halliburton Holdings, one can find how the company has been doing in delivering shareholder values since
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Halliburton Holdings return on equity have direct relationship with the stock price of the company which is the direct way to maximize shareholders’ wealth. One could therefore see that the past performances of the company over the last five years from no negative profitability in 2003 and 2004 to 37% ROE in 2005, 32% in 2006 and 51% in 2007. To have made turn around from negative profitability prior to 2005 and sustained the said profitability for the next three years is something that must indicate good performance by Halliburton Holdings. A return of equity of more than 30% as in the case of Halliburton Holdings is very attractive to investors when the compared with base rate from the US Federal Reserve Bank base rate of 2.0% % (Housepricecrash,co.uk, 2008). Yet it would appear that the rate has stayed for at least 3 years and it is bringing the message that it could stay longer. It’s remarkable to note the company produced profits in 2005 despite decline in revenues for the said year. Although the rate is computed using the net profit as numerator and total stockholders equity as denominator and indicative of only books values, the ratio means much to investors since it could be established by research that there is direct relationship of return on equity to stock price. As such, increase in return on equity would necessarily bring increase in stock price. One could ask any investor and they one will hear that a
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Example Halliburton - Halliburton Holdings Running Head...

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