Anthem Project Part I & II final .docx

Table 3 total asset turnover ratio mba602 financial

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Table 3 Total Asset Turnover Ratio MBA602 Financial Analysis and Valuation, Group Project –Anthem Inc Valuation Page 10
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Company 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY Anthem Inc. 1.198 1.219 1.283 1.339 1.328 Aetna Inc. 1.036 1.124 1.127 1.03 0.974 Humana Inc. 2.029 2.191 2.252 2.172 2.045 United Health Group Inc. 1.505 1.551 1.59 1.579 1.536 Fixed Asset Turnover Ratio Company 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY Anthem Inc. 40.368 39.45 39.938 42.456 43.368 Aetna Inc. 74.946 83.356 92.671 103.788 103.214 Humana Inc. 35.676 39.657 41.569 37.646 34.812 United Health Group Inc. 45.765 45.917 50.517 52.068 47.393 Source: “Financial Ratios.” Performance Analysis. S&P Global Market Intelligence, .com. The total asset turnover ratio analyzes how Anthem fares when compared to its competitors: Aetna, Humana and United Health Group. The total asset turnover ratio measures the dollars in sales that are generated for each dollar that is tied up in assets. The ratio is calculated by dividing sales by total assets. The chart below shows the ratios for Anthem and each of their competitors for the last five years. From the above table, we can see that Anthem’s three competitors were all trending upward until 2016 and 2017. Anthem was able to continue the upward trend into 2016 but saw a slight decline in 2017. Humana is most efficiently utilizing its assets when compared to the other three companies. The second asset management ratio that we will discuss is the fixed asset turnover ratio. This ratio measures how effectively the firm uses its plant and equipment. The ratio is calculated by dividing sales by net fixed assets. The chart below shows the ratios for Anthem and each of their competitors for the last five years. When looking at the table above, Aetna is significantly better at using its plant and equipment assets than its competitors. The fixed asset ratio is almost double some of the other companies. The ratios themselves do not account for inflation and uses the historical cost of the plant and equipment. Aetna is a significantly older company than the other three, over one- hundred years older than Humana, which is the next closest company in age. The companies’ age MBA602 Financial Analysis and Valuation, Group Project –Anthem Inc Valuation Page 11
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differences would account for the substantial difference in the ratios, as Aetna could have plant and equipment bought before the other companies came to existence thus causing the cost of the equipment to be much lower. Leverage Ratios Leverage ratios are a type of financial ratio that indicates the level of debt incurred by a business against several other accounts in its balance sheet, income statement, or cash flow statement. These ratios provide an indication of how the company’s assets and business operations are financed. Leverage ratios are measures of risk, a company that cannot pay back its debt is at higher risk of going bankrupt. Although leverage ratios that are too large can be problematic, a moderate leverage ratio can be valuable to shareholders. A smaller ratio shows that the company minimizes the amount of equity it uses to fund its business, which increases the return on equity for current shareholders.
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  • Fall '14
  • Economics, ........., Anthem Inc, Group Project –Anthem

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