Financial Analysis Essay

Financial Analysis Essay
Rachelle Stanley
Columbia College
FINC 350
A firm's performance and financial situation is measured by financial ratios. In order to reach these
ratios a financial analysis must be done on the company's financial information. Financial analysis is
the evaluation, selection and interpretation of financial data to assist in investment and financial
decision–making. Financial data is drawn from many sources however, the primary source is data
that is provided by the company in its annual reports. These annual reports consist of the income
statement, the balance sheet and the statement of cash flows. Financial ratios can be used to analyze
trends and compare the firm's financial standing to those of other firms. Financial ratios are...show
more content...
Any number 3 or above could mean that management has too much cash on hand and may be
doing a poor job of finding ways to invest. By reading the annual report or the 10K you can see
what executives plans are for future investments. A current ratio below 1 may be a sign that the
company may have trouble paying its bills on time. Only companies that have inventory that can
immediately be converted into cash should have a current ratio below 1.
Quick Ratio
The quick ratio, also known as acid test, is calculated by subtracting inventory from current assets
divided by current liability. This ratio indicates a company's ability to satisfy current liabilities with
liquid assets. Current assets used in the quick ratio are cash, accounts receivable and notes
receivable. Any quick ratio less than 1.00X would require the company to sell their inventory to
meet its obligations. Lenders are very interested in quick ratio because inventory is not included,
which is not converted to cash easily. USD IN MILLIONS| 2008–1| 2009–1| 2010–1| 2011–1|
2012–1| Target
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UNIVERSITY OF PORTSMOUTH| Report for Primark's IPO purposes| Financial Analysis
Assignment| | Student ID: 635281, 636484, 640073| 11/28/2011| |
––––––––––––––––––––––––––––––––––––––––––––––––– Table of Contents I.Introduction4
II.Primark's business and financial situation5 2.1.Primark's business and financial analysis5
2.1.1.Business analysis5 2.1.2.Financial situation (trend analysis)6 2.2.Industry sector11
2.2.1.Overview11 2.2.2.Cross–sectional analysis12 2.2.3.Summary of Primark's strength and
weakness16 III.Financial ranking and forecast17 3.1.Financial ranking17 3.2.Forecasted 2011 post
tax profit18 IV.Corporate Governance Structure20...show more content...
Finally, the last section is the conclusion, which summarizes the report and evaluate of the
techniques applied in the analysis. II. Primark's business and financial situation 2. 3.1. Primark's
business and financial analysis 3.2.1. Business analysis Chesbrough (2006) suggested that Business
model emphasizes how business can use technological potential to create economic value and
suggested that its main functions are: value proposition, market segment, value chain, cost
structure and target margin, value network, competitive strategy. According to a case study of
Primark (The Times 100, 2010), the business model which is based on "high sales volumes" and
"lower retail margins" with minimal advertising enables Primark to offer value and low price
products. The economies of scales resulting by buying large quantity of items help Primark to keep
costs down. Moreover, retails prices are kept at considerably low level through "lean operation" and
efficient operational practices (e.g. off–season factory time, flat management structure, effectiveness
of distribution network and supply chain). This business model has created and enhanced Primark's
competitive advantage which is the vital key to survive and grow in its industry sector. 3.2.2.
Financial situation (trend analysis) In recent years, thanks to meeting customers' need and
expanding stores, Primark has grown rapidly year by year [ (The Times 100) ].

Financial Analysis of Carrefour Essay
Chapter 5 Carrefour S.A. Teaching Note Version: March 2007
Introduction The Carrefour case is a financial analysis case. Carrefour S.A. is one of the world's
largest retailers. During the first half of the 2000s, the company's share prices steadily declined,
despite the fact that the company reported above–average returns on equity. Students are asked to
analyze Carrefour's financial statements and segment data to find explanations for the company's
poor share price performance and to make recommendations for the future. The discussion of the
financial analysis is preceded by a discussion of Carrefour's strategy and accounting. Both the
accounting analysis and the financial analysis are affected by Carrefour's switch from French GAAP
...show more content...
International growth. When large companies such as Carrefour start to obtain a dominant position
in their domestic markets, they may be "forced" to expand overseas or enter other industries.
Carrefour's corporate strategy is to expand overseas rather than diversify. More importantly, as
indicated above, achieving growth is an essential part of Carrefour's strategy because
(international) growth helps the company to obtain economies of scale in purchasing, logistics and
the development of Carrefourbranded products. For example, Carrefour sells its own branded
products in the same packaging worldwide (of course printed in different languages). The
company's overseas retailing operations are, however, more risky than its domestic operations.
First, to some extent retailing remains a local business because consumers' tastes differ
substantially across countries. Profitable expansion outside Carrefour's domestic market is only
possible if the company has good knowledge about local customers' preferences and tastes.
Consequently, a slightly safer way to expand abroad is to acquire local supermarket chains. A
disadvantage of this strategy is, however, that acquisition premiums have to be paid, which can also
drive down profits. Second, many of Carrefour's "intercontinental" hypermarkets are located in
countries where the economic environment is risky: consumers in economically less developed
countries are likely to be more price sensitive; East Asian

Essay about Analysis of Financial Statement
To determine Panorama's financial positions, we need to use ratio analysis. There are four main
categories we can use. They are liquidity, activity, profitability, and debt or financial leverage.
The first category Panorama needs to look at is liquidity. This is measured in three different ways.
Working capital, current ratio and the acid–test ratio. Working capital can be described as a
company's current assets minus its current liabilities. Panorama's working capital would be
$833.89. The second is the current ratio in which we would find by taking a company's assets
divided by its current liabilities. In this case Panorama had current assets of $1808.89 and current
liabilities of $975.00. A company's current ratio is very important in...show more content...
The higher the turnover, the better the company.
Profitability measures are used to determine return on investment and the return on equity. Price
/Earnings ratio is another way to measure a company's profitability by dividing the market price
of a common share of stock by the earnings per share. The P/E ratio tells us the value of a
company's common stock. Dividend pawet ratio and the dividend yield are some other ways to
judge a company's profitability. Debt, or financial leverage is the last category of ratio analysis used
to find the financial condition of a company.
Debt, or financial leverage is the last category of ration analysis used to find the financial
condition of a company. Leverage adds risk to the operation of a company because a highly
leveraged company would be at a greater risk for bankruptcy than a company that was not. Debt
and preferred stock provided good leverage for a company because the interest rate is at a fixed
rate. There are two financial leverage measures used to tell whether a company is using financial
leverage. Debt ratio is the total liabilities to the total of liabilities and owners equity whereas the debt
/equity ratio is the ratio of total liabilities to total owner's equity. Both of these measures are the same
concept but just stated in a different manner.
In conclusion, from looking at Panorama's financial statement and using

Financial Ratio Analysis Essay
Investors and other external users of financial information will often need to measure the
performance and financial health of an organization. This is done in order to evaluate the success of
the business, determine any weaknesses of the business, compare current and past performance, and
compare current performance with industry standards. Financially stable organizations are desirable,
because a financially stable business is one that successfully ensures its ability to generate income
for investors and retain or increase value.
There are many different methods that can be used alone or together to help investors assess the
financial stability of an organization. One of the most common methods is financial ratio analysis.
The basic...show more content...
This ratio is used to determine the amount of net profit for each dollar of sales that remains after
subtracting all expenses. Example: a net profit margin of 0.084 indicates that 8.4% of each sales
dollar remains after all expenses are paid.
The ROA ratio is calculated by taking the net earnings available to common stockholders (net
income) and dividing it by total assets. This ratio is used to determine the amount of income each
dollar of assets generates. Example: an ROA ratio of 0.0568 indicates that each dollar of company
assets produced income of almost $0.06.
The ROE ratio is calculated by taking the net earnings available to common stockholders and
dividing it by common stockholders' equity. This ratio is used to determine the amount of income
produced for each dollar that common stockholders have invested. Example: An ROE ratio of 0.0869
indicates that the company returned 8.69% for every dollar invested by common stockholders.
Liquidity Ratios
Liquidity ratios measure the organizations ability to meet short–term obligations. These include the
current ratio and the quick ratio.
The current ratio is calculated by taking the total amount of current assets and dividing it by the total
amount of current liabilities. This ratio is used to determine whether the company has a sufficient
amount of current assets to pay off current liabilities. Example: a current ratio of 2.57

Is the Industry's Analyst Research Useful for Investment Decisions?
The primary role of the research analysts is to study the publicly traded companies and pass
recommendations based on their financial securities, future growth potentials, and profit generation
potentials. These recommendations influence economic activities in the contemporary industries.
For instance, such recommendations can affect stock prices, especially if they are broadcasted to a
large population. People's decisions to purchase a company's stocks depend on the information that
the research analysts provide regarding its securities and potentials. Renowned analysts can
facilitate the rise or fall of stock prices of a given company just by a mere mention of its...show more
content...
Biases tend to misinform the decisions taken by investors in any industry, thus leading to a mass loss
of financial resources. For instance, most financial analysts tend to link the 2000 – 2001 stock market
downturn to biased analysts research (Guan, Wu & Long, 2012). The stock market downturn led to
substantial investor losses during the same period (Guan et al., 2012). Since then, the major players
in the business community such as the investors and regulators have remained skeptic about the
roles of research analysts. Specifically, they have suspected that research analysts tend to advance
bases to gain investment banking from the companies that command their interests (Guan et al.,
2012). These trends prompted the regulatory commission to adopt a set of ethical guidelines in 2000
to improve the roles of research analysts and restore the confidence of investors.
Several regulatory policies followed in 2003. One of the notable implementation of these reforms
occurred in 2003 when the SEC imposed enforced policies on the prominent investment banks in the
United States (Guan et al., 2012). These changes aimed the investment research industry, especially
the compensation of the research analysts and the structure of the related operations. However,
investors are still skeptic regarding the credibility of the processes amidst the enforced reforms. The
investment banking businesses incentives are just one of the

Financial Analysis
Final Project – Financial Analysis
Beatrice Valdez, MBA Student
Capella University
MBA 6016 Finance and Value Creation [ May 16, 2012 ]
Michael Blagg, Professor
Table of Contents Executive Summary| | 3| Historical Financial Statement Analysis: Financial Ratios|
| 3–4| Balance Sheet| | 4–6| Income Statement| | 6| Statement of Cash Flows| | 6| Pro–Forma Financial
Statements| | 7| Balance Sheet Pro–Forma| | 7–8| Income Statement Pro–Forma| | 9| Cash Flow
Pro–Forma| | 9–10| Investing Activities| | 11| Financial Activities| | 11| Equations of Statements| |
11–12| Summary of Valuation| | 12–14| Current and Quick Ratios| | 14–15| Transparency| | 15–16|
...show more content...
For 2010, the same was used for 2011 amount with 2009 and 2010 average. Urban Outfitter ratios
compared to industry ratios were pretty much close with the exception of Receivables Turnover
(61.16 vs. 54.24), Accounts Payable Turnover (15.26 vs. 6.43), Operating Profit Margin, 15.62 vs.
6.24), Return on Equity (20.94 vs. 13.11), Net Profit Margin (10.75 vs. 3.77). and Return on Assets
(15.92 vs. 7.17). The ratios for Urban Outfitters was significantly larger than the average industry
ratios mainly in the profitability section (See Appendix G).
Balance Sheet
"The purpose of the balance sheet is to report the financial position (amount of assets, liabilities,
and stockholders' equity) of an accounting entity at a particular point in time" (Libby, Libby
& Short, 2011). The information on the Balance Sheet will help managers, investors, and
lenders to analyze the company's financial capabilities. The report is only written at the end of the
year and does not provide prior financial information. Therefore, the Balance Sheet should also
include the other financial reports required to view the company as a whole. The Balance Sheet
can also be a useful tool to analyze trends of accounts receivables and payables. The formula for the
Balance Sheet is:

however, Poland, Switzerland, Netherlands, Scandinavia, Italy and Hungary were offset by turn
down otherwise it would have been increased more by ВЈ119 million or 16% whereas, the volumes
rose 6% to 130 billion. Profit in Eastern Europe has fallen by ВЈ59 million to ВЈ409 million due to
lower volumes by 4% than previous year. Russia, Uzbekistan, Ukraine and Romania were mainly
had lower performance. In Africa and Middle East, the profit has increased by ВЈ211 million to
ВЈ724 million where it could have been increased by 28%. Falling Revenues from Major Operating
Segments: Revenue excluding duty, excise and various taxes, was ВЈ10,768 million during 2004 and
has declined to ВЈ9,325 million in 2005, however, again rose to ВЈ9,762, ВЈ10,018 and...show more
content...
BAT along with China Eastern Investments Corporation founded a factory where 100 billion of
cigarettes are being manufactured annually. The business also distributes and sells its own products
across China. Rising Popularity of Smokeless Tobacco: BAT was first to introduce smokeless
Swedish–style Snus, comparatively less harmful than cigarettes. Snus is such kind of innovations
that facilitate to lessen influence of tobacco on community and has begun its journey since 2005.
Profit from Snus in the global market is estimated around ВЈ2 billion in where America itself
accounts for 65% then comes Sweden with ВЈ480 million. Other markets in South Africa, Pakistan,
India, Algeria, Norway and European regions have tradition of strong smokeless tobacco and hence
BAT growing opportunity. Threats: Increasing Health Concerns: Due to smoking people face heart
and respiratory problems and therefore the consumption of tobacco products are declining in huge
numbers as people are getting conscious about their health. Even passive smokers often have
certain ailments. Tobacco companies are often taken to court by people for disciplinary or
compensation. BAT also encountered with such kind of incidences, which might be a major cause
for declination of revenues. Competitor Strategies: Most leading tobacco producers are subject to
pending legal actions, valued billions of dollars, whereas small producers are there as

Financial Ratio Analysis Essay
Before beginning an analysis of a company it is necessary to have a complete set of financial
statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a
way for anyone to get an idea of the financial performance of a company by using the information
contained in the financial statements. Ratios are grouped into four basic categories, liquidity,
activity, profitability, and financial leverage. This document will use a variety of these ratios to
analyze the firm, Sample Company, as of December 31,2000. Financial Statement Ratios
Profitability Ratios The ratios returns on investment (ROI) and return on equity (ROE) are two of
the most popular measure of profitability of a company and, along...show more content...
In general, the average ROI for American merchandising companies is between 8% and 12% when
using net income, and average margin is 5% to 10%. When using operating income it is between 10
and 15% and average margin is also 10% – 15%. Asset turnover is another important component of
the DuPont model and is usually in the range of 1% to 1.5% ROE В– Return on Equity The return
on equity conveys the profits of the company as a rate of return on the amount of owners' equity.
ROE uses average owners equity over the specified time period and net income. Historically a ROE
of between 10% and 15% were considered average. Recently higher rates in growth industries have
been greater. Price earnings ratio (P/E) In general, the higher the ROI and rate of earnings growth,
the higher the P/E. . In the past, for a very long period of time P/E ratios in the range of 12 to 18
were consider good P/E ratios for a company. In recent years, the 12 to 18 values have been
abandoned as a norm and what can be considered the norm now is under debate. Sample Companies'
Profitability Ratios ROI for Sample CO. is $350 / $7,196 = 4.8% using net income. If operating
Income is used we have $498 / $7,196 = 6.9%. An additional measure used for ROI is the DuPont
Model. The DuPont model figures are ($498 / $8,251) * ($8,251 / $7,196) = 6.0% using operating
income. These are somewhat low when compared to the average. ROE is $350 / $3,357 = 10.4%
and is also below

Financial Analysis Essay

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