Individual Comparative Analysis Memo
Individual Comparative Analysis Memo
Accounting – Annual Report Project
Fall 2009
Annual Report Project | SJM | Medtronic | | 2008 | 2008 | Profitability Ratios | | | Return on Equity | 12.5% | 17.8% | Return on Assets | 13.13% | 7.9% | Earnings per Share | $1.12 | $1.94 | Return on Sales | 8.81% | 14.86% | Gross Margin Percentage | 73.17% | 80.60% | Solvency Ratios | | | Current Ratio | 2.02 | 2.37 | Working Capital | 1,051,539* | 4,313** | Quick Ratio | 1.20 | 1.52 | Interest Coverage Ratio | 28.93 | 90.44 | Activity/Asset Turnover Ratios | | | Receivable Turnover | N/A | N/A | Receivable Collection Period | N/A | N/A | Inventory Turnover | 2.33 | 2.67 | Average Days Supply*** | 154 days | 135 days | Capitalization/Leverage Ratios | | | Debt/Equity | 0.76 | 0.50 | Market Ratios | | | Price/Earnings Ratio | 30.59 | 15.24 |
*SJM- dollar amounts in thousands
**Medtronic- dollar amounts in millions
***360 days
Comparative Analysis
First off, I am going to rank the companies’ two financial measures, earning power and solvency. The scale ranges from 1 (very weak) to 10 (very strong). After analyzing the numbers of both companies, it is very apparent that Medtronic has generally done better than SJM in the fiscal year 2008, and this applies to both financial measures. For the first measure, earning power, Medtronic has done better than SJM in all ratios, excluding Return on Assets (ROA). Based on this, on a scale from 1 to 10, I would rank Medtronic as an eight and SJM a six. Moving onto the next financial measure, under all solvency ratios, Medtronic had done better than SJM. Once again, Medtronic’s ranking is 8, but SJM seems a little worse, therefore I rank SJM a five.
The five ratios that determine the earning power of a company are Return on equity (ROE), Return on assets (ROA), Earnings per share (EPS), Return on Sales (ROS), and Gross Margin (GM). Those five ratios are also known as the
Accounting – Annual Report Project
Fall 2009
Annual Report Project | SJM | Medtronic | | 2008 | 2008 | Profitability Ratios | | | Return on Equity | 12.5% | 17.8% | Return on Assets | 13.13% | 7.9% | Earnings per Share | $1.12 | $1.94 | Return on Sales | 8.81% | 14.86% | Gross Margin Percentage | 73.17% | 80.60% | Solvency Ratios | | | Current Ratio | 2.02 | 2.37 | Working Capital | 1,051,539* | 4,313** | Quick Ratio | 1.20 | 1.52 | Interest Coverage Ratio | 28.93 | 90.44 | Activity/Asset Turnover Ratios | | | Receivable Turnover | N/A | N/A | Receivable Collection Period | N/A | N/A | Inventory Turnover | 2.33 | 2.67 | Average Days Supply*** | 154 days | 135 days | Capitalization/Leverage Ratios | | | Debt/Equity | 0.76 | 0.50 | Market Ratios | | | Price/Earnings Ratio | 30.59 | 15.24 |
*SJM- dollar amounts in thousands
**Medtronic- dollar amounts in millions
***360 days
Comparative Analysis
First off, I am going to rank the companies’ two financial measures, earning power and solvency. The scale ranges from 1 (very weak) to 10 (very strong). After analyzing the numbers of both companies, it is very apparent that Medtronic has generally done better than SJM in the fiscal year 2008, and this applies to both financial measures. For the first measure, earning power, Medtronic has done better than SJM in all ratios, excluding Return on Assets (ROA). Based on this, on a scale from 1 to 10, I would rank Medtronic as an eight and SJM a six. Moving onto the next financial measure, under all solvency ratios, Medtronic had done better than SJM. Once again, Medtronic’s ranking is 8, but SJM seems a little worse, therefore I rank SJM a five.
The five ratios that determine the earning power of a company are Return on equity (ROE), Return on assets (ROA), Earnings per share (EPS), Return on Sales (ROS), and Gross Margin (GM). Those five ratios are also known as the