Ratio Analysis to Determine Corporate Health
Exxon and Wal-Mart
One must consider many factors before deciding whether or not to invest in a company. The following is an analysis and comparison of the health of two well known companies, Exxon and Wal-Mart. Some of the factors that were analyzed include current ration, inventory turnover, accounts receivable turnover, and days’ sales in inventory. Most of the values used for the calculations were obtained from Yahoo Finance. Current ratio evaluates a company’s ability to pay its short-term obligations (Wild, 2008). Exxon’s current ratio of 1.47 indicates that it should not have any issues paying its short-term obligations. In contrast, Wal-Mart’s current ratio of 0.88, indicates that the company’s current liabilities exceed current assets and thus investors should be doubtful of its ability to pay short-term obligations. Inventory turnover is another indicator of a company’s ability to pay short-term debt. Specifically, it is the number of times a company’s average inventory is sold during a period (Wild, 2008). Wal-Mart’s inventory turnover of 9.12 indicates that it may be holding more inventory than it needs, and thus it may be using its assets in efficiently. Exxon’s inventory turnover of 28.31 is more preferable, as long as inventory adequately meets demand (Wild, 2008). These numbers show that Wal-Mart may be having difficulties paying its short-term debt and thus caution should be warranted.

Accounts receivable turnover measure the quality and liquidity of accounts receivable. Thus it indicates how often receivable are received and collected during the period (Wild, 2008). Exxon’s accounts receivable turnover is 15.6, while Walmart’s is 107.3. Exxon’s low turnover suggests management should consider stricter credit terms and more aggressive collection efforts to avoid its resources being tied up in accounts receivables. On the other hand, Wal-Mart’s high turnover implies the opposite;...

...RatioAnalysis to DetermineCorporateHealth; Exxon Mobile Corp & BP Petroleum
Financial statement analysis centers on one or more aspects of a company’s financial state and performance (Wild, 2011, p.565). According to Wild, there are four areas of inquiry that must be given emphasis to when completing a financial analysis (2011, p. 565). These four areas include: (1) liquidity, (2) solvency, (3) profitability, and (4) market prospects (Wild, 2011, pp. 565-582). A ratioanalysis expresses a mathematical relation between two quantities, and can be expressed as a percent, rate, or portion (Wild, 2011, p.575). Analyzing BP Petroleum’s (BP) and Exxon Mobile Corp’s (Exxon) financial statements using ratioanalysis will show the relation between the two companies and determine the state of their corporatehealth.
Liquidity and Efficiency
Liquidity refers to the accessibility to meet short term cash requirements, and efficiency refers to how productive a company is in using its assets. Liquidity and efficiency can be analyzed by measuring a company’s: (1) Current ratio, (2) Acid-test ratio, (3) Accounts receivable turnover, (4) Days sales uncollected, (5) Inventory turnover, (6) Day’s sales in inventory, and (7) Total asset turnover.
According to Wild, if...

...Financial ratioanalysis
A reading prepared by Pamela Peterson Drake
OUTLINE
1.
2.
3.
4.
5.
1.
Introduction
Liquidity ratios
Profitability ratios and activity ratios
Financial leverage ratios
Shareholder ratios
Introduction
As a manager, you may want to reward employees based on their performance. How do you know
how well they have done? How can you determine what departments or divisions have performed
well? As a lender, how do decide the borrower will be able to pay back as promised? As a manager of
a corporation how do you know when existing capacity will be exceeded and enlarged capacity will be
needed? As an investor, how do you predict how well the securities of one company will perform
relative to that of another? How can you tell whether one security is riskier than another? We can
address all of these questions through financial analysis.
Financial analysis is the selection, evaluation, and interpretation of financial data, along with other
pertinent information, to assist in investment and financial decision-making. Financial analysis may be
used internally to evaluate issues such as employee performance, the efficiency of operations, and
credit policies, and externally to evaluate potential investments and the credit-worthiness of
borrowers, among other things.
The analyst draws the financial data...

...Contents
1. Introduction | 2 |
2. Company Background | 2 |
3. An examination of financial statements | 2 |
4.1 Vertical analysis 4.2 Horizontal analysis | 23 |
4. Key ratiosanalysis | 4 |
5. Share issues | 5 |
6. Conclusion | 5 |
7. Bibliography | 6 |
Table of Appendixes
1. Income statement – Horizontal and vertical analysis |
2. Statement of financial position – Horizontal and vertical analysis |
3. Ratioanalysis - Liquidity and Profitability |
4. Ratioanalysis – Efficiency and Investment |
5. FTSE 100 Index – weekly share prices table and graph |
6. Invensys plc – weekly share prices table and graph |
1. Introduction
This report gives an analysis of financial statement of Invensys plc over the past two years. The main aim of this report is to analyse company’s performance and to compare it with other companies working in the similar sector. The purpose of this report is to present the results of analysis to its potential stakeholders. The three form of analysis will be done on financial statements of this company (i.e. vertical analysis, horizontal analysis and ratioanalysis), which will help us to examine the liquidity, profitability and...

...
RATIOANALYSIS
Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. In some cases, ratioanalysis can predict future bankruptcy.
Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:
1. Liquidity ratios
2. Capital Structure and Solvency
3. Return On Investment
4. Operating Performance
5. Asset Utilization
6. Market Measures
The ratios measure the short term ability of the company to pay its current short-term liabilities.
1. Liquidity Ratio
Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. They are of particular interest to those extending short-term credit to the firm. Two frequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick ratio.
i. Current ratio:
The current ratio is the ratio of current assets to current liabilities
The company have decreasing trend in current ratio...

...RatioAnalysisRatioanalysis is one of the techniques of financial analysis where ratios are used as a yardstick for evaluating the financial condition and performance of a firm. Analysis and interpretation of various accounting ratios gives skilled and experienced analyst a better understanding of the financial condition and performance of the firm than what he could have obtained only through a perusal of financial statements.
Types of ratio’s
1. Profitability ratio
2. Leverage ratio / Capital structure ratio
3. Turn over ratio
4. Liquidity or Short term solvency ratio’s
Profitability ratio : Profitability ratio measures profitability of a concern firm or company
Net profit ratio: Net profit ratio is the ratio between net profits after taxes and net sales it indicates what portion of sales is left to the owners after operation expenses.
Net profit ratio = (Net profit after taxes / Net sales) x 100
Operating ratio: Operating ratio is the ratio between cost of goods sold plus operating expenses and the net sales
Operation ratio = {(operating expenses + cost of goods sold)/ net sales)} x 100
Cost...

...strong, and appeasing and profitable for its shareholders. Shareholders as well as the company's management use several tools to determine a company's health and direction. These tools are better known as ratioanalysis. Ratios are among the more widely used tools of financial analysis because they provide clues to and symptoms of underlying conditions.2 Ratios help measure a company's liquidity, activity, profitability, leverage and coverage.1 These five measured sections show how ratioanalysis is used in decision-making, how a firm can measure its financial situation and financial performance, and the strengths and weaknesses of the company.
The term ratioanalysis can be broken down into smaller sections. The first is a current ratio which is the ratio of current assets to current liabilities. This ratio shows how well a company's current liabilities are covered.1 Even though this ratio is used often, it does have its limitations. Since it shows all current assets it does not differentiate among the assets with regard to their degrees of liquidity, show it can show skued results .Another commonly used ratio is the acid-test ratio, also known as the quick ratio. This ratio shows an investor how the...

...Public Private Partnership (PPP) mode. .
RatioAnalysis
A popular way to analyze the financial statements is by computing ratios. A ratio is a relationship between two numbers, e.g. ratio of A: B = 1.5:1 ==> A is 1.5 times B. A ratio by itself may have no meaning. Hence, a given ratio is compared to:
1. Ratios from previous years for internal trend. 2. Ratios of other firms in the same industry for external trends.
Ratioanalysis is a diagnostic tool that helps to identify problem areas and opportunities within a company.The most frequently used ratios by Financial Analysts provide insights into a firm's
A. Liquidity B. Degree of financial leverage or debt C. Profitability D. Efficiency E. V alue
Analyzing Liquidity
Liquid assets are those that can be converted into cash quickly. The short-term liquidity ratios show the firm’s ability to meet its short-term obligations. Thus a higher ratio (#1 and #2) would indicate a greater liquidity and lower risk for short-term lenders. The Rules of Thumb for acceptable values are: Current Ratio (2:1), Quick Ratio (1:1).
While high liquidity means that the company will not default on its short-term obligations, one should keep in mind that by retaining assets as cash, valuable investment opportunities may be...

...
بسم الله الرحمن الرحيم
|الجامعة الإسلامية – غزة | |Islamic University – Gaza |
|كلية التجارة | |Faculty of Commerce |
|قسم المحاسبة | |Department of Accounting |
Importance of financial ratios
(Applied Study on PALTEL Company)
prepared By :
Ali Own Moheisen 120092647
Khaled Kamel Dawoud 120092173
Supervisor's name :
Dr. Salah Shubair .
August, 2012
بسم الله الرحمن الرحيم
"يَرْفَعِ اللهُ الَّذِينَ آمَنُوا مِنكُمْ وَالَّذِينَ أُوتُوا الْعِلْمَ دَرَجَاتٍ"
صدق الله العظيم
{سورة المجادلة،11 }
Dedication:
For Our Palestine…
For Our University…
For Our Teachers…
For Our Family…
We Present This Research…
Acknowledgment:
- First of all, we thank Allah for helping us to complete our Research.
- Our ability to accomplish this research is due to the good effort provided by our great university IUG.
- We thank very much our parents, who were granted every thing in their life for us, and also we thank them for push us to success.
- We would like to thank Mr....