American Corporation Analysis

Topics: Ratio, Financial ratios, Financial ratio Pages: 4 (1789 words) Published: October 29, 2014
As of 2012, all of the worlds Hard Disk Drives (HDDs) are manufactured by three large companies Seagate, Western Digital and Toshiba. According to Fang Zhang analysis, Western Digital and Seagate have 90 of HDD market shares (Goodspeed, 2012). Since these two companies control majority of HDD market shares, team A has decided to do comparative analysis on these two companies. In this paper, the financial performance of WDC and STX for years 2011-2014 will be assessed by comparing the financial data of the two companies. The Ratio analysis will be used as a basic tool in financial statement analysis to highlight the significance of financial statement data to get a better understanding of the WDCs sustainable earnings and measure profitability and liquidity. There are three financial ratio classification Liquidity, Solvency and Profitability Liquidity. Liquidity ratio measures short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. Solvency Ratio measures the ability of the company to survive over a long period of time. Profitability Ratio measures the income or operating success of a company for a given period of time (Kimmel, Weygandt, Kieso, 2011). Three ratios from each classification will be used to do intra-company and inter-company analysis. LIQUIDITY RATIOS In comparing the current ratio in the area of asset and liabilities between WDC and STX, current ratio of STX show increasing trend (Figure 1). EMBED Excel.Chart.8 s Figure 1. Current ratio In 2011, STX had a current ratio of 1.9 and remained the same in 2012, but increased to 2.1 in 2013 and 2.4 in 2014 respectively. In 2011, WDC had current ratio of 2.5 but then decreased to 1.8 in 2012 and increased in 2013 and 2014 to 1.9 and 2.4 respectively. This figure shows both companies are very solid/strong because both companies have twice amount of current assets per its liabilities. Figure 2. Current cash debt coverage ratio In...
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