Financial Analysis of Amway

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FINANCIAL ANALYSIS OF AMWAY

Financial ratios are useful indicators of a firm’s performance and position. 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 in the industry.
(http://www.netmba.com/finance/financial/ratios/)

There are wide ranges of relative financial performance indicators that can be used to assess various aspects of a target company’s financial performance which include:

3.1 Growth
3.2 Operational efficiencies
3.3 Profitability
3.4 Liquidity
3.5 Capital structure
3.6 Investor’s return

3.1 Growth

Table 3.1A: Revenue and Growth
|Year |2002 |2003 |2004 |2005 |
|Revenue (RM' Million) |387 |422 |456 |507 |
|Growth ( % per annum) |- |9 |8 |11 |

(www.amway2u.com)

Comment:
Year 2002
The revenues were the lowest as compared to the results in the following years because:- • Global economy slow down in year 2001 up to the mid of year 2002. • There were growing difficulties in external environment. • Consumer spending remained cautious due the backdrop of sluggish employment market despite of marginal increase in income levels. • Very lethargic marketplace fraught with uncertainties like many other businesses such as uncertainties in global scene. (Annual report 2002)

Year 2003
Increase revenues were attributed to several factors:- • Company has introduced strategic measures particularly in marketing area. These include product introductions and aggressive promotion of high ticket items with Easy Payment Plans (EPP) and propose enhancements Sales Incentive Program (SIP), and Non-Cash Award (NCA) programmes. • Outbreak of

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