Financial Statement Analysis
Introduction to Management Accounting 561
August 31, 2010
Robert L. Hynous, Jr.
Financial Statement Analysis
The primary principle of the financial statement analysis is to examine the accounting books for the accountability of review each year-end for profit or loss in a company to be review by the stockholders. Team A will review the financial statement analysis of two American companies; United Parcel Service (UPS) a service, Talbots (TLB) a retailer, and an International company Toyota (TMC) a manufacturer of automobiles. Each of these American companies has shares of stock on the New York Stock exchange and the International Company on the Tokyo Stock Exchange. However, there are several types of governing boards to help the companies meet certain standard in accounting procedures. The International Accounting Standard Board (IASB) works under the oversight of the International Financial Reporting standards (IFRS). The conversion of the IFRS is too permit or is a requirement by over 100 counties to have set standards of accountabilities monitoring board, and hold a public and webcast meeting to confer with stockholders on all financial statements. Furthermore, the team will evaluate how each company performs the quick and current liquidity ratios; assess the DuPont ratio, profit margin, and earnings per share and how they affects companies stocks and net profit and loss each fiscal year end for the stockholders. Ratios
Ratio analysis is an appraisal of the monetary results of the trade to measure the performance. Using ratios provides opportunities to compare the business against diverse standards from the balance sheet. The current ratio is current assets divided by the current liabilities. The quick or acid test ratio is the current assets minus inventory divided by the current liabilities (Horngren, Sundem, Stratton, 2008).
Liquidity ratios states if the firm can meet the short-term monetary responsibilities required to conduct trades. The liquidity ratio of UPS is 1.3 at present, TM at 1.0, and TLB reporting in at 0.6 changing daily. The price-to-earnings is the amount paid for a share of stock. UPS reports price-to-earnings of 23.89 down from yesterday, and TM is down to 19.60 today. While, Talbots price-to-earnings is down to 11.5 per share.
Financial Leverage is the level that an investor or business is using the money borrowed. Highly leveraged businesses are at risk for bankruptcy. The financial leverage of UPS is 4.2, TM is 2.9, and 6.55 for TLB. TM reports profits of over $4.5 billion this year. TLB records reflect 1.2 billion in profits (Forbes.com, 2010). To measure how well a company is performing requires asset management. Monitoring assets, inventory, sales, and fixed goods are ways to measure performance. Current assets, fixed assets, and total net sale tell how the company is progressing in the creating sales. The chart displays how the companies in diverse industries measure.
|Ratios |United Parcel Service (UPS) |Toyota (TM) |Talbot TLB |DuPont | |Quick | 1.3 | 1.0 | 0.6 |1.6 | |Liquidity | 1.4 | 2.9 | 1.3 |2.3 | |Price-to-earnings | 23.89 | 19.60 | 0 |11.5 | |Financial Leverage | 4.2 | 2.9 | 6.55 |4.4 | |Profit Margin | 5.7% | 2.1% | -0.8% |8.5% | |Earnings per share | 2.67% | 3.56...
References: Bloomberg Business Week (2010). Talbot Incorporated
Forbes.com (2010). United Parcel Service Inc.
Horngren, C., Sundem, G., Stratton, W., Burgstahler, D., Schatzberg, J., (2008)
Epstein, L. (2010). For Dummies. Retrieved from Deciding between Cash-Basis and Accrual Accounting: http://www.dummies.com/how-to/content/deciding-between-cashbasis-and-accrual-accounting
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