Financial Statement Analysis Summary
Financial Statement Analyses (Intro)
The financial statement is a company’s document reporting the outcome of the business. Managers, investors, and the public can look to the company’s financial statements to assess a company’s current position, past performance, and predictions of future performance (Horngren, Sundem, Stratton, Burgstahler, & Schatzberg, 2008). The individual financial statement assists investors in coming to a conclusion concerning the company. It is imperative that investors not only evaluate the financial statements on an individual basis but also compare them to other companies within the same industry. The financial statement in itself may not provide an investor with sufficient information concerning the company’s inner workings. Thus, investors use data calculations and ratios to establish how companies measure up to one another. For instance, one company’s reported net income may not be equivalent to a business in the same industry if the two differ in size. Conversely, a profit margin ratio calculated by dividing sales into net income is equivalent to any other company regardless of size. This paper illustrates the annual report data for three firms in the manufacturing, service, and retail sectors and portrays the company’s financial standing.
How Differences in Industries Affect Presentations The discrepancy in industries affects presentations because industries operate differently, especially when coming from different sectors. Comparing presentations from one company to the next is like comparing apples to oranges. It is important to observe each industry separately and evaluate them on an individual basis. Since each company has its own operating parameters, a high debt ratio for one company could mean opportunity and growth. However, a high debt ratio for an alternative company could be an indication of weakness. McDonalds is a large company. Starbucks is a smaller yet also a
The financial statement is a company’s document reporting the outcome of the business. Managers, investors, and the public can look to the company’s financial statements to assess a company’s current position, past performance, and predictions of future performance (Horngren, Sundem, Stratton, Burgstahler, & Schatzberg, 2008). The individual financial statement assists investors in coming to a conclusion concerning the company. It is imperative that investors not only evaluate the financial statements on an individual basis but also compare them to other companies within the same industry. The financial statement in itself may not provide an investor with sufficient information concerning the company’s inner workings. Thus, investors use data calculations and ratios to establish how companies measure up to one another. For instance, one company’s reported net income may not be equivalent to a business in the same industry if the two differ in size. Conversely, a profit margin ratio calculated by dividing sales into net income is equivalent to any other company regardless of size. This paper illustrates the annual report data for three firms in the manufacturing, service, and retail sectors and portrays the company’s financial standing.
How Differences in Industries Affect Presentations The discrepancy in industries affects presentations because industries operate differently, especially when coming from different sectors. Comparing presentations from one company to the next is like comparing apples to oranges. It is important to observe each industry separately and evaluate them on an individual basis. Since each company has its own operating parameters, a high debt ratio for one company could mean opportunity and growth. However, a high debt ratio for an alternative company could be an indication of weakness. McDonalds is a large company. Starbucks is a smaller yet also a
References: McDonalds. (2005). McDonald 's corporation. Retrieved from http://mmoore.ba.ttu.edu/ValuationReports/McDonalds.pdf The American Association of Individual Investors Seeking Alpha. (2011). What 's driving Toyota 's sale price?. Retrieved from http://seekingalpha.com/article/205941-what-s-driving-toyota-share-price Starbucks Toyota Motor. (2010). Accounting changes. Retrieved fromhttp://www.wikinvest.com/stock/Toyota_Motor_(TM)/Accounting_Changes