Looking at the previously conducted profitability ratios for Blackberry, we can notice that all the ratios are not only lower than Apple’s, but have also decreased throughout 2011 until 2013. However, for Apple, all conducted profitability ratios are increasing throughout a three-year time span, from 2010 to 2012.
The gross margin measures the relationship between sales and the costs that support these sales. Blackberry’s gross margin has decreased from years 2011-2013. It was 44% in 2011, but decreased to 35% in 2012. Apple’s gross margin, however, is clearly increasing. It was 40% in 2011, and increased to 44% in 2012, which shows that Apple retains more revenue to cover its costs compared to Blackberry.
Return on assets (ROA) measures
As we can see, there is a significant decline in ROE from the year 2011 to 2013, and the return on equity turns out to be negative in 2013. On the other hand, the return on equity for Apple in the years 2010, 2011 and 2012 is 21%, 34% and 35% respectively. We can see that this ratio has improved from 2010 to 2012 by 14%.
The return on equity ratio is suitable for measuring and comparing the profitability of an enterprise to that of other companies in the same industry. Therefore, by comparing Apple and Blackberry ratios over a span of three years we realize that Apple has been doing a better job in terms of ROE, meaning that Apple is more effective and efficient in its use of money from investments to generate profit.
The return on invested capital (ROIC) measures how efficiently a company uses the capital (owned or borrowed) that has been invested in its operations. A high ROIC means that a company is getting a high return on invested capital. Not surprisingly, Apple has the higher ROIC, with a ROIC of 35% in 2012, when Blackberry was only making a return of 14%. In 2013, Blackberry’s ROIC dropped to 0$, which means that, for every 1$ invested in invested capital, their return is
This requirement makes it important to look through a majority of the return ratios, which include return on sales, return on assets, and return on equity. Additionally, investors are also interested in the ratios related to the company’s earnings, such as earnings per share (EPS) and PE ratio. Looking at return on sales, we can see that Wendy’s has a 7.27% return on sales and Bob Evans has a 1.23%, which demonstrates Wendy’s has a higher profit margin. Moreover, Wendys’ return on assets is 2.85% and Bob Evans is 1.58%. Also, Wendy’s and Bob Evan 's have return on equity ratios of 6.66% and 4.30%, respectively. All of these return ratios show that Wendy’s has a better handle on turning working capital into revenue. On the other hand, although Wendy’s return ratios are higher than Bob Evans, Bob Evans has a better performance on earnings per share and PE ratio. This is due to Bob Evans having less common stock share outstanding, which makes their earnings per share and PE ratio higher than Wendy’s. Due to the EPS being higher for Bob Evans, we would recommend that investors look towards Bob
By looking at the return on equity Hasbro is more efficient with investors money as not only did they earn more per invested dollar each year, but their efficiency increased while Mattel’s declined. By looking at the return on assets, Hasbro utilizes its assets more effectively as not only did they earn more per dollar of assets each year, but Hasbro’s ratio increased from 2015 to 2016 while Mattel’s declined. Hasbro has a higher turnover ratio than Mattel and increased from 2015 to 2016 while Mattel’s dropped. Hasbro is more efficient and is gaining efficiency while Mattel is losing it. By comparing inventory turnover ratios, Mattel’s has decreased and their days increased which means they are losing efficiency with selling their inventory. Hasbro’s is increasing meaning they are gaining efficiency. For the cash coverage ratio, Hasbro increased while Mattel fell. This means that from 2015 to 2016 Hasbro made more in cash for every dollar of interest paid while Mattel earned less per dollar from their previous year. Hasbro would be the better investment
Return on sales is decreasing and is below the industry average, but the goods news is that sales and profits have been increasing each year. However, costs of goods are increasing and more inventory is left over each year causing the return on sales to decrease. For 1995, it was 1.7% which is less than the average of 2.44% but is a lot higher than the bottom 25% of companies as seen in exhibit 3, which actually have negative sales return of 0.7%. Return on equity is increasing each year and at a higher rate than industry average. In 1995, it was 20.7%, greater than the average of 18.25% and close to the highest companies in exhibit 3, of 22.1% showing that the return in investment in the company is increasing, which is good for the owner.
The return on total assets (ROA) is an overall measure of profitability which measures the total effectiveness of management in generating profits with its available assets. This ratio indicates the amount of net income generated by each dollar invested in assets. The higher the firm's return on total assets, the better. Harley Davidson's return on total assets was 14.04% for 2001, 14.27% for 2000. These percentages are high and show an upward trend, this shows strong performance in this area for the past two years.
Return on capital employed (ROCE) expresses a company’s profit and displayed as a percentage of the amount of capital invested in the company. ROCE interprets “capital employed” as the total amount of money invested in the company in the long term, regardless of whether that money has been supplied by shareholders or lenders. This amount will compared with the return achieved on that capital. The results were shown that Wm Morrison Supermarkets are higher than Tesco by 4.55 per cent.
The main contributing factor to the decline in the return on stockholders’ equity (25.37% to 8.73%) was the decline in the profit margin (11.79% vs. 5.08%). The decrease in asset turnover (1.11 to 1.00) made a small contribution to the decline, as did the decline in the debt ratio (48.4% to 41.8%).
Lastly, Apple’s stock sells at 15230.83 times one year’s earnings compared to Microsoft selling at 38.82 times. This ratio tells investors how much they will to pay for every dollar of a company’s earnings. As a result, Apple has a higher ratio, signifying that a higher price/earnings ratio, a higher return on investment (Miller-Nobles, Mattison and Matsumura 670).
Six ratios - return on assets, profit-margin ratio, accounts receivable turnover, and inventory turnover, price-earnings ratio (P/E ratio), and the debt-to-equity ratio - reveals Boeing’s performance ability and offers insight into the company’s future outlook. Boeing’s return on assets - as related to its historical performance and that of its competitors - is a key factor in the determination the company’s performance. For example, Boeing’s return on assets of 4.0% - or $0.04 of profit for every dollar of assets - are slightly below the industry standard of 4.4% and significantly below some it 's peers - who hold return on assets of 5.7%, United Technologies, and 7.7% , Lockheed Martin. The wide difference between Boeing and its peers’ return on assets demonstrates that the company is not performing at it 's optimal condition. A concern for Boeing’s performance can also be proven by its historical return on assets statistics. Boeing’s return on assets has declined since 2014 - falling from 4.8% to its lowest percentage in four year - 4.0% (S&P Capital IQ, 2016). Based upon these finding, Boeing is not effectively utilizing its assets to make a profit (S&P Capital IQ, 2016; Hicks & Hicks, 2014). “The profit-margin ratio examines the amount of profit one is able to earn for each dollar of sales revenue” (Hicks & Hicks, 2014, p. 45). Boeing’s profit-margin ratio is 13.6% - meaning
Blackberry lost focus on its core business and consequently lost its position as the “Business phone” market leader. Its Market-Share of the smartphone shrank from>21% to below 1%.
The first analysis will be on Verizon. The current ratio and the debt to equity ratio both improved in 2006 when compared to 2005. However, the net profit margin dropped from 9.8% to 7.0%. What does this tell us as investors...
The ratios returns on investment (ROI) and return on equity (ROE) are two of the most popular measure of profitability of a company and, along with the P/E ratio, have the most significant value of any of the ratios. The DuPont Model expands on the ROI calculation by inserting sales and it's relationship to the companies' generation of profits and utilization of assets into the calculation. Additional profitability ratios include the price earnings ratio (P/E), the dividend payout and the dividend yield. The price earnings ratio helps to indicate to investor how expensive the shares of common stock of a firm are. Dividend yield is part of the stockholders ROI and is represented by the annual cash dividend. Dividend yields have historically been between 3% to 6% for common stock and 5% to 8% for preferred stock. Dividend payout ratio shows the proportion of the earnings paid to common shareholders. Dividend payout for manufacturing companies range from 30% to 50%, but can vary widely.
Apple Inc.’s Financial Analysis case study will cover the nine-step assessment process to evaluate the company’s future financial health. The nine-step evaluation process will entail the following: 1) Fundamental analysis covers objectives, plan of action, market, competing technology, and governing and operational traits, 2) Fundamental analysis-revenue direction, 3) Investments to support the firm’s entities action plan, 4) Forthcoming profit and competitive accomplishment, 5) Forthcoming external financial requirements, 6) Accessibility to direct at sources of external finance, 7) Sustainability of the 3-5 year plan, 8) Strain examination beneath scenarios of calamity, and 9) Present financial plan (State University, 2013). The fundamental analysis will be explained primarily in the next section.
Any successful business owner or investor is constantly evaluating the performance of the companies they are involved with, comparing historical figures with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of any company's effectiveness, however, more needs to be looked at than the easily attainable numbers like sales, profits, and total assets. Luckily, there are many well-tested ratios out there that make the task a bit less daunting. Financial ratio analysis helps identify and quantify a company's strengths and weaknesses, evaluate its financial position, and shows potential risks. As with any other form of analysis, financial ratios aren't definitive and their results shouldn't be viewed as the only possibilities. However, when used in conjuncture with various other business evaluation processes, financial ratios are invaluable. By examining Ford Motor Company's financial ratios, along with a few other company factors, this report will give a clear picture of how the company is doing now and should do in the future.
BlackBerry’s fall from market leadership and financial success is the result of a corporate structure that failed to foster individual employee creativity and company-wide innovation. The financial distress, upper-management turnover, and loss of strategic direction are symptoms of BlackBerry’s problem: a failure to innovate and remain competitive in the smartphone market.
“The Net-Profit margin narrows the focus on profitability and highlights not just the company’s sales efforts, but also its ability to keep operating costs down, relative to sales”. (Carlberg, 2007) The Net Profit Margin shows how well these major retail businesses can control...