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Financial management assignment
Financial management assignment
Financial management topic
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Calculating Financial Ratios Sandra Montejano Argosy University Financial Management Vital to any ratio analysis are the steps of gathering financial data and selecting and calculating relevant ratios. This assignment provides you with an opportunity to do just that. Company: General Electric Balance Sheet Assets 2017 2016 2015 Cash & Equivalents 81,995 92,442 102,456 Receivables 41,075 42,262 45,856 Notes Receivable 0 0 0 Inventories 21,923 22,354 22,515 Other Current Assets 0 0 0 Total Current Assets 144,993 157,058 170,827 Net Property & Equipment 53,874 50,518 54,095 Investments & Advances 0 0 0 Other Non-Current Assets 5,912 14,815 120,951 Deferred Charges 6,207 1,833 3,105 Intangibles 104,241 86,874 82,270 …show more content…
& Amort Expenses 21,912 19,359 20,439 Income After Depreciation & Amortization 8,246 16,851 14,254 Non-Operating Income -12,168 -2,797 -2,605 Interest Expense 4,869 5,025 3,463 Pretax Income -8,791 9,030 8,186 Income Taxes -3,043 -464 6,485 Minority Interest -270 -291 332 Investment Gains/Losses 0 0 0 Other Income/Charges 0 0 0 Income From Cont. Operations -5,748 9,494 1,700 Extras & Discontinued Operations -309 -954 -7,495 Net Income …show more content…
From smart grids that help utilities manage the demands of electricity to Flex efficiency Combined Cycle power, and gas engines that run organic waste, its technology helps deliver a quarter of the globe’s electricity. Its gas and Oil is currently operating in and working in about 120 countries and is known to also be the most innovative, reliable, and cost effective in the field. (GE,2018). Liquidity Ratio: Current Ratio Ratio Formula 2017 2016 2015 Current Ratio Current Assets Current Assets 377,945 Current Assets 365,183 Current Assets 492,692 Current Liabilities Current Liabilities 295,959 Current Liabilities 287,692 Current
The first financial ratio of the analysis is the Price to Earnings ratio (“P/E ratio”). The ratio is computed by dividing the price of one share of common stock, by the earnings per share of common stock. This analysis uses diluted earnings per share which assumes the issuance of new stock for all existing stock options. Also, the price of the stock was computed as an average of the fourth quarter high and low stock prices published in the 10K report of each company, because the year end stock prices were not listed for all the companies. Because the P/E ratio measures the relative costliness of different stocks, in relation to their income, it provides a useful place to begin the analysis.
Troy, PhD., Leo. Almanac of Business and Industrial Financial Ratios. 30th edt. (1999) (page 159) Paramus, NJ: Prentice Hall.
Financial ratios are "just a convenient way to summarize large quantities of financial data and to compare firms' performance" (Brealey & Myer & Marcus, 2003, p. 450). Financial ratios are very useful tools in order to determine the health of a company, help managers to make decision, and help to compare companies that belong to the same industry in order to know about their performance.
The first method we will review is the accounting method. Through this accounting approach we will analyze specific ratios and their possible impact on the company's performance. The specific ratios we will review include the return on total assets, return on equity, gross profit margin, earnings per share, price earnings ratio, debt to assets, debt to equity, accounts receivable turnover, total asset turnover, fixed asset turnover, and average collection period. I will explain each ratio in greater detail, and why I have included it in this analysis, when I give the results of each specific ratio calculation.
Payables Turnover Ratio is the ratio of net credit purchases to average accounts payable during the period. It measures short term liquidity by showing how many times during a period your average accounts payable is paid.
Research about ratio analysis and financial statements has been going on for years, with different outcomes and different methods of foreseeing a company’s financial future. Ratios are highly important in financial statements by allowing companies to compare financial data against itself. By analysis the financial statement it allows individuals invest in and the company to see where they are in a current financial status and to predict the future status of the company by see improvements or
There are nine ratios that can be used to help determine the company’s financial health.
The ratio of 1.7 for the last two years indicates consistency, although a lower number is preferred. As a company produces high value product, this could be a satisfactory ratio. By comparing it to 2011 when a ratio was 2.9, in the last two years a ratio improved
investors and lenders. There are various financial terms which help in providing financial information of an organization. By looking at the raw data merely it is difficult to make any judgement from the income statement and balance sheet. “Ratio analysis is a form of financial statement analysis that is used to get a quick sign of a firm’s financial performance in several key areas. Ratio analysis is a cornerstone of fundamental analysis. Ratio analysis provides information about company’s financial information, whether it is in loss or profit.
After above consultation with mentor, I decided to select ratio analysis model for my research project. Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick indication of a firm's financial performance in several key areas. The ratios are categorized as Short-term Solvency Ratios, Debt Management Ratios, Asset Management Ratios, Profitability Ratios, and Market Value Ratios. (Mark A. Lane, 2002 - 2017).
This section will discuss ratio analysis for the following ratios: current ratio, quick (acid-test) ratio, average collection period, debt to assets ratio, debt to equity ratio, interest coverage ratio, net profit margin, and price to earnings ratio. Depending on the end user which ratio carries more importance, however, all must be familiar with ratio analysis. Details on each company's performance for each of these areas can be found in the attached ratio analysis worksheet.
I have leant that ratio analysis offers better insight of a company’s financial position on the short-term and long-term basis. However, I would recommend that investor advice should be based on ratio analysis that considers ratios from several years. This will ensure that the investor is making an informed decision based on the company’s financial ratio performance trend.
Ratio Analysis Ratio analysis is a process of determining and presenting the relationship of items and groups of items in the financial statements so as to provide information to the financial statements in a concise form. In the words of Myres, “ Ratio analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements and a study of the trend of these factors as shown in a series of statements.” Advantages of ratio analysis It facilitates the comprehension of financial statements and evaluation of several aspects such as financial health, profitability and operational efficiency of the undertaking. It provides the inter-firm comparison to measure efficiency and helps the management to take remedial measures. It is also helpful in forewarning corporate sickness and helps the management to take corrective action. Trend analysis with the use of ratios helps in planning and forecasting. It helps in investment decisions in the case of investors and lending decisions in the case of bankers and financial institutions. Disadvantages of ratio analysis Ratios are an attempt to make an analysis of the past financial statements; so they are historical documents. Now days keeping in view the complexities of the business, it is important to have an idea of the probable happenings in future. Changes in price levels make comparison for various years difficult. For example, the ratio of sales to total assets in 1999 would be much higher than in 1980 due to rising prices. Types of Ratio 1.ROCE 2.Gross Profit 3.Operating Ratio 4.Price Earning 5.Dividend Ratio 6.Fixed Asset Ratio 7.Stock Turnover Ratio 8.Creditor Turnover 9.Debtor Turnover 10.Liquidity Ratio 11.Quick Ratio ...
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound.
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.