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Financial Management: Ratios, Risk Essay

… The Relationship between Risk and Financial Returns

Generally, investments with a higher level of risk have a significantly higher rate of return than those with a lower risk level. As Stickney et al. (2009) point out; an individual who invests in Wal-Mart's shares would ordinarily demand a higher rate of return than an individual who invests in a certificate of deposit. Here, individuals purchasing Wal-Mart's shares would require to be compensated for embracing a riskier investment option.

The Beta Concept

Beta in the words of Shim and Siegel (2008) "measures a security's volatility relative to an average security." According to the authors, beta can hence be used by an individual in the determination of not only the risk but also the expected return.

Systematic and…. [read more]


Financial Ratios: Pepsico Essay

… Debt Ratio

A high debt ratio in relation to the ratios of companies in the same industry (Gallagher and Andrew, 2007).

- Management must take appropriate measures to reduce the entity's risk level.

- One way to do this would be reducing the amount of debt the entity currently has.

Current Ratio

A low current ratio than that of companies in the same industry.

- Ideally, the current ratio value ought to be more than/or above 1 as this clearly indicates that the concerned entity would comfortably settle its obligations if it were forced to do so at that point in time.

- Enhance the entity's operating efficiency.

- Explore (and implement) other ways of converting the company's goods/services into cash, i.e. via value addition,…. [read more]


Ratio Analysis: Midwest Health Plan Essay

… Debt Ratio

According to Baker and Powell (2005), "the debt ratio is computed by dividing a firm's total (current and non-current) liabilities by its total assets." Hence in our case, Midwest Health Plan's debt ratio will be:

Midwest Health Plan's Debt Ratio = 30,800,896/51,729,482 = 0.595

The debt ratio as Baker and Powell (2005) point out "measures the percentage of a firm's total assets financed by debt." With that in mind, an organization having a debt ratio of less than 1 can be considered safe as far as its debt-load is concerned than an organization having a debt ratio of more than 1. Further, as Baker and Powell (2005) note, an entity having a high debt ratio could be having a significant chunk of its…. [read more]


Financial Ratios Calculation and Interpretation Application Essay

… Financial Ratios Calculation & Interpretation

Looking at the Rate of Return on Equity (ROE), it is clear that the shareholders of Plume Inc. are better off than those of Arrow Company as their earnings for each dollar invested seems to be much higher. When it comes to the Return on Assets (ROA), the higher value of the same in regard to Plume Inc. shows that the entity's assets are being used more effectively than those of Arrow Company to generate profits. A comparison of the gross margin between the two companies shows that Plume Inc. maintains a higher proportion of revenue (per dollar) as gross profit. That is, for each revenue dollar, $0.44 is retained. This is in comparison to Arrow Company's retention of $0.40…. [read more]


Financial Essay

… Financial Overview

Business Description

Wal-Mart "operates retail stores in various formats around the world and is committed to saving people money" as a business strategy (Wal-Mart 2012 Annual Report). The company operates three main segments, Wal-Mart U.S., Sam's Club and Wal-Mart International. Of these, Wal-Mart U.S. accounts for 59.5% of its total revenues, Wal-Mart International accounts for 28.4% of total sales and Sam's Club accounts for 12.1%. Wal-Mart's total revenues are $443 billion. The company is by far the largest player in the retail industry globally, although this industry is extremely fragmented. Wal-Mart has a dominant share in the United States, and dominates a number of individual product segments, such as groceries. It is also one of the largest online retailers, trailing only companies like…. [read more]


Wal-Mart: Financial Statement Analysis Essay

… 75

0.73

0.58

0.65

0.69

Fig 4: Five-Year Wal-Mart Debt-to-Equity Ratio

Net Profit Margin

Net profit margin is calculated by dividing net income by total revenue, and net profit margin represents the percentage of revenue that a company has been able to keep as profits after deducting both variable and fixed costs. However, narrow profit margin indicates higher volatility and wide profit margin indicates that a firm is operating with reduced risks. A formula used to calculate net profit margin is as follows:

Formula: Profit Margin = Net Income / Revenue

The data in Table 6 and Fig 5 reveal that Wal-Mart has been able to improve its net profit margin between 2010 and 2011. However, the company net profit margin deteriorated between 2011 and…. [read more]


Financial Ratios Thesis

… Ratio analysis has become one of the most prominent forms of financial analysis in business. The technique, which was originally developed to analyze credit in the short run (Horrigan, 1965) has risen to prominence because it offers a variety of advantages. However, its popularity belies the fact that ratio analysis also has many limitations. For the first several decades of ratio analysis, such limitations were given little consideration, since it was widely felt that ratio analysis was beneficial (O'Connor, 1973). Any individual using ratio analysis to understand a company's operations should understand these limitations. Ratio analysis is but one tool that can be used to analyze a company and is not intended to be the only tool. This paper will discuss the benefits and limitations…. [read more]


Financial Reporting on the Internet Essay

… Under this approach, "revenues are recorded at the point of sale and costs when they are incurred, not necessarily when a firm receives or pays out cash" (Graham and Smart, 2011, p.G-I). During the financial years 2012, 2011, and 2010, the cash provided by operations was $612,464,000, $508,565,000, and $423,013,000 respectively. I derived this information from AMETEK's consolidated statement of cash flows.

Q.7

Some of the accounts that provide evidence that AMETEK makes use of accrual accounting include:

Accounts receivables -- For sales made on credit at a certain date, revenue is realized during that period. In this case, the accounts receivables account is debited while revenue account is credited with the value of the said credit sales.

Cash (and cash equivalents) -- When payment…. [read more]


Financial Analysis of Medassets Term Paper

… Financial Analysis of MedAssets

Company Overview

MedAssets Inc. is an organization that provides technology enabled product and service to mitigate the financial instability facing the healthcare providers across the United States. The company has assisted many healthcare organizations to increase their net revenue between 1 and 3% and decline the costs by 3 to 10%. Through the company efficient operation, MedAssets has assisted 4,000 hospitals, 180 health systems and 90,000 non-acute healthcare providers to control costs and optimize operational efficiency. The company was incorporated in 1999 with headquarter in Alpharetta in Georgia. Typically, the company provides a streamlined solution to improve the operating margin and cash flow of many healthcare providers in the United States.

"Over time, MDAS has evolved into a comprehensive health care…. [read more]


Financial Analysis Ratios Essay

… Ratio and Financial Statement Analysis

The topic for this essay is ratio and financial statement analysis. It is meant to show and analytically examine the benefits and confines of ratio analysis by elucidating what factors impact the significance of such methods and what new theories or practices may be developing regarding the presentation and application of ratio and financial statement analysis. Emphasis on practical applications will come from peer-reviewed articles.

The articles are within the last five years as well as use real-world ratios synthesizing. They are a mixture of researched material and studies. From the start of January 1, 2011, the majority of the world fiscal market economies utilize International Reporting

Standards or IFRS as the obligatory outline for financial statements. This has a…. [read more]


Ratio and Financial Statement Analysis Essay

… Ratio and Financial Statement Analysis

The purpose of this essay is to critically analyze the benefits and limitations of 'Ratio and Financial Statements Analysis', explaining which factors impact on the meaningfulness of the financial ratio analysis; and establishing the new practices or theories that may be emerging regarding the application of ratio and financial statement analysis.

The essay covers 'Ratio and Financial Statements Analysis' with a critical analysis of the benefits and limitations of ratio analysis; it explains the factors that impact on the meaningfulness of such measures. In between, the essay outlines and explains the four stages of financial statements analysis. More so, the essay explains CAMEL as a new practice or theory that may be emerging regarding the application of 'Ratio and Financial…. [read more]


Financial Management Calculate or Identify Term Paper

… The higher the return, the more efficient management is in utilizing its asset base (Investopedia Ulc., 2011, para. 1). The return on equity (ROE) ratio measures how much the shareholders earned for their investment in the company. The higher the ratio percentage, the more efficient management is in utilizing its equity base and the better return is to investors (Investopedia Ulc., 2011, para. 3).

While the ROA percentage of Google Inc. is 17.2%, it is 21.8% in Microsoft Corporation. Even though the percentages are so close each other, just looking at this percentages tell there is more efficient management is in utilizing its asset base in Microsoft. However ROE needs to be interpreted in the context of a company's debt-equity relationship, higher ratio indicates higher…. [read more]


Financial Comparison Financial Analysis Essay

… Thus, the focal point operationally needs to be on improving efficiency and driving these synergies.

The third recommendation for these two companies is that they both need to reduce their debt. Both firms took on a lot of debt as part of their 2010 acquisitions, and this is a detriment to both companies. The best strategic move therefore is to begin reducing that debt. The companies had much healthier debt levels pre-acquisition, so those pre-acquisition debt levels should be the benchmark for both Coca-Cola and for Pepsi to target.

Conclusion

The analysis of Coke and Pepsi finds that Coke is the better performer financial, both in terms of raw numbers and in terms of trend. Both firms made major acquisitions in the 2010 that changed…. [read more]


Financial Management Is an Important Managerial Function Term Paper

… Financial management is an important managerial function that deals with the monetary resources of the company. Financial management helps to handle the funds of investors in order to give returns to them. In order to do proper financial management, it is important to understand financial ratios, what they mean and their importance. This paper deals with the most common financial ratios and how they affect investors' decisions for Google and Microsoft.

Core business and leading products of Microsoft

The company is involved in the development of software and creative solutions for business and for personal use. The company has eight divisions. The first division is the online services division which deals with Bing search, the MSN portal, advertising services as well as other personal communication…. [read more]


Financial Statement Analysis Westpac (Wbc) Essay

… The financial data over the three years between 2009 and 2011 are used to access the financial health of the company.

ROE between 2009 and 2011

ROE in 2009: 218 / 3,013*100= 7.2%

ROE in 2010: 202 / 4,068*100= 4.69%

ROE in 2011: 380 / 3,688*100= 10.30

ROA between 2009 and 2011

ROA in 2009: 218/8,446*100 =2.5%

ROA in 2010: 202/11,117*100=1.8%

ROA in 2011: 380/10,924*100=3.5%

Profitability Ratio

Profitability ratio in 2010: 202 / 2,809*100= 7.19%

Profitability ratio in 2011: 380 / 6,310*100= 6.022%

Table 3: Profitability of AMCOR between 2009 and 2011

Profitability Ratios in %

2011

2010

2009

Profitability Ratio

6.2.%

7.19%

Return on Assets (ROA)

3.5%

1.8%

2.5%

Return on Equity (ROE)

10.3%

4.6%

7.2%

Based on the financial data from 2009 and…. [read more]


Financial Statements Are Produced Essay

… This ratio is at 0.26, its lowest level of the past three years, and well down from the 0.35 of the year before. This might be of some concern to an analyst if there are other factors at play, and other warning signs. The acid test ratio is not as important for Sainsbury's as it might be for other companies because most of its inventory will be sold, it can be safely assumed. Much of the goods are not especially perishable, and most of the items can be sold even if a discount is needed. Sainsbury's therefore cannot be viewed in the same light as a company whose inventory might be worthless if unsold. If Sainsbury's need to sell more cans of beans, it just…. [read more]


Financial Analysis: Wal-Mart Research Paper

… Financial Analysis: Wal-Mart

In this analysis, I concern myself with Wal-Mart Stores -- an NYSE listed multinational corporation. Amongst other things, I will come up with a concise description of the company and its line of business. Further, in addition to evaluating the vulnerability of the retailer to current financial threats, I will also highlight the impact of the company's financial trends on its future financial performance.

Wal-Mart: Overview

Founded 51 years ago by Sam Walton, Wal-Mart's key purpose is helping "people around the world save money and live better -- anytime and anywhere -- in retail stores, online and through their mobile devices" (Wal-Mart, 2013). Currently, Wal-Mart's key competitors in the discount, variety stores industry include but they are not limited to Target Group…. [read more]


Financial Analysis of Bestwish Limited Essay

… Efficiency Ratio

Efficiency ratio measures how effectively Bestwish limited utilized its assets and the extent the company managed its liabilities. The paper uses the inventory turnover ratio and total asset turnover to evaluate the efficiency ratio of Bestwish Limited.

Inventory Turnover Ratio= Cost of Sales / Average Inventory

2010=372,142, 000 / (37,653,000+36,217,000)2)

=372,142, 000/36,935,000

=10.07

The result reveals that Bestwish Limited replenished its inventory 10.07 times between 2009 and 2010.

Total Asset Turnover= Revenue/Average Total Assets

2010: 400,042,000 / (140,170,000+ 125,632,000)/2)

=400,042,000/132,901,000

=3.01

The results reveal that for every dollar that Bestwish invests, the company generates $3.01 of revenue.

Recommendation

Analysis of the company comprehensive income statement reveals that the company cost of sales increase yearly between 2009 and 2010. Moreover, company administrative expenses increase…. [read more]


Financial Statements and Ethics Research Paper

… Financial Statements and Ethics

McDonald's Corporation remains one of the largest operators and franchisers of fast food restaurants in the world. Over the last two tears, the corporation's profitability has been on a steady increase. In this text, I analyze McDonald's Corporation's financial statements in an attempt to determine the nature of the company's performance over the last two years.

McDonald's: Financial Statement Analysis

Profitability Analysis

In seeking to analyze the firm's performance in terms of profitability over the last two years, it would be prudent to utilize a number of profitability ratios including return on equity, net profit margin, and return on assets. Profitability ratios in the words of Brigham and Houston (2009) "reflect the net result of all of the financing policies and…. [read more]


Financial Risk the Financial Ratio Essay

… With this in mind, the appropriate risk would need to have the ability to reach the goal at a target date. There would need to be enough risk to meet the goal with enough low risk investments to diversify any losses for the overall portfolio. The overall portfolio would require assets from all three asset categories and contain diversification within each of the asset categories.

Bibliography

Beginner's Guide to Asset Allocation, Diversification, and Rebalancing. (n.d.). Retrieved from SEC: http://www.sec.gov/investor/pubs/assetallocation.htm

Buffett, W. (2010, Jan 7). Modern Portfolio Theory: Why It's Still Hip. Retrieved from Investopedia: http://www.investopedia.com/articles/06/MPT.asp#axzz1acTq56Kw

Derrick, J. (2012, Jan 30). Understanding Stocks: The Concept of Beta. Retrieved from benzinga: http"://www.benzinga.com/general/psychology/'12/01/2300328/understanding-stocks-the-concept-of-beta

Kieso, D.E., Weygant, J.J., & Warfield, T.D. (2008). Full disclosure in Financial Reporting. In D.E.…. [read more]


Financial Analysis Essay

… Financial ratios can therefore be used in providing meaningful information for comparing companies that operate within similar industries.

The factors to consider when interpreting results of ratio analysis

There are several factors to consider when interpreting ratio analysis. Key among them includes inflation, the type of industry, the financial year and duration as well as the seasonality of the firm's performance.

Sample ratio analysis calculation for a healthcare organization

Cost per discharge

Cost per discharge is a system level metric used in healthcare to refer to the costs that are related to the operations at the inpatient side of the business and is never associated in any way with the administrative cost.

Cost per discharge =Total cost/Discharges

For instance is a major hospital made $2…. [read more]


Ratio Analysis of Different Companies Within the Same Industry Term Paper

… Ratio Analysis of Different Companies Within the Same Industry

The aim of this report is to make a comparison between 10 important companies, from different fields of activities. The comparison tool would represent various financial-accounting ratios that would best highlight in quantitative terms the specific characteristics and performance of the company.

This comparison based on financial and accounting ratios is important due to the fact that stakeholders in these companies need to be informed at all times about their investments. A basic principle of security placements is that all investors must be aware about the opportunities on the market and should act only upon an informed decision.

The five fields of activity included in the presentation represent main industries in the current economy, each employing…. [read more]


Financial Ratio Analysis Research Paper

… Financial Ratio Analysis

Liquidity

Apple

Google

Working Capital

Current Ratio

Current Cash Debt Coverage Ratio

A/R Turnover

Inventory Turnover

According to Correia et al., liquidity ratios are of great importance for an individual seeking to gauge a firm's ability to settle its financial obligations as they mature (5-13). To gauge the appropriateness of Apple's liquidity, a look at its current ratio would be necessary. Basically, given that Apple's current ratio is higher than one, the company cannot be said to be encountering any serious liquidity problems at the moment. Hence if Apple's short-term obligations fell due, the company would be able to meet them. However, Apple has a lower current ratio than its competitor. It can be noted that in basic terms, a company with…. [read more]


Financial Analysis Oracle Sells Software Term Paper

… Conclusion

Ratios

Valuation Ratios

Company

Industry

Sector

S&P 500

P/E Ratio (TTM)

Price to Sales (TTM)

Growth Rates (%)

Company

Industry

Sector

S&P 500

Sales - 5 Yr. Growth Rate

Financial Strength

Company

Industry

Sector

S&P 500

Quick Ratio (MRQ)

Current Ratio (MRQ)

Profitability Ratios (%)

Company

Industry

Sector

S&P 500

Gross Margin (TTM)

Gross Margin - 5 Yr. Avg.

Management Effectiveness (%)

Company

Industry

Sector

S&P 500

Return On Equity (TTM)

Oracle seems to be in a good position by their valuation ratios; their high P/E ratio is nearly double the industry average. However, an investor should notice extremely lower rates for Oracle's growth compared to the industry and it's sector. This could be due to a mixture of economic and envirnmental factors -…. [read more]


Financial Health Hyundai Company Analysis Essay

… The company showed great ability and potential because of the increase in the capacity of its assets over the first two years but disrupted the fall in its total assets in the third year. The liabilities section did show irregularities in its trend as well. It rose in between the first two years, but fell in the third year. This demonstrated that there were policy attempts to manage the liabilities of the company.

Ratio analysis

Current ratio analysis is a measure of a company's ability to honor short-term obligation. The measure result from dividing the current assets with current liabilities in the balance sheet of a company (Mclean, 2003). The ratio reflects a company's ability to pay its short-term liabilities that include payables and debts.…. [read more]


Ratios in Order to Estimate Term Paper

… The Eli Lilly company should reassess its' credit policy and must reduce account receivable as this is short-term no interest credit offered for clients of the company and thus is a resources loss. The total accounts receivable for Eli Lilly company for year 2004 have amounted to $2,058.7 and for J& J. this number is at the range of $6,831 millions while the information on average annual goods sold in credit is not available from annual reports of both companies.

The second financial efficiency ratio we shall use in our financial analysis is the net profit margin which is equal to net profit or net income divided by net sales, thus reflecting how much out of each dollar of sales the company keeps in earnings…. [read more]


Financial Analysis: Home Depot Summary Research Paper

… Financial Position

Working Capital

The company's working capital ratio/current ratio remained relatively stable during the three years under consideration. The relevant computations as highlighted elsewhere in this text indicate that for the years 2013, 2012, and 2011 respectively, the working capital ratio for Home Depot was 1.34, 1.55, and 1.33 respectively.

Property, Plant and Equipment

The property, plant, and equipment figure registered a $612 million decrease in 2012. The same further decreased from $24,448 million in 2012 to $24,069 in 2013.

Total Assets

The total assets figure in this case registered a slight increase of 0.98% in 2012. The said figure also increased by 1.40% in 2013.

Long-Term Assets

Between the years 2011 and 2012, the long-term assets of Home Depot decreased from $26,646 million…. [read more]


Financial Accounting Thesis

… Financial Accounting

A ratio analysis can help to gain understanding of a company's financial position. Ratios regarding profitability and liquidity provide a quick snapshot of the company's performance and allow for easier translation of financial performance over multiple time periods. To analyze the financial situation of the Gap Inc., four ratios will be analyzed -- the net income percentage, the return on equity, working capital and the current ratio. The first two are profitability ratios and the latter two are liquidity ratios. Together, they will paint a picture of the company's financial health by illustrating the degree to which the Gap converts its revenues into profits and by indicating the company's ability to meet its short-term debt obligations.

The net income percentage is defined as…. [read more]


Financial Ratios Essay

… 3. Financial returns are related to risk because if all other factors are equal, an investor will prefer an investment with lower risk. What this means is that if there were two investments, and they both had the same return, the investor would always choose the lower-risk one. In order to convince people to buy the other one, the price would need to be lowered. With a lower price, the return will increase. Thus, the higher return will compensate for the greater risk. Investors demand that this relationship exists. It is basic microeconomics.

4. Beta is a measure of unsystematic risk. The beta is calculated by taking the correlation of the company's stock market returns vs. The general market's returns. The beta is therefore a…. [read more]


Financial Ratios Coca Cola Company Essay

… Profit margin is net income to net sales. Financial ratios are the starting points that are used to figure the financial analysis. Ratios are usually based on historical information, which can cause distortions in the performance measurement. When estimated items, such as depreciation and amortization, are significant, credibility is lost in income ratios. It is difficult to achieve comparability among firms in the same industry. To achieve comparability the basic differences in accounting principles, procedures, and adjusting the balances of the accounts need to be considered. A substantial amount of important information is not included in the financial statements. Industry changes, management changes, competitor's actions, technological developments, government actions, and union activities all play a vital role in the success of an operation. There is…. [read more]

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