on its income statement. Is zero expense a good indicator of the cost of using those buildings and equipment? Compare that situation to a company with new buildings and equipment where there will be large amounts of depreciation expense. The remainder of our explanation of financial ratios and financial statement analysis will use information from the following income statement: Example Corporation Income Statement For the year ended December 31‚ 2011 | | Sales (all on credit) | $500
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Coursework Ratio Analysis of Tesco and Sainsbury Introduction This report details the results of a ratio analysis of two of the largest retailers in the UK: Sainsbury and Tesco based on their audited financial statements for the financial years ending 2011‚ 2012‚ and 2013. The two companies are compared with each other based on their profitability and liquidity ratios. This report then critically interprets the results of the ratio analysis calculations and then discusses the weaknesses of ratio analysis
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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
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Stockholder Ratios Stockholders are primarily interested in two things: (1) The creation of value‚ and (2) The distribution of value. Stockholder ratios such as earnings per share and return on common equity provide information about the creation of value for shareholders. The value is distributed to shareholders in one of two ways. Either the corporation issues dividends or repurchases stock. The remainder of the stockholder ratios—dividend yield‚ dividend payout‚ stock repurchase payout
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Customer profitabilty analysis idetifies customer service activities and cost drivers and determines the profitability of each customer or customer group. Here‚ customer service include all activities to complete the sale and satisfy the customer including advertising‚ sales calls‚ delivery‚ billing‚ collection‚ service calls‚ inquiries and other forms of customer service. Customer profitability analysis allow managers to: Identify most profitable customers Manage each customer’s cost-to-serve Introduce
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Financial Ratios: What They MeanIn assessing the significance of various financial data‚ managers often engage in ratio analysis‚ the process of determining and evaluating financial ratios. A financial ratio is a relationship that indicates something about a company’s activities‚ such as the ratio between the company’s current assets and current liabilities or between its accounts receivable and its annual sales. The basic source for these ratios is the company’s financial statements that contain
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A customer profitability analysis is an evaluation process that focuses on assigning costs and revenues to segments of the customer base‚ instead of assigning revenues and costs to the actual products‚ or the units or departments that compose the corporate structure of the producer. Approaching profitability from this angle can sometimes provide valuable insights into how each step of the process of designing‚ manufacturing‚ and ultimately selling a good or service incurs cost and generates revenue
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GROUP 1 REPORT FINANCIAL RATIOS Financial ratios are useful indicators of a firm’s performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm’s financials to those of other firms. In some cases‚ ratio analysis can predict future bankruptcy. SOURCES OF DATA FOR FINANCIAL RATIOS Balance Sheet Income Statement Statement of Cash Flows Statement of Retained
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Financial Reporting II Review of Ratio Analysis Ratio analysis is a useful tool for analyzing financial statements. Calculating ratios will aid in understanding the company’s strategy and in understanding its strengths and weaknesses relative to other companies and over time. They can sometimes be useful in identifying earnings management and in understanding the effect of accounting choices on the firm’s reported profitability and growth. Finally‚ the ratios help in obtaining a better understanding
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Financial Results FIN/571 July 22‚ 2013 Interpreting Financial Results Liquidity: Current Ratio Parrino‚ Kidwell‚ & Bates (2012) detail the current ratio as current assets divided by liabilities. The current ratio identifies a firm’s potential to pay short-term liabilities; higher liquidity is a good sign for potential creditors (Parrino et al.‚ 2012). At the same time‚ however‚ the current ratio should not greatly exceed benchmarks of other competitors (Parrino et al.‚ 2012). This could be
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