comparison of financial statements of two companies examples

Given that the company is able to make a lot of sales, it should acquire more capital which should be used in research. After comparing both the companies the highlights of the discussion are: Adidas has a higher GPM as compared to Nike Inc showing that direct costs are lower for Adidas as compared to Nike Inc Adidas has a lower NPM than that of Nike Inc showing that the even though the GPM is higher for Adidas its indirect costs are so high that its overall profitability has reduced The Stock Turnover of Adidas is low compared to that of Nike Inc showing that Nike Inc is able to convert its stock into turnover faster Having the NPM and the Stock Turnover both higher than Adidas, it shows that Nike Inc have their administration and other indirect expenses lower than that of Adidas Due to recession Adidas would be hit more as the stock turnover ratio is low despite high GPM Adidas has a higher ROCE than that of Nike Inc. English law does not normally impose liability for failure to act despite the fact that they may be compelling moral justification for doing so? However, the cost of goods sold for the company increased by just Rs 15,000 in the same period. Montage market is a market who deals with loans on residential, commercial, industrial real estate and farmland and the federal government has confirmed that a major economic role in the mortgage loan market because real estate development is a major sector of the U.S. Economy. This is good for the company The company graph shows that the ROCE was constant in 2006-2007 The company had a reasonable rise in their ROCE in the year 2008 but it dropped drastically in the year 2009, but stabilized in 2010 If the capital employed is high then there could be a decline in the ROCE which could be a reason in the year 2009 2010 is the year where the company begins stabilizing and tries to recover their standards https://www.soccerwallpaper.mackafe.com/var/albums/David-Beckham-Wallpaper-Gallery/beckham-wallpaper-adidas.jpg ADIDAS, 1 EUR = $1.337479367 The profit would be the key objective for most of the businesses and can help act as the measure of the firms financial success and performance. Find the most recent financial statements for two companies of same industry which are listed in KLSE (Kuala Lumpur Stock Exchange). This Case Study was written by one of our professional writers. New York: McGraw-Hill College Publishing. The income statements and balance sheets of the two companies information that are required for business performance and it obtain the required information from the related company financial reports via internet . The aim of the comparison may vary depending on who is conducting the analysis. From the information above the following ratios can be deduced. Net Profit Margin =, The trend in the above graph shows the NPM of the company Adidas over 4 years. See current prices, . The four general purpose financial statements include: Income Statement Balance Sheet Statement of Stockholders Equity Statement of Cash Flows for. Ratio analysis can be used by not only the management to know its status, but as it projects a trend, it can be used by prospective investors, government agencies etc. According to the financial analysis above, both companies are performing well. It is based on the accounting equation that states that the sum of the total liabilities and the owner . It has been prepared by a group of fore students for the Financial Accounting. But you can one from professional essay writers. 2006 2007 these financial years specifically showed consistency in their performance without making heavy losses which is the primary aim of all the companies. This was on account of the huge addition made to the plant and machinery by the company in the given accounting periods. We will write it for you, in any discipline! For instance the company can make use of locally available raw materials instead of importing the materials. So, lets understand a comparative balance sheet through an example. https://shoesobsessions.files.wordpress.com/2008/08/ad-2-copia.jpg NIKE INC, Profit would be the main aim for many businesses and can help act as one of the methods to measure of the firms financial success and performance. Company A would conversely have a lower income but higher inventory. Normally such products have substitutes in the market) Example: If the company reduce their cost of shoes by 5%, its turnover may increase beyond the loss due to reduction in the price. This analysis detects changes in a company's performance and highlights trends. Every business needs to prepare basic financial statements that summarize its operating results and financial position for a particular period. It should not be treated as authoritative or accurate when considering investments or other financial products. Percentage Change = (Absolute Increase or Decrease)/Absolute Figure of the Previous Years Item) * 100. Consequently, this is reflected in its level off gross profit. 3 This means that 31.8% of the firm's assets are financed with debt. The next component that a financial manager or a business owner needs to analyze is the change in thefixed assets, long-term liabilities and capital of a business. Using video conferencing instead of flying over to other destinations unless need be Reducing other overhead expenditure which can be cut down, say for instance, making a policy to shut down the computers, air conditioners/heaters when they are not in use, Stock Turnover ratio would measure the number of times a firm sells its stocks within a time period. On the other hand, the current liabilities have decreased by Rs 27,000 only. At the same time the trading of the stock and bonds that they get in financial market take place direct between buys and sellers and also financial market can be a good relationship by domestic or international business level in communication. Life insurance companies is a collect saving that form or annual premiums and invest in stocks, bonds, real estate and montage, finally make payments to the beneficiaries of the insured parties. Peter, A. Firstly, specify absolute figures of items such as cost of goods sold, net sales, selling expenses, office expenses, etc. Company with heavy debts burden is risky for not able to finance or not able to pay back its debts or maybe it is being forced to dispose or to sell its assets for paying back the debts. Mutual saving funds is a savings that has no stockholders and reinvests all profits in itself and the savings banks are owned their depositors and borrowers because there are no stockholders to please, mutual savings banks are often very conservative with how they invest deposits. The formula to find out Stock Turnover is Stock Turnover = OR Stock Turnover = * 365, Inventory turnover ratio or Stock turnover ratio measures the velocity of conversion of stock into sales Usually a high inventory turnover ratio indicates that the stock is fast selling and the management does not face difficulty in conversion of stock into sales In the graph for the stock turnover of Nike Inc it can be observed the rise in the stock turnover ratio for the years 2006-2008 2009 had a drastic fall in the stock turnover This fall was recovered and improved better than 2008 in the year 2010. Accounting and Finance for Non-Specialists. Calculate the percentage change in assets and liabilities . A comparative income statement showcases the operational results of the business for multiple accounting periods. The companies can be compared by the revenues they earned over those financial years, the sales of the company, the sales turnovers of the company, using the various tests and to comment on the performance of the company overall. This wills in turn impact positively on customer confidence. One such ratio is the current ratio which is the ratio between the current assets and current liabilities i.e. 1. & John, W. (2000). These statements are: the income statement, the balance sheet, the cash flow statement and the statement of retained earnings. Analyzing Financial Statements. This report is based on compare of two company's financial situation. current assets/current liabilities. Stock Turnover, Graph of the GPM for Adidas (2006 2009) & Nike Inc (2006 2010), Graph of the NPM for Adidas (2006 2009) & Nike Inc (2006 2010), Graph of the Stock Turnover for Adidas (2006 2009) & Nike Inc (2006 2010), Graph of the Return on Capital Employed for Adidas (2006 2009) & Nike Inc (2006 2010), https://studydriver.com/the-financial-comparisons-between-two-companies-finance-essay/, Financial Performance of the Nokia Corporation Finance Essay, Financial Statement Analysis for Blackmore Company Finance Essay, A Financial Statement Analysis Finance Essay, The Impact of Ownership Structure on Companies Finance Essay, A Financial Evaluation of Mccain Foods Finance Essay, Investment and Financial Data on Non Financial Firms Finance Essay, Two Types of Ratio Comparisons for Etisalat Finance Essay, Financial Analysis and Decision Making at Bresil Investment Finance Essay, Using Financial Planning to Manage Financial Resources Finance Essay, Financial Resource Management MG Fabrications Plc Finance Essay, Genting Group Comprises of Five Public Companies Finance Essay, Financial Ratios for Pace Ltd with Calculations Finance Essay, Methods and Reasons for Investing in Certain Companies Finance Essay, Financial Indicators Asset Turnover Finance Essay, Analysis of Financial Reporting and Financial Statement Finance Essay, Year 2006. Example it can be shown in a view from balance sheet, profit and loss account, and budgetary control system or in any accounting organization that shows relationship between accounting data. You are free to use it as an inspiration or a source for your own work. For operating profit margin on sales, (Gamuda Berhad) have a lower profit earned by company from the sales made for the ineffective control on expenditures and interest cost, incurring higher operating expenses and higher interest costs to reduce the profit earning but profit margin on sales, (Gamuda Berhad) have higher profit earned by company from the sales that is made for the effective control on its expenditures and interest costs, incurring lower operating expenses and lower interest costs to increase the profit earning than the second company. Capital markets is who deals for securities where companies and governments can intermediate or long-term debts in a periods of one year or more than one years and also it include stock market. Financial statements are used as a way . Accounting ratio is one number that expressed in terms of another relationship between two or various figures and company that can be compared. QuickBooks Payroll is only accessible via QuickBooks Online subscriptions. There are many various of types in financial market that is physical asset markets to deal with the tangible, real and physical products such as computer, machinery, real estate and other assets the financial market deal with different types of instruments such as stocks or shares, bonds, notes, mortgagees and other claims or real assets with derivative securities whose values derived from changes in the price of other assets. This analysis helps to understand the relationship between various components showcased in each of these statements. The more the NPM the better for the company as the company would have more profit to distribute to shareholders and to reinvest in the business. Also known as 'horizontal analysis, are financial statements showing financial position & profitability at different periods of time. Ratio analysis makes it possible to measure the effectiveness of any kind of business. Hence, this technique is also termed as Horizontal Analysis. This increase in the debt-to-equity ratio could indicate management's decision to increase the company's debt load to better leverage the company's assets and equity and more closely match the industry. Overview of the Three Financial Statements The statements may also reveal unusual spikes in the reported information that can indicate the presence of accounting errors. Turnover of total operating assets ratio=total sales/total operating assets, For universal motor manufacturers limited, the ratio =176558/36877=4.8. This will help us conclude which company has done well financially better than its counterpart. QuickBooks Online mobile access is included with your QuickBooks Online subscription at no additional cost. The Essay Writing ExpertsUK Essay Experts. With the objective to understand the business performance of the two entities, we reviewed the 2007 financial statements of both company and tried to obtain some insight on the profitability and solvency of each entity. 2 income statement which shows how the net income of the firm is arrived and 3 cash flow statement which shows the inflows and outflows of cash caused by the firms activities. The Financial Comparisons between Two Companies Finance Essay. Adidas and Nike Inc are the only companies which dominate the footwear, sportswear and sports equipment sector of the market. The formula to find out Stock Turnover is Stock Turnover = OR Stock Turnover = * 365, Inventory turnover ratio or Stock turnover ratio measures the velocity of conversion of stock into sales Usually a high inventory stock velocity indicates efficient management because more stocks are sold Graph above for the stock turnover of Adidas shows the decline in the stock turnover ratio from 2006 to 2007 Since 2007 the company had a low stock turnover However the company could not improve its stock turnover ratio over the years The low inventory turnover ratio implies that the products of the company are not selling as fast as they were in the year 2006 The other reason for rise in the ratio could be that the company started producing for increasing its stocks, but considering the situation at that point of time, it seems highly improbable. Basic Analysis includes the following: Net Sales increased by 25% over the period. Financial comparison between two companies or inter firm financial comparison is a method of analyzing the financial status of a business comparing it based on a number of criteria with another similar firm. Both the companies manufacture all types of vehicles. It helps the business owner to compare the results of business operations over different periods of time. the company can manage their finance, Debts management is how they manage their tax, and Market value of investment to ordinary shareholders is how they create their market value book. However, the cost of goods sold for the company increased by just Rs 15,000 in the same period. Every business needs to prepare basic financial statements that summarize its operating results and financial position for a particular period. This is achieved by comparing the operating results of the business over multiple accounting periods. It also have many kind of tax deferred saving plans to provide benefits to the participants when they retire. It offers an overview of a business's liabilities, assets, and shareholder equity. Intuit, QuickBooks, QB, TurboTax, ProConnect, and Mint are registered trademarks of Intuit Inc. A professional writer will make a clear, mistake-free paper for you! Ratio analysis is a tool for evaluating financial statements but also relies on the numbers in the reported financial statements being put into order to be used as ratios for comparison over time or across companies. Gross Profit Margin (GPM), Efficiency Ratios for Nike Inc.Stock Turnover, Profitability Ratios for Adidas. Sales Revenue of Adidas $13884.4, Graph of the GPM of Adidas from 2006-2009, Year 2006. Generally, a company's comparative statements show . . Such additional machinery leads to an incredible improvement in the production capacity of the company during the year. financial reporting - comparison of two companies, Copyright 2023 StudeerSnel B.V., Keizersgracht 424, 1016 GC Amsterdam, KVK: 56829787, BTW: NL852321363B01, Unit 12 The Human Muscular and Skeletal Systems (RH33MR051), personal injury and clinical negligence (2020/21), Medicines and Disease - Cancer, Infection, Joints, Lungs and Skin (PHAM1128), International Development Econ (ECON30142), Unit 9 - Human Nutrition and the Digestive System, BTEC business level 3 Exploring business (Unit 1 A1), Introduction to English Language (EN1023), Summary Sensation and Perception chapter 11 - 13, Physiology Year 1 Exam, questions and answers essay, Solved problems in engineering economy 2016. Other than that it also helps in the of planning, forecasting and assist management and it helps in case of investors and lending decision of bankers. Part 1 The NHLBI (2022) defines metabolic syndrome as a cluster of conditions and risk factors that increase the chances of developing cardiovascular diseases, coronary [], Introduction In many tertiary hospitals worldwide, pediatric patient emergencies occur frequently. The company should invest more on market research and advertisement with a view to open up new markets, increase in the number of units sold and thereby boost its financial position by improving on its profitability. You can convert this difference to a percentage of the base year by dividing $300,000 by $600,000, which equals 0.5. An investor on the other hand may want to compare two firms in order for him to invest in the best company that will offer him good return for his investment. comparison of two companies; Financial report; Newest Financial Reporting Coursework Adjusted; EE Accts YE . They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders' equity. The following differences outlined in this section affect what financial information is presented, how it is presented, and where it is presented. Adidas had a major decline in their GPM where Nike did not have a very major fall although the company had a decline it was not as bad as Adidas It was also said that the boom of the commodities which was on for 5 years had come to an end, Adidas had a relatively low NPM compared to Nike Inc In the year 2006 Adidas had a lower NPM than Nike Inc In the year 2007-2008 they were almost the same Due to the recession in the year 2009 hit Adidas very bad as they had fallen in both the NPM and the GPM Nike Inc on the other hand was not affected that badly due to the recession Reducing other overhead expenditure which can be cut down, say for instance, making a policy to shut down the computers, air conditioners/heaters when they are not in use, Inventory turnover ratio or stock turnover ratio measures the velocity of conversion of stock into sales. Find out the absolute change in the items mentioned in the balance sheet. 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Ratios for Nike Inc.Stock turnover, Profitability Ratios for Adidas company & # x27 s... Particular period have many kind of tax deferred saving plans to provide benefits to financial... This analysis helps to understand the relationship between two or various figures and company that can be deduced information the. This was on account of the total liabilities and the statement of Stockholders Equity statement of Stockholders Equity statement Stockholders. Statements that summarize its operating results of the business owner to compare the of.