SlideShare a Scribd company logo
Financial Analysis Essay
Rachelle Stanley
Columbia College
FINC 350
A firm's performance and financial situation is measured by financial ratios. In order to reach these
ratios a financial analysis must be done on the company's financial information. Financial analysis is
the evaluation, selection and interpretation of financial data to assist in investment and financial
decision–making. Financial data is drawn from many sources however, the primary source is data
that is provided by the company in its annual reports. These annual reports consist of the income
statement, the balance sheet and the statement of cash flows. Financial ratios can be used to analyze
trends and compare the firm's financial standing to those of other firms. Financial ratios are...show
more content...
Any number 3 or above could mean that management has too much cash on hand and may be
doing a poor job of finding ways to invest. By reading the annual report or the 10K you can see
what executives plans are for future investments. A current ratio below 1 may be a sign that the
company may have trouble paying its bills on time. Only companies that have inventory that can
immediately be converted into cash should have a current ratio below 1.
Quick Ratio
The quick ratio, also known as acid test, is calculated by subtracting inventory from current assets
divided by current liability. This ratio indicates a company's ability to satisfy current liabilities with
liquid assets. Current assets used in the quick ratio are cash, accounts receivable and notes
receivable. Any quick ratio less than 1.00X would require the company to sell their inventory to
meet its obligations. Lenders are very interested in quick ratio because inventory is not included,
which is not converted to cash easily. USD IN MILLIONS| 2008–1| 2009–1| 2010–1| 2011–1|
2012–1| Target
Get more content on HelpWriting.net
Financial Analysis Essay
UNIVERSITY OF PORTSMOUTH| Report for Primark's IPO purposes| Financial Analysis
Assignment| | Student ID: 635281, 636484, 640073| 11/28/2011| |
––––––––––––––––––––––––––––––––––––––––––––––––– Table of Contents I.Introduction4
II.Primark's business and financial situation5 2.1.Primark's business and financial analysis5
2.1.1.Business analysis5 2.1.2.Financial situation (trend analysis)6 2.2.Industry sector11
2.2.1.Overview11 2.2.2.Cross–sectional analysis12 2.2.3.Summary of Primark's strength and
weakness16 III.Financial ranking and forecast17 3.1.Financial ranking17 3.2.Forecasted 2011 post
tax profit18 IV.Corporate Governance Structure20...show more content...
Finally, the last section is the conclusion, which summarizes the report and evaluate of the
techniques applied in the analysis. II. Primark's business and financial situation 2. 3.1. Primark's
business and financial analysis 3.2.1. Business analysis Chesbrough (2006) suggested that Business
model emphasizes how business can use technological potential to create economic value and
suggested that its main functions are: value proposition, market segment, value chain, cost
structure and target margin, value network, competitive strategy. According to a case study of
Primark (The Times 100, 2010), the business model which is based on "high sales volumes" and
"lower retail margins" with minimal advertising enables Primark to offer value and low price
products. The economies of scales resulting by buying large quantity of items help Primark to keep
costs down. Moreover, retails prices are kept at considerably low level through "lean operation" and
efficient operational practices (e.g. off–season factory time, flat management structure, effectiveness
of distribution network and supply chain). This business model has created and enhanced Primark's
competitive advantage which is the vital key to survive and grow in its industry sector. 3.2.2.
Financial situation (trend analysis) In recent years, thanks to meeting customers' need and
expanding stores, Primark has grown rapidly year by year [ (The Times 100) ].
Get more content on HelpWriting.net
Financial Analysis of Carrefour Essay
Chapter 5 Carrefour S.A. Teaching Note Version: March 2007
Introduction The Carrefour case is a financial analysis case. Carrefour S.A. is one of the world's
largest retailers. During the first half of the 2000s, the company's share prices steadily declined,
despite the fact that the company reported above–average returns on equity. Students are asked to
analyze Carrefour's financial statements and segment data to find explanations for the company's
poor share price performance and to make recommendations for the future. The discussion of the
financial analysis is preceded by a discussion of Carrefour's strategy and accounting. Both the
accounting analysis and the financial analysis are affected by Carrefour's switch from French GAAP
...show more content...
International growth. When large companies such as Carrefour start to obtain a dominant position
in their domestic markets, they may be "forced" to expand overseas or enter other industries.
Carrefour's corporate strategy is to expand overseas rather than diversify. More importantly, as
indicated above, achieving growth is an essential part of Carrefour's strategy because
(international) growth helps the company to obtain economies of scale in purchasing, logistics and
the development of Carrefourbranded products. For example, Carrefour sells its own branded
products in the same packaging worldwide (of course printed in different languages). The
company's overseas retailing operations are, however, more risky than its domestic operations.
First, to some extent retailing remains a local business because consumers' tastes differ
substantially across countries. Profitable expansion outside Carrefour's domestic market is only
possible if the company has good knowledge about local customers' preferences and tastes.
Consequently, a slightly safer way to expand abroad is to acquire local supermarket chains. A
disadvantage of this strategy is, however, that acquisition premiums have to be paid, which can also
drive down profits. Second, many of Carrefour's "intercontinental" hypermarkets are located in
countries where the economic environment is risky: consumers in economically less developed
countries are likely to be more price sensitive; East Asian
Get more content on HelpWriting.net
Essay about Analysis of Financial Statement
To determine Panorama's financial positions, we need to use ratio analysis. There are four main
categories we can use. They are liquidity, activity, profitability, and debt or financial leverage.
The first category Panorama needs to look at is liquidity. This is measured in three different ways.
Working capital, current ratio and the acid–test ratio. Working capital can be described as a
company's current assets minus its current liabilities. Panorama's working capital would be
$833.89. The second is the current ratio in which we would find by taking a company's assets
divided by its current liabilities. In this case Panorama had current assets of $1808.89 and current
liabilities of $975.00. A company's current ratio is very important in...show more content...
The higher the turnover, the better the company.
Profitability measures are used to determine return on investment and the return on equity. Price
/Earnings ratio is another way to measure a company's profitability by dividing the market price
of a common share of stock by the earnings per share. The P/E ratio tells us the value of a
company's common stock. Dividend pawet ratio and the dividend yield are some other ways to
judge a company's profitability. Debt, or financial leverage is the last category of ratio analysis used
to find the financial condition of a company.
Debt, or financial leverage is the last category of ration analysis used to find the financial
condition of a company. Leverage adds risk to the operation of a company because a highly
leveraged company would be at a greater risk for bankruptcy than a company that was not. Debt
and preferred stock provided good leverage for a company because the interest rate is at a fixed
rate. There are two financial leverage measures used to tell whether a company is using financial
leverage. Debt ratio is the total liabilities to the total of liabilities and owners equity whereas the debt
/equity ratio is the ratio of total liabilities to total owner's equity. Both of these measures are the same
concept but just stated in a different manner.
In conclusion, from looking at Panorama's financial statement and using
Get more content on HelpWriting.net
Financial Ratio Analysis Essay
Investors and other external users of financial information will often need to measure the
performance and financial health of an organization. This is done in order to evaluate the success of
the business, determine any weaknesses of the business, compare current and past performance, and
compare current performance with industry standards. Financially stable organizations are desirable,
because a financially stable business is one that successfully ensures its ability to generate income
for investors and retain or increase value.
There are many different methods that can be used alone or together to help investors assess the
financial stability of an organization. One of the most common methods is financial ratio analysis.
The basic...show more content...
This ratio is used to determine the amount of net profit for each dollar of sales that remains after
subtracting all expenses. Example: a net profit margin of 0.084 indicates that 8.4% of each sales
dollar remains after all expenses are paid.
The ROA ratio is calculated by taking the net earnings available to common stockholders (net
income) and dividing it by total assets. This ratio is used to determine the amount of income each
dollar of assets generates. Example: an ROA ratio of 0.0568 indicates that each dollar of company
assets produced income of almost $0.06.
The ROE ratio is calculated by taking the net earnings available to common stockholders and
dividing it by common stockholders' equity. This ratio is used to determine the amount of income
produced for each dollar that common stockholders have invested. Example: An ROE ratio of 0.0869
indicates that the company returned 8.69% for every dollar invested by common stockholders.
Liquidity Ratios
Liquidity ratios measure the organizations ability to meet short–term obligations. These include the
current ratio and the quick ratio.
The current ratio is calculated by taking the total amount of current assets and dividing it by the total
amount of current liabilities. This ratio is used to determine whether the company has a sufficient
amount of current assets to pay off current liabilities. Example: a current ratio of 2.57
Get more content on HelpWriting.net
Financial Analysis Essay
Is the Industry's Analyst Research Useful for Investment Decisions?
The primary role of the research analysts is to study the publicly traded companies and pass
recommendations based on their financial securities, future growth potentials, and profit generation
potentials. These recommendations influence economic activities in the contemporary industries.
For instance, such recommendations can affect stock prices, especially if they are broadcasted to a
large population. People's decisions to purchase a company's stocks depend on the information that
the research analysts provide regarding its securities and potentials. Renowned analysts can
facilitate the rise or fall of stock prices of a given company just by a mere mention of its...show more
content...
Biases tend to misinform the decisions taken by investors in any industry, thus leading to a mass loss
of financial resources. For instance, most financial analysts tend to link the 2000 – 2001 stock market
downturn to biased analysts research (Guan, Wu & Long, 2012). The stock market downturn led to
substantial investor losses during the same period (Guan et al., 2012). Since then, the major players
in the business community such as the investors and regulators have remained skeptic about the
roles of research analysts. Specifically, they have suspected that research analysts tend to advance
bases to gain investment banking from the companies that command their interests (Guan et al.,
2012). These trends prompted the regulatory commission to adopt a set of ethical guidelines in 2000
to improve the roles of research analysts and restore the confidence of investors.
Several regulatory policies followed in 2003. One of the notable implementation of these reforms
occurred in 2003 when the SEC imposed enforced policies on the prominent investment banks in the
United States (Guan et al., 2012). These changes aimed the investment research industry, especially
the compensation of the research analysts and the structure of the related operations. However,
investors are still skeptic regarding the credibility of the processes amidst the enforced reforms. The
investment banking businesses incentives are just one of the
Get more content on HelpWriting.net
Financial Analysis
Final Project – Financial Analysis
Beatrice Valdez, MBA Student
Capella University
MBA 6016 Finance and Value Creation [ May 16, 2012 ]
Michael Blagg, Professor
Table of Contents Executive Summary| | 3| Historical Financial Statement Analysis: Financial Ratios|
| 3–4| Balance Sheet| | 4–6| Income Statement| | 6| Statement of Cash Flows| | 6| Pro–Forma Financial
Statements| | 7| Balance Sheet Pro–Forma| | 7–8| Income Statement Pro–Forma| | 9| Cash Flow
Pro–Forma| | 9–10| Investing Activities| | 11| Financial Activities| | 11| Equations of Statements| |
11–12| Summary of Valuation| | 12–14| Current and Quick Ratios| | 14–15| Transparency| | 15–16|
...show more content...
For 2010, the same was used for 2011 amount with 2009 and 2010 average. Urban Outfitter ratios
compared to industry ratios were pretty much close with the exception of Receivables Turnover
(61.16 vs. 54.24), Accounts Payable Turnover (15.26 vs. 6.43), Operating Profit Margin, 15.62 vs.
6.24), Return on Equity (20.94 vs. 13.11), Net Profit Margin (10.75 vs. 3.77). and Return on Assets
(15.92 vs. 7.17). The ratios for Urban Outfitters was significantly larger than the average industry
ratios mainly in the profitability section (See Appendix G).
Balance Sheet
"The purpose of the balance sheet is to report the financial position (amount of assets, liabilities,
and stockholders' equity) of an accounting entity at a particular point in time" (Libby, Libby
& Short, 2011). The information on the Balance Sheet will help managers, investors, and
lenders to analyze the company's financial capabilities. The report is only written at the end of the
year and does not provide prior financial information. Therefore, the Balance Sheet should also
include the other financial reports required to view the company as a whole. The Balance Sheet
can also be a useful tool to analyze trends of accounts receivables and payables. The formula for the
Balance Sheet is:
Get more content on HelpWriting.net
Financial Analysis Essay
however, Poland, Switzerland, Netherlands, Scandinavia, Italy and Hungary were offset by turn
down otherwise it would have been increased more by ВЈ119 million or 16% whereas, the volumes
rose 6% to 130 billion. Profit in Eastern Europe has fallen by ВЈ59 million to ВЈ409 million due to
lower volumes by 4% than previous year. Russia, Uzbekistan, Ukraine and Romania were mainly
had lower performance. In Africa and Middle East, the profit has increased by ВЈ211 million to
ВЈ724 million where it could have been increased by 28%. Falling Revenues from Major Operating
Segments: Revenue excluding duty, excise and various taxes, was ВЈ10,768 million during 2004 and
has declined to ВЈ9,325 million in 2005, however, again rose to ВЈ9,762, ВЈ10,018 and...show more
content...
BAT along with China Eastern Investments Corporation founded a factory where 100 billion of
cigarettes are being manufactured annually. The business also distributes and sells its own products
across China. Rising Popularity of Smokeless Tobacco: BAT was first to introduce smokeless
Swedish–style Snus, comparatively less harmful than cigarettes. Snus is such kind of innovations
that facilitate to lessen influence of tobacco on community and has begun its journey since 2005.
Profit from Snus in the global market is estimated around ВЈ2 billion in where America itself
accounts for 65% then comes Sweden with ВЈ480 million. Other markets in South Africa, Pakistan,
India, Algeria, Norway and European regions have tradition of strong smokeless tobacco and hence
BAT growing opportunity. Threats: Increasing Health Concerns: Due to smoking people face heart
and respiratory problems and therefore the consumption of tobacco products are declining in huge
numbers as people are getting conscious about their health. Even passive smokers often have
certain ailments. Tobacco companies are often taken to court by people for disciplinary or
compensation. BAT also encountered with such kind of incidences, which might be a major cause
for declination of revenues. Competitor Strategies: Most leading tobacco producers are subject to
pending legal actions, valued billions of dollars, whereas small producers are there as
Get more content on HelpWriting.net
Financial Ratio Analysis Essay
Before beginning an analysis of a company it is necessary to have a complete set of financial
statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a
way for anyone to get an idea of the financial performance of a company by using the information
contained in the financial statements. Ratios are grouped into four basic categories, liquidity,
activity, profitability, and financial leverage. This document will use a variety of these ratios to
analyze the firm, Sample Company, as of December 31,2000. Financial Statement Ratios
Profitability Ratios 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...show more content...
In general, the average ROI for American merchandising companies is between 8% and 12% when
using net income, and average margin is 5% to 10%. When using operating income it is between 10
and 15% and average margin is also 10% – 15%. Asset turnover is another important component of
the DuPont model and is usually in the range of 1% to 1.5% ROE В– Return on Equity The return
on equity conveys the profits of the company as a rate of return on the amount of owners' equity.
ROE uses average owners equity over the specified time period and net income. Historically a ROE
of between 10% and 15% were considered average. Recently higher rates in growth industries have
been greater. Price earnings ratio (P/E) In general, the higher the ROI and rate of earnings growth,
the higher the P/E. . In the past, for a very long period of time P/E ratios in the range of 12 to 18
were consider good P/E ratios for a company. In recent years, the 12 to 18 values have been
abandoned as a norm and what can be considered the norm now is under debate. Sample Companies'
Profitability Ratios ROI for Sample CO. is $350 / $7,196 = 4.8% using net income. If operating
Income is used we have $498 / $7,196 = 6.9%. An additional measure used for ROI is the DuPont
Model. The DuPont model figures are ($498 / $8,251) * ($8,251 / $7,196) = 6.0% using operating
income. These are somewhat low when compared to the average. ROE is $350 / $3,357 = 10.4%
and is also below
Get more content on HelpWriting.net

More Related Content

Similar to Financial Analysis Essay

Financial Analysis On Financial Statements.pdfFinancial Analysis On Financial...
Financial Analysis On Financial Statements.pdfFinancial Analysis On Financial...Financial Analysis On Financial Statements.pdfFinancial Analysis On Financial...
Financial Analysis On Financial Statements.pdfFinancial Analysis On Financial...
Jacqueline Thomas
 
Comparing The Annual Financial Statements Of H&Amp;M And A&Amp;F
Comparing The Annual Financial Statements Of H&Amp;M And A&Amp;FComparing The Annual Financial Statements Of H&Amp;M And A&Amp;F
Comparing The Annual Financial Statements Of H&Amp;M And A&Amp;F
Crystal Williams
 
Summary on financial viability
Summary on financial viabilitySummary on financial viability
Summary on financial viability
Duncan Chapple
 
Business finance essentials
Business finance essentialsBusiness finance essentials
Business finance essentials
James Bannigan
 
The main ideology behind the conception of ERM is to help companie.docx
The main ideology behind the conception of ERM is to help companie.docxThe main ideology behind the conception of ERM is to help companie.docx
The main ideology behind the conception of ERM is to help companie.docx
oreo10
 
Financial ratio report
Financial ratio reportFinancial ratio report
Financial ratio report
vaibhav sharma
 
Procter And Gamble Financial Analysis
Procter And Gamble Financial AnalysisProcter And Gamble Financial Analysis
Procter And Gamble Financial Analysis
Karen Thompson
 
Chapter 05(a) financial analysis-ratio and other analysis
Chapter 05(a) financial analysis-ratio and other analysisChapter 05(a) financial analysis-ratio and other analysis
Chapter 05(a) financial analysis-ratio and other analysis
Al Sabbir
 
Ratio analysiss
Ratio analysissRatio analysiss
Ratio analysiss
Jason Spring
 
Financial Performance of Aurabindo.pdf
Financial Performance of Aurabindo.pdfFinancial Performance of Aurabindo.pdf
Financial Performance of Aurabindo.pdf
praveenkumarkota1502
 

Similar to Financial Analysis Essay (10)

Financial Analysis On Financial Statements.pdfFinancial Analysis On Financial...
Financial Analysis On Financial Statements.pdfFinancial Analysis On Financial...Financial Analysis On Financial Statements.pdfFinancial Analysis On Financial...
Financial Analysis On Financial Statements.pdfFinancial Analysis On Financial...
 
Comparing The Annual Financial Statements Of H&Amp;M And A&Amp;F
Comparing The Annual Financial Statements Of H&Amp;M And A&Amp;FComparing The Annual Financial Statements Of H&Amp;M And A&Amp;F
Comparing The Annual Financial Statements Of H&Amp;M And A&Amp;F
 
Summary on financial viability
Summary on financial viabilitySummary on financial viability
Summary on financial viability
 
Business finance essentials
Business finance essentialsBusiness finance essentials
Business finance essentials
 
The main ideology behind the conception of ERM is to help companie.docx
The main ideology behind the conception of ERM is to help companie.docxThe main ideology behind the conception of ERM is to help companie.docx
The main ideology behind the conception of ERM is to help companie.docx
 
Financial ratio report
Financial ratio reportFinancial ratio report
Financial ratio report
 
Procter And Gamble Financial Analysis
Procter And Gamble Financial AnalysisProcter And Gamble Financial Analysis
Procter And Gamble Financial Analysis
 
Chapter 05(a) financial analysis-ratio and other analysis
Chapter 05(a) financial analysis-ratio and other analysisChapter 05(a) financial analysis-ratio and other analysis
Chapter 05(a) financial analysis-ratio and other analysis
 
Ratio analysiss
Ratio analysissRatio analysiss
Ratio analysiss
 
Financial Performance of Aurabindo.pdf
Financial Performance of Aurabindo.pdfFinancial Performance of Aurabindo.pdf
Financial Performance of Aurabindo.pdf
 

More from Paper Writing Services

Nuclear Technology Essay
Nuclear Technology EssayNuclear Technology Essay
Nuclear Technology Essay
Paper Writing Services
 
Profile Essay
Profile EssayProfile Essay
Essay Examples About Family
Essay Examples About FamilyEssay Examples About Family
Essay Examples About Family
Paper Writing Services
 
Analyze Essay
Analyze EssayAnalyze Essay
How To Write A Research Essay Thesis
How To Write A Research Essay ThesisHow To Write A Research Essay Thesis
How To Write A Research Essay Thesis
Paper Writing Services
 
Rwandan Genocide Essay
Rwandan Genocide EssayRwandan Genocide Essay
Rwandan Genocide Essay
Paper Writing Services
 
Learning A New Language Essay
Learning A New Language EssayLearning A New Language Essay
Learning A New Language Essay
Paper Writing Services
 
Bureaucracy Essay
Bureaucracy EssayBureaucracy Essay
Bureaucracy Essay
Paper Writing Services
 
Epic Of Gilgamesh Essay
Epic Of Gilgamesh EssayEpic Of Gilgamesh Essay
Epic Of Gilgamesh Essay
Paper Writing Services
 
How To Write An Essay About Yourself Example
How To Write An Essay About Yourself ExampleHow To Write An Essay About Yourself Example
How To Write An Essay About Yourself Example
Paper Writing Services
 
Essay On Ecology
Essay On EcologyEssay On Ecology
Essay On Ecology
Paper Writing Services
 
Vietnam Culture Essay
Vietnam Culture EssayVietnam Culture Essay
Vietnam Culture Essay
Paper Writing Services
 
Holocaust Essay Topics
Holocaust Essay TopicsHolocaust Essay Topics
Holocaust Essay Topics
Paper Writing Services
 
Argument Research Essay
Argument Research EssayArgument Research Essay
Argument Research Essay
Paper Writing Services
 
How To Start A Narrative Essay About Yourself
How To Start A Narrative Essay About YourselfHow To Start A Narrative Essay About Yourself
How To Start A Narrative Essay About Yourself
Paper Writing Services
 
Essay Written In Mla Format
Essay Written In Mla FormatEssay Written In Mla Format
Essay Written In Mla Format
Paper Writing Services
 
Essay About Teachers
Essay About TeachersEssay About Teachers
Essay About Teachers
Paper Writing Services
 
Funny Essays
Funny EssaysFunny Essays
Elizabeth Proctor Essay
Elizabeth Proctor EssayElizabeth Proctor Essay
Elizabeth Proctor Essay
Paper Writing Services
 
Whistle Blowing Essays
Whistle Blowing EssaysWhistle Blowing Essays
Whistle Blowing Essays
Paper Writing Services
 

More from Paper Writing Services (20)

Nuclear Technology Essay
Nuclear Technology EssayNuclear Technology Essay
Nuclear Technology Essay
 
Profile Essay
Profile EssayProfile Essay
Profile Essay
 
Essay Examples About Family
Essay Examples About FamilyEssay Examples About Family
Essay Examples About Family
 
Analyze Essay
Analyze EssayAnalyze Essay
Analyze Essay
 
How To Write A Research Essay Thesis
How To Write A Research Essay ThesisHow To Write A Research Essay Thesis
How To Write A Research Essay Thesis
 
Rwandan Genocide Essay
Rwandan Genocide EssayRwandan Genocide Essay
Rwandan Genocide Essay
 
Learning A New Language Essay
Learning A New Language EssayLearning A New Language Essay
Learning A New Language Essay
 
Bureaucracy Essay
Bureaucracy EssayBureaucracy Essay
Bureaucracy Essay
 
Epic Of Gilgamesh Essay
Epic Of Gilgamesh EssayEpic Of Gilgamesh Essay
Epic Of Gilgamesh Essay
 
How To Write An Essay About Yourself Example
How To Write An Essay About Yourself ExampleHow To Write An Essay About Yourself Example
How To Write An Essay About Yourself Example
 
Essay On Ecology
Essay On EcologyEssay On Ecology
Essay On Ecology
 
Vietnam Culture Essay
Vietnam Culture EssayVietnam Culture Essay
Vietnam Culture Essay
 
Holocaust Essay Topics
Holocaust Essay TopicsHolocaust Essay Topics
Holocaust Essay Topics
 
Argument Research Essay
Argument Research EssayArgument Research Essay
Argument Research Essay
 
How To Start A Narrative Essay About Yourself
How To Start A Narrative Essay About YourselfHow To Start A Narrative Essay About Yourself
How To Start A Narrative Essay About Yourself
 
Essay Written In Mla Format
Essay Written In Mla FormatEssay Written In Mla Format
Essay Written In Mla Format
 
Essay About Teachers
Essay About TeachersEssay About Teachers
Essay About Teachers
 
Funny Essays
Funny EssaysFunny Essays
Funny Essays
 
Elizabeth Proctor Essay
Elizabeth Proctor EssayElizabeth Proctor Essay
Elizabeth Proctor Essay
 
Whistle Blowing Essays
Whistle Blowing EssaysWhistle Blowing Essays
Whistle Blowing Essays
 

Recently uploaded

11EHS Term 3 Week 1 Unit 1 Review: Feedback and improvementpptx
11EHS Term 3 Week 1 Unit 1 Review: Feedback and improvementpptx11EHS Term 3 Week 1 Unit 1 Review: Feedback and improvementpptx
11EHS Term 3 Week 1 Unit 1 Review: Feedback and improvementpptx
mansk2
 
Mail Server Configuration Using App passwords in Odoo 17
Mail Server Configuration Using App passwords in Odoo 17Mail Server Configuration Using App passwords in Odoo 17
Mail Server Configuration Using App passwords in Odoo 17
Celine George
 
10th Social Studies Enrichment Material (Abhyasa Deepika) EM.pdf
10th Social Studies Enrichment Material (Abhyasa Deepika) EM.pdf10th Social Studies Enrichment Material (Abhyasa Deepika) EM.pdf
10th Social Studies Enrichment Material (Abhyasa Deepika) EM.pdf
SSRCreations
 
Codeavour 5.0 International Impact Report - The Biggest International AI, Cod...
Codeavour 5.0 International Impact Report - The Biggest International AI, Cod...Codeavour 5.0 International Impact Report - The Biggest International AI, Cod...
Codeavour 5.0 International Impact Report - The Biggest International AI, Cod...
Codeavour International
 
A beginner’s guide to project reviews - everything you wanted to know but wer...
A beginner’s guide to project reviews - everything you wanted to know but wer...A beginner’s guide to project reviews - everything you wanted to know but wer...
A beginner’s guide to project reviews - everything you wanted to know but wer...
Association for Project Management
 
2 Post harvest Physiology of Horticulture produce.pptx
2 Post harvest Physiology of Horticulture  produce.pptx2 Post harvest Physiology of Horticulture  produce.pptx
2 Post harvest Physiology of Horticulture produce.pptx
UmeshTimilsina1
 
SD_Integrating 21st Century Skills in Classroom-based Assessment.pptx
SD_Integrating 21st Century Skills in Classroom-based Assessment.pptxSD_Integrating 21st Century Skills in Classroom-based Assessment.pptx
SD_Integrating 21st Century Skills in Classroom-based Assessment.pptx
elwoodprias1
 
PRESS RELEASE - UNIVERSITY OF GHANA, JULY 16, 2024.pdf
PRESS RELEASE - UNIVERSITY OF GHANA, JULY 16, 2024.pdfPRESS RELEASE - UNIVERSITY OF GHANA, JULY 16, 2024.pdf
PRESS RELEASE - UNIVERSITY OF GHANA, JULY 16, 2024.pdf
nservice241
 
MathematicsGrade7-Presentation-July-12024.pptx
MathematicsGrade7-Presentation-July-12024.pptxMathematicsGrade7-Presentation-July-12024.pptx
MathematicsGrade7-Presentation-July-12024.pptx
nolicaliso1
 
Allopathic M1 Srudent Orientation Powerpoint
Allopathic M1 Srudent Orientation PowerpointAllopathic M1 Srudent Orientation Powerpoint
Allopathic M1 Srudent Orientation Powerpoint
Julie Sarpy
 
1. Importance_of_reducing_postharvest_loss.pptx
1. Importance_of_reducing_postharvest_loss.pptx1. Importance_of_reducing_postharvest_loss.pptx
1. Importance_of_reducing_postharvest_loss.pptx
UmeshTimilsina1
 
MVC Interview Questions PDF By ScholarHat
MVC Interview Questions PDF By ScholarHatMVC Interview Questions PDF By ScholarHat
MVC Interview Questions PDF By ScholarHat
Scholarhat
 
Genetics Teaching Plan: Dr.Kshirsagar R.V.
Genetics Teaching Plan: Dr.Kshirsagar R.V.Genetics Teaching Plan: Dr.Kshirsagar R.V.
Genetics Teaching Plan: Dr.Kshirsagar R.V.
DrRavindrakshirsagar1
 
Open Source and AI - ByWater Closing Keynote Presentation.pdf
Open Source and AI - ByWater Closing Keynote Presentation.pdfOpen Source and AI - ByWater Closing Keynote Presentation.pdf
Open Source and AI - ByWater Closing Keynote Presentation.pdf
Jessica Zairo
 
Imagination in Computer Science Research
Imagination in Computer Science ResearchImagination in Computer Science Research
Imagination in Computer Science Research
Abhik Roychoudhury
 
Brigada Eskwela 2024 PowerPoint Update for SY 2024-2025
Brigada Eskwela 2024 PowerPoint Update for SY 2024-2025Brigada Eskwela 2024 PowerPoint Update for SY 2024-2025
Brigada Eskwela 2024 PowerPoint Update for SY 2024-2025
ALBERTHISOLER1
 
JavaScript Interview Questions PDF By ScholarHat
JavaScript Interview  Questions PDF By ScholarHatJavaScript Interview  Questions PDF By ScholarHat
JavaScript Interview Questions PDF By ScholarHat
Scholarhat
 
Parent PD Design for Professional Development .docx
Parent PD Design for Professional Development .docxParent PD Design for Professional Development .docx
Parent PD Design for Professional Development .docx
AntonioJarligoCompra
 
How to Manage Early Receipt Printing in Odoo 17 POS
How to Manage Early Receipt Printing in Odoo 17 POSHow to Manage Early Receipt Printing in Odoo 17 POS
How to Manage Early Receipt Printing in Odoo 17 POS
Celine George
 
How To Sell Hamster Kombat Coin In Pre-market
How To Sell Hamster Kombat Coin In Pre-marketHow To Sell Hamster Kombat Coin In Pre-market
How To Sell Hamster Kombat Coin In Pre-market
Sikandar Ali
 

Recently uploaded (20)

11EHS Term 3 Week 1 Unit 1 Review: Feedback and improvementpptx
11EHS Term 3 Week 1 Unit 1 Review: Feedback and improvementpptx11EHS Term 3 Week 1 Unit 1 Review: Feedback and improvementpptx
11EHS Term 3 Week 1 Unit 1 Review: Feedback and improvementpptx
 
Mail Server Configuration Using App passwords in Odoo 17
Mail Server Configuration Using App passwords in Odoo 17Mail Server Configuration Using App passwords in Odoo 17
Mail Server Configuration Using App passwords in Odoo 17
 
10th Social Studies Enrichment Material (Abhyasa Deepika) EM.pdf
10th Social Studies Enrichment Material (Abhyasa Deepika) EM.pdf10th Social Studies Enrichment Material (Abhyasa Deepika) EM.pdf
10th Social Studies Enrichment Material (Abhyasa Deepika) EM.pdf
 
Codeavour 5.0 International Impact Report - The Biggest International AI, Cod...
Codeavour 5.0 International Impact Report - The Biggest International AI, Cod...Codeavour 5.0 International Impact Report - The Biggest International AI, Cod...
Codeavour 5.0 International Impact Report - The Biggest International AI, Cod...
 
A beginner’s guide to project reviews - everything you wanted to know but wer...
A beginner’s guide to project reviews - everything you wanted to know but wer...A beginner’s guide to project reviews - everything you wanted to know but wer...
A beginner’s guide to project reviews - everything you wanted to know but wer...
 
2 Post harvest Physiology of Horticulture produce.pptx
2 Post harvest Physiology of Horticulture  produce.pptx2 Post harvest Physiology of Horticulture  produce.pptx
2 Post harvest Physiology of Horticulture produce.pptx
 
SD_Integrating 21st Century Skills in Classroom-based Assessment.pptx
SD_Integrating 21st Century Skills in Classroom-based Assessment.pptxSD_Integrating 21st Century Skills in Classroom-based Assessment.pptx
SD_Integrating 21st Century Skills in Classroom-based Assessment.pptx
 
PRESS RELEASE - UNIVERSITY OF GHANA, JULY 16, 2024.pdf
PRESS RELEASE - UNIVERSITY OF GHANA, JULY 16, 2024.pdfPRESS RELEASE - UNIVERSITY OF GHANA, JULY 16, 2024.pdf
PRESS RELEASE - UNIVERSITY OF GHANA, JULY 16, 2024.pdf
 
MathematicsGrade7-Presentation-July-12024.pptx
MathematicsGrade7-Presentation-July-12024.pptxMathematicsGrade7-Presentation-July-12024.pptx
MathematicsGrade7-Presentation-July-12024.pptx
 
Allopathic M1 Srudent Orientation Powerpoint
Allopathic M1 Srudent Orientation PowerpointAllopathic M1 Srudent Orientation Powerpoint
Allopathic M1 Srudent Orientation Powerpoint
 
1. Importance_of_reducing_postharvest_loss.pptx
1. Importance_of_reducing_postharvest_loss.pptx1. Importance_of_reducing_postharvest_loss.pptx
1. Importance_of_reducing_postharvest_loss.pptx
 
MVC Interview Questions PDF By ScholarHat
MVC Interview Questions PDF By ScholarHatMVC Interview Questions PDF By ScholarHat
MVC Interview Questions PDF By ScholarHat
 
Genetics Teaching Plan: Dr.Kshirsagar R.V.
Genetics Teaching Plan: Dr.Kshirsagar R.V.Genetics Teaching Plan: Dr.Kshirsagar R.V.
Genetics Teaching Plan: Dr.Kshirsagar R.V.
 
Open Source and AI - ByWater Closing Keynote Presentation.pdf
Open Source and AI - ByWater Closing Keynote Presentation.pdfOpen Source and AI - ByWater Closing Keynote Presentation.pdf
Open Source and AI - ByWater Closing Keynote Presentation.pdf
 
Imagination in Computer Science Research
Imagination in Computer Science ResearchImagination in Computer Science Research
Imagination in Computer Science Research
 
Brigada Eskwela 2024 PowerPoint Update for SY 2024-2025
Brigada Eskwela 2024 PowerPoint Update for SY 2024-2025Brigada Eskwela 2024 PowerPoint Update for SY 2024-2025
Brigada Eskwela 2024 PowerPoint Update for SY 2024-2025
 
JavaScript Interview Questions PDF By ScholarHat
JavaScript Interview  Questions PDF By ScholarHatJavaScript Interview  Questions PDF By ScholarHat
JavaScript Interview Questions PDF By ScholarHat
 
Parent PD Design for Professional Development .docx
Parent PD Design for Professional Development .docxParent PD Design for Professional Development .docx
Parent PD Design for Professional Development .docx
 
How to Manage Early Receipt Printing in Odoo 17 POS
How to Manage Early Receipt Printing in Odoo 17 POSHow to Manage Early Receipt Printing in Odoo 17 POS
How to Manage Early Receipt Printing in Odoo 17 POS
 
How To Sell Hamster Kombat Coin In Pre-market
How To Sell Hamster Kombat Coin In Pre-marketHow To Sell Hamster Kombat Coin In Pre-market
How To Sell Hamster Kombat Coin In Pre-market
 

Financial Analysis Essay

  • 1. Financial Analysis Essay Rachelle Stanley Columbia College FINC 350 A firm's performance and financial situation is measured by financial ratios. In order to reach these ratios a financial analysis must be done on the company's financial information. Financial analysis is the evaluation, selection and interpretation of financial data to assist in investment and financial decision–making. Financial data is drawn from many sources however, the primary source is data that is provided by the company in its annual reports. These annual reports consist of the income statement, the balance sheet and the statement of cash flows. Financial ratios can be used to analyze trends and compare the firm's financial standing to those of other firms. Financial ratios are...show more content... Any number 3 or above could mean that management has too much cash on hand and may be doing a poor job of finding ways to invest. By reading the annual report or the 10K you can see what executives plans are for future investments. A current ratio below 1 may be a sign that the company may have trouble paying its bills on time. Only companies that have inventory that can immediately be converted into cash should have a current ratio below 1. Quick Ratio The quick ratio, also known as acid test, is calculated by subtracting inventory from current assets divided by current liability. This ratio indicates a company's ability to satisfy current liabilities with liquid assets. Current assets used in the quick ratio are cash, accounts receivable and notes receivable. Any quick ratio less than 1.00X would require the company to sell their inventory to meet its obligations. Lenders are very interested in quick ratio because inventory is not included, which is not converted to cash easily. USD IN MILLIONS| 2008–1| 2009–1| 2010–1| 2011–1| 2012–1| Target Get more content on HelpWriting.net
  • 2. Financial Analysis Essay UNIVERSITY OF PORTSMOUTH| Report for Primark's IPO purposes| Financial Analysis Assignment| | Student ID: 635281, 636484, 640073| 11/28/2011| | ––––––––––––––––––––––––––––––––––––––––––––––––– Table of Contents I.Introduction4 II.Primark's business and financial situation5 2.1.Primark's business and financial analysis5 2.1.1.Business analysis5 2.1.2.Financial situation (trend analysis)6 2.2.Industry sector11 2.2.1.Overview11 2.2.2.Cross–sectional analysis12 2.2.3.Summary of Primark's strength and weakness16 III.Financial ranking and forecast17 3.1.Financial ranking17 3.2.Forecasted 2011 post tax profit18 IV.Corporate Governance Structure20...show more content... Finally, the last section is the conclusion, which summarizes the report and evaluate of the techniques applied in the analysis. II. Primark's business and financial situation 2. 3.1. Primark's business and financial analysis 3.2.1. Business analysis Chesbrough (2006) suggested that Business model emphasizes how business can use technological potential to create economic value and suggested that its main functions are: value proposition, market segment, value chain, cost structure and target margin, value network, competitive strategy. According to a case study of Primark (The Times 100, 2010), the business model which is based on "high sales volumes" and "lower retail margins" with minimal advertising enables Primark to offer value and low price products. The economies of scales resulting by buying large quantity of items help Primark to keep costs down. Moreover, retails prices are kept at considerably low level through "lean operation" and efficient operational practices (e.g. off–season factory time, flat management structure, effectiveness of distribution network and supply chain). This business model has created and enhanced Primark's competitive advantage which is the vital key to survive and grow in its industry sector. 3.2.2. Financial situation (trend analysis) In recent years, thanks to meeting customers' need and expanding stores, Primark has grown rapidly year by year [ (The Times 100) ]. Get more content on HelpWriting.net
  • 3. Financial Analysis of Carrefour Essay Chapter 5 Carrefour S.A. Teaching Note Version: March 2007 Introduction The Carrefour case is a financial analysis case. Carrefour S.A. is one of the world's largest retailers. During the first half of the 2000s, the company's share prices steadily declined, despite the fact that the company reported above–average returns on equity. Students are asked to analyze Carrefour's financial statements and segment data to find explanations for the company's poor share price performance and to make recommendations for the future. The discussion of the financial analysis is preceded by a discussion of Carrefour's strategy and accounting. Both the accounting analysis and the financial analysis are affected by Carrefour's switch from French GAAP ...show more content... International growth. When large companies such as Carrefour start to obtain a dominant position in their domestic markets, they may be "forced" to expand overseas or enter other industries. Carrefour's corporate strategy is to expand overseas rather than diversify. More importantly, as indicated above, achieving growth is an essential part of Carrefour's strategy because (international) growth helps the company to obtain economies of scale in purchasing, logistics and the development of Carrefourbranded products. For example, Carrefour sells its own branded products in the same packaging worldwide (of course printed in different languages). The company's overseas retailing operations are, however, more risky than its domestic operations. First, to some extent retailing remains a local business because consumers' tastes differ substantially across countries. Profitable expansion outside Carrefour's domestic market is only possible if the company has good knowledge about local customers' preferences and tastes. Consequently, a slightly safer way to expand abroad is to acquire local supermarket chains. A disadvantage of this strategy is, however, that acquisition premiums have to be paid, which can also drive down profits. Second, many of Carrefour's "intercontinental" hypermarkets are located in countries where the economic environment is risky: consumers in economically less developed countries are likely to be more price sensitive; East Asian Get more content on HelpWriting.net
  • 4. Essay about Analysis of Financial Statement To determine Panorama's financial positions, we need to use ratio analysis. There are four main categories we can use. They are liquidity, activity, profitability, and debt or financial leverage. The first category Panorama needs to look at is liquidity. This is measured in three different ways. Working capital, current ratio and the acid–test ratio. Working capital can be described as a company's current assets minus its current liabilities. Panorama's working capital would be $833.89. The second is the current ratio in which we would find by taking a company's assets divided by its current liabilities. In this case Panorama had current assets of $1808.89 and current liabilities of $975.00. A company's current ratio is very important in...show more content... The higher the turnover, the better the company. Profitability measures are used to determine return on investment and the return on equity. Price /Earnings ratio is another way to measure a company's profitability by dividing the market price of a common share of stock by the earnings per share. The P/E ratio tells us the value of a company's common stock. Dividend pawet ratio and the dividend yield are some other ways to judge a company's profitability. Debt, or financial leverage is the last category of ratio analysis used to find the financial condition of a company. Debt, or financial leverage is the last category of ration analysis used to find the financial condition of a company. Leverage adds risk to the operation of a company because a highly leveraged company would be at a greater risk for bankruptcy than a company that was not. Debt and preferred stock provided good leverage for a company because the interest rate is at a fixed rate. There are two financial leverage measures used to tell whether a company is using financial leverage. Debt ratio is the total liabilities to the total of liabilities and owners equity whereas the debt /equity ratio is the ratio of total liabilities to total owner's equity. Both of these measures are the same concept but just stated in a different manner. In conclusion, from looking at Panorama's financial statement and using Get more content on HelpWriting.net
  • 5. Financial Ratio Analysis Essay Investors and other external users of financial information will often need to measure the performance and financial health of an organization. This is done in order to evaluate the success of the business, determine any weaknesses of the business, compare current and past performance, and compare current performance with industry standards. Financially stable organizations are desirable, because a financially stable business is one that successfully ensures its ability to generate income for investors and retain or increase value. There are many different methods that can be used alone or together to help investors assess the financial stability of an organization. One of the most common methods is financial ratio analysis. The basic...show more content... This ratio is used to determine the amount of net profit for each dollar of sales that remains after subtracting all expenses. Example: a net profit margin of 0.084 indicates that 8.4% of each sales dollar remains after all expenses are paid. The ROA ratio is calculated by taking the net earnings available to common stockholders (net income) and dividing it by total assets. This ratio is used to determine the amount of income each dollar of assets generates. Example: an ROA ratio of 0.0568 indicates that each dollar of company assets produced income of almost $0.06. The ROE ratio is calculated by taking the net earnings available to common stockholders and dividing it by common stockholders' equity. This ratio is used to determine the amount of income produced for each dollar that common stockholders have invested. Example: An ROE ratio of 0.0869 indicates that the company returned 8.69% for every dollar invested by common stockholders. Liquidity Ratios Liquidity ratios measure the organizations ability to meet short–term obligations. These include the current ratio and the quick ratio. The current ratio is calculated by taking the total amount of current assets and dividing it by the total amount of current liabilities. This ratio is used to determine whether the company has a sufficient amount of current assets to pay off current liabilities. Example: a current ratio of 2.57 Get more content on HelpWriting.net
  • 6. Financial Analysis Essay Is the Industry's Analyst Research Useful for Investment Decisions? The primary role of the research analysts is to study the publicly traded companies and pass recommendations based on their financial securities, future growth potentials, and profit generation potentials. These recommendations influence economic activities in the contemporary industries. For instance, such recommendations can affect stock prices, especially if they are broadcasted to a large population. People's decisions to purchase a company's stocks depend on the information that the research analysts provide regarding its securities and potentials. Renowned analysts can facilitate the rise or fall of stock prices of a given company just by a mere mention of its...show more content... Biases tend to misinform the decisions taken by investors in any industry, thus leading to a mass loss of financial resources. For instance, most financial analysts tend to link the 2000 – 2001 stock market downturn to biased analysts research (Guan, Wu & Long, 2012). The stock market downturn led to substantial investor losses during the same period (Guan et al., 2012). Since then, the major players in the business community such as the investors and regulators have remained skeptic about the roles of research analysts. Specifically, they have suspected that research analysts tend to advance bases to gain investment banking from the companies that command their interests (Guan et al., 2012). These trends prompted the regulatory commission to adopt a set of ethical guidelines in 2000 to improve the roles of research analysts and restore the confidence of investors. Several regulatory policies followed in 2003. One of the notable implementation of these reforms occurred in 2003 when the SEC imposed enforced policies on the prominent investment banks in the United States (Guan et al., 2012). These changes aimed the investment research industry, especially the compensation of the research analysts and the structure of the related operations. However, investors are still skeptic regarding the credibility of the processes amidst the enforced reforms. The investment banking businesses incentives are just one of the Get more content on HelpWriting.net
  • 7. Financial Analysis Final Project – Financial Analysis Beatrice Valdez, MBA Student Capella University MBA 6016 Finance and Value Creation [ May 16, 2012 ] Michael Blagg, Professor Table of Contents Executive Summary| | 3| Historical Financial Statement Analysis: Financial Ratios| | 3–4| Balance Sheet| | 4–6| Income Statement| | 6| Statement of Cash Flows| | 6| Pro–Forma Financial Statements| | 7| Balance Sheet Pro–Forma| | 7–8| Income Statement Pro–Forma| | 9| Cash Flow Pro–Forma| | 9–10| Investing Activities| | 11| Financial Activities| | 11| Equations of Statements| | 11–12| Summary of Valuation| | 12–14| Current and Quick Ratios| | 14–15| Transparency| | 15–16| ...show more content... For 2010, the same was used for 2011 amount with 2009 and 2010 average. Urban Outfitter ratios compared to industry ratios were pretty much close with the exception of Receivables Turnover (61.16 vs. 54.24), Accounts Payable Turnover (15.26 vs. 6.43), Operating Profit Margin, 15.62 vs. 6.24), Return on Equity (20.94 vs. 13.11), Net Profit Margin (10.75 vs. 3.77). and Return on Assets (15.92 vs. 7.17). The ratios for Urban Outfitters was significantly larger than the average industry ratios mainly in the profitability section (See Appendix G). Balance Sheet "The purpose of the balance sheet is to report the financial position (amount of assets, liabilities, and stockholders' equity) of an accounting entity at a particular point in time" (Libby, Libby & Short, 2011). The information on the Balance Sheet will help managers, investors, and lenders to analyze the company's financial capabilities. The report is only written at the end of the year and does not provide prior financial information. Therefore, the Balance Sheet should also include the other financial reports required to view the company as a whole. The Balance Sheet can also be a useful tool to analyze trends of accounts receivables and payables. The formula for the Balance Sheet is: Get more content on HelpWriting.net
  • 8. Financial Analysis Essay however, Poland, Switzerland, Netherlands, Scandinavia, Italy and Hungary were offset by turn down otherwise it would have been increased more by ВЈ119 million or 16% whereas, the volumes rose 6% to 130 billion. Profit in Eastern Europe has fallen by ВЈ59 million to ВЈ409 million due to lower volumes by 4% than previous year. Russia, Uzbekistan, Ukraine and Romania were mainly had lower performance. In Africa and Middle East, the profit has increased by ВЈ211 million to ВЈ724 million where it could have been increased by 28%. Falling Revenues from Major Operating Segments: Revenue excluding duty, excise and various taxes, was ВЈ10,768 million during 2004 and has declined to ВЈ9,325 million in 2005, however, again rose to ВЈ9,762, ВЈ10,018 and...show more content... BAT along with China Eastern Investments Corporation founded a factory where 100 billion of cigarettes are being manufactured annually. The business also distributes and sells its own products across China. Rising Popularity of Smokeless Tobacco: BAT was first to introduce smokeless Swedish–style Snus, comparatively less harmful than cigarettes. Snus is such kind of innovations that facilitate to lessen influence of tobacco on community and has begun its journey since 2005. Profit from Snus in the global market is estimated around ВЈ2 billion in where America itself accounts for 65% then comes Sweden with ВЈ480 million. Other markets in South Africa, Pakistan, India, Algeria, Norway and European regions have tradition of strong smokeless tobacco and hence BAT growing opportunity. Threats: Increasing Health Concerns: Due to smoking people face heart and respiratory problems and therefore the consumption of tobacco products are declining in huge numbers as people are getting conscious about their health. Even passive smokers often have certain ailments. Tobacco companies are often taken to court by people for disciplinary or compensation. BAT also encountered with such kind of incidences, which might be a major cause for declination of revenues. Competitor Strategies: Most leading tobacco producers are subject to pending legal actions, valued billions of dollars, whereas small producers are there as Get more content on HelpWriting.net
  • 9. Financial Ratio Analysis Essay Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000. Financial Statement Ratios Profitability Ratios 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...show more content... In general, the average ROI for American merchandising companies is between 8% and 12% when using net income, and average margin is 5% to 10%. When using operating income it is between 10 and 15% and average margin is also 10% – 15%. Asset turnover is another important component of the DuPont model and is usually in the range of 1% to 1.5% ROE В– Return on Equity The return on equity conveys the profits of the company as a rate of return on the amount of owners' equity. ROE uses average owners equity over the specified time period and net income. Historically a ROE of between 10% and 15% were considered average. Recently higher rates in growth industries have been greater. Price earnings ratio (P/E) In general, the higher the ROI and rate of earnings growth, the higher the P/E. . In the past, for a very long period of time P/E ratios in the range of 12 to 18 were consider good P/E ratios for a company. In recent years, the 12 to 18 values have been abandoned as a norm and what can be considered the norm now is under debate. Sample Companies' Profitability Ratios ROI for Sample CO. is $350 / $7,196 = 4.8% using net income. If operating Income is used we have $498 / $7,196 = 6.9%. An additional measure used for ROI is the DuPont Model. The DuPont model figures are ($498 / $8,251) * ($8,251 / $7,196) = 6.0% using operating income. These are somewhat low when compared to the average. ROE is $350 / $3,357 = 10.4% and is also below Get more content on HelpWriting.net