Topic: Ratio Analysis Type: Essay Subject: Accounting and Finance Academic Level: Undergraduate Style: APA Language: English (U.S) Number of pages: 3 (double spaced, Times New Roman, Font 12) Number of sources: 3

3. Running head: Ratio Analysis
Task details
Using academic sources, choose a publicly traded firm, and use its data from within the
past three (3) years to identify financial ratios, precisely; the profit margin, debt to asset ratio,
price-earnings (PE) ratio, inventory turnover, current ratio, and the times interest earned. Analyze
financial trends of that firm and evaluate whether it realize success throughout the next five (5)
years, or whether there appear to be challenges that will inhibit its growth. Provide a rationale for
your response.
As a manager of the chosen firm, summarize the major steps towards improving the firm
or to maintain its prevailing financial success. Give a rationale behind the success of your
approach

4. Ratio analysis !2
GE Healthcare Financial Analysis
The GE Healthcare company has been in operation for more than a century. It operates
globally in more than 170 countries with its headquarters in the U.S. It entity provides financial
and infrastructure services worldwide. The company’s water and power segments offer steam,
gas and aero-derivative generators, turbines, combined cycle systems, and other related services.
It employs over 100,000 people across the globe under its Chief Executive Officer Jeffrey R.
Imemelt who has been the firm’s director for the last 14 years.
Analyzing this company’s financial status will assist investors in knowing the firm's
financial position, which is essential for their investment decision-making (Axel, 2012). The
total revenue for the GE Company for the year 2013 was $146,045 million while the cost of
goods sold was $77,141 million to give a gross profit margin of $68,904 million. The net profit
margin after taxes and operating expenses was 8.94% of the total revenue. From a three-year
financial analysis, ranging from 2011 to 2013, GE Healthcare has been making significant
returns, an implication that the company has been effectively and efficiently managing its
expenses to increase profitability (Weygandt, 2005). Also, the ability of the company to meet its
short and long-term obligations has been good, implying that the company is in a good position
to meet its debt obligations. This is clearly depicted by the current, quick and long term debt
ratios in Appendix I. The comparison of returns on equity and assets for the three years, as from
2011 to 2013 shows that GE Company gained better returns. This makes this company a viable
investment opportunity.

5. Ratio analysis !3
According to Axel (2012), asset utilization ratio measures how the management used an
asset to generate revenue. For the last three years, GE Company has been managing efficiently
its assets in the generation of income as depicted by inventory turnover and account receivable
turnover in Appendix I. The trend in the inventory turnover has been declining for the last three
years. As such, the management should find out the reasons behind this reduction for corrective
measures to be implemented. The EPS of the company in 2013 was 1.27, and the dividend
payout was 53.7%. The trend in dividend payout and the price-earnings ratio has been increasing
steadily for the last three years, showing that the firm has been paying substantial dividends to its
shareholders (Weygandt, 2005). The EPS of GE Company has been positive throughout the three
years. This is attributed to the positive returns it has been making. Besides, times interest earned
for the company has been increasing progressively from 2.38 in 2011 to 2.60 in 2013, suggesting
how GE Healthcare has been gaining from the interest that was being paid for the cost of capital.
From the company’s ratio analysis in Appendix I, it is clear GE Healthcare has had better
performance in terms of profitability, liquidity, asset utilization and market measure. Based on
this data, the company’s investors, both the existing ones and those joining the firm are likely to
get higher returns. This makes it clear that the company will continue experiencing better
financial performance for the next five years as shown by a number of ratios, including: the
profitability ratios, return on assets and equity, which have been growing since 2011 with the
profit margin changing slightly, even though this margin is still high. The current and acid test
ratios have also had a significant increment, an implication that the company will continue to
manage well its long and short term obligations

6. Ratio analysis !4
As the manager of GE Company, it is worth defining the products and markets that
describe the domain of the company (Boulton, 2004). Once the business segment that the
company is operating has been understood, it will be easier to serve it effeciently. Secondly, it is
essential going an extra mile to know some of the segment’s key players, including; customers,
suppliers, and competitors. Thirdly, identifying the requirement and trends that determine the
critical success factors for the company is vital (Boulton, 2004). These factors include
competitive factors which must be met, customer requirements, and regulatory standards in the
business, technical requirements, and the resource requirement in order to implement
competitive strategies.
As the manager of the company, understanding the market in which the company is
operating in will ensure that better and informed decisions are made. This will ensure that an
investor gets better returns. By fully understanding the three main players in the industry in
which the company is operating, it becomes clear that the company will meet the needs of these
players, which in most cases, determine the future success of the company. For instance, if the
company is offering quality services and products to the customers, the market share will be able
to grow progressively, thereby, increase sales, which translates to an increase in the firm’s
profitability.

7. Ratio analysis !5
References
Axel, T. (2012). Ratio Analysis Fundamentals: How seventeen Financial Ratios Can Allow You
to Analyze Any Business on the Planet. Sydney: RatioAnalysis.net.
Boulton, R. (2004). The strategic analysis model. Business Journal, 1-10.
Weygandt, J. (2005). Hospitality Financial Accounting. New York: John Willey & Sons.
Appendices
Appendix I: Financial analysis of GE Healthcare
Ratios 2013 2012 2011
Liquidity Ratios GE Ltd GE Ltd GE Ltd
Cash ratio 1.16 1.19 1.46
Quick Ratio 2.42 2.26 2.02
Current ratio 2.53 2.34 2.08
Long-term debt
ratios
Debt equity
ratio 1.86 2.07 2.25
Times
interest
earned 2.60 2.39 2.38
Profitability
Ratios

8. Ratio analysis !6
Source: http://financials.morningstar.com/ratios/r.html?t=GE&region=usa&culture=en-US
Profit
margin (%) 8.94 9.26 8.91
Return on
assets (%) 1.97 1.95 1.79
Return on
equity (%) 10.3 11.39 11.15
Asset utilization
Ratios
Inventory
turnover 4.72 5.1 5.39
Account
receivable 6.81 7.2 6.25
Market measure
Ratios
Price
earnings
ratio 12.98 11.8 11.01
Earnings per
share 1.27 1.29 1.23
Dividend
payout (%) 53.7 50.4 49.6

9. Ratio analysis !7
Our links
https://writersperhour.com
https://writersperhour.com/order