Financial Ratio Analysis of two companies - 3083 Words

FINANCIAL RATIO ANALYSIS Table of Contents3 Abstract4 Introduction4 Memorandum4 Profitability of Sample Company5 Sample Company ROI for 20005 Sample Company ROI for 20015 Stock Performance6 Activity of Sample Company7 Leverage of Sample Company7 Liquidity of Sample Company7 What Is Necessary to Assess the Company?8 What Ratios Have the Most Value?10 What Other Factors, Beyond Ratios, Need To Be Considered?10 How Would Your Assessment Criteria Change If The Company In a Different Industry12 Changes in Assessment Method12 Conclusion13 References14 Appendix A - Sample Companys Financial Statements from 1999 - 200115 Appendix B - Financial Ratio Analysis of Sample Company19 Abstract This research paper will evaluate†¦show more content†¦In the short term, this would be a good trend, but if it continues, it could be a sign that Sample Company is not keeping a big investment in assets, because not that as the denominator in this ROI calculation, a low asset figure can be used to help drive up the overall result. Meaning that if this trend continues, it may be an indication of increased operations rather than improvement in asset efficiency. Stock Performance The common stock value increased 54.8%, from $42/share to $65/share, between 2000 and 2001. This is an indicate that the market likes what it sees in the performance and the management of Sample Company. In addition, it paid 1.2% in dividends for the past two years. Another key indicator, the Price to Earnings Ratio, fell from 12.0 to 10.7. This is not enough to be alarming. In fact, some investors, myself included, feel that lower Price to Earnings Ratios are not necessarily a good thing. The reason being that if a company is struggling to pay out large earnings per share, to make the denominator in the P/E equation large enough to keep the P/E ratio low, then often such financial pressures can take the attention of the management away from the companys operations and other important issues, like surviving as a going concern in a tough business climate. Activity of Sample Company The activity ratios measure the companys management of asset levels and sales (Marshall, 2002). Between 2000 and 2001, Sample CompanyShow MoreRelatedFinancial Ratio Analysis in a Company859 Words   |  3 Pagesto Olowe (1997), Financial Ratio Analysis is the relationship between the performance of a company and the monetary data in the financial statements to assist the economic conditions. Financial ratio was defined by Robert (1994) as two financial variables being used that have been taken from either the income statement or from the balance sheet. 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