Chelsea Diggs 2-2 Memo Financial Health Report ACC 660

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Southern New Hampshire University *

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660

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Accounting

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Jan 9, 2024

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Chelsea Diggs ACC-660-Q2026 Controllership 23TW2 2-2 Memo: Financial Health Report “Visa Inc (Visa) is a global digital payment technology company that serves individual and commercial clients, financial institutions, government entities, and merchants. It facilitates global e-commerce through digital payments and information.” (Global Data, 2023) Visa has been one if not the top competitor in its industry. The company has been able to position itself in a equitable stance with it competitors. Based on the chart below, we take a look at one of the top competitors in the industry American Express compared to VISA. Performance Indicators VISA American Express Operating profit margin = 100 × Operating income ÷ Net revenues 64.19 19.02 Net profit margin = 100 × Net income ÷ Net revenues 51.03 21.96 ROE = 100 × Net income ÷ Equity 41.77 32.85 ROI = 100 x Net Return on Investment ÷ Cost of Investment 34.34 15.93 ROA = 100 x Net income ÷ Average total Assets 17.88 3.74 Current ratio = Current assets ÷ Current liabilities 1.45 1.61 Quick ratio = Total quick assets ÷ Current liabilities 1.15 1.79 As you can see while American Express is profitable in areas such as Return on Assets, Return on Equity and Net profit margin but so is VISA. First, we review ROA, VSIA is return on assets is over 17% while American Express is just over 3.50% for the year 2022. Both companies have strong Return on Investment (ROI) coming in above 15% for 2022, VISA comes in at 34.34%. This means that while both companies have strong ROI, Visa has a stronger return on its investment for the current year along with averaging over 25% historically over the past 3 years.

Chelsea Diggs ACC-660-Q2026 Controllership 23TW2 2-2 Memo: Financial Health Report “The use of financial ratios is a time-tested method of analyzing a business. Wall Street investment firms, bank loan officers and knowledgeable business owners all use financial ratio analysis to learn more about a company's current financial health as well as its potential.” (Edward Lowe Foundation, 2023) These ratios can assist in both internal targets and external benchmarks to aid in improving performance. An internal target would be to drive operational growth. The company would be able to increase the current ratio that can drive up liquidity. External benchmarks would be for investors regarding the loans. Lenders often impose these benchmarks within their loan agreement. The benchmarks are used as metrics that are used as minimum baselines and if not met could lead to loan denial and/or higher interest rates. I would recommend as the controller for the company to continue to explore ways to expand VISA such as advanced technologies for digital payments and continued partnerships with new and current business partners. I would also suggest that while we may explore these opportunities to continue to balance profit margins with market satisfaction while not expanding too quickly that would cause loss. One of the biggest partnerships for Visa currently is with professional sporting leagues such NFL. Visa should continue to pursue partnership with smaller businesses as well especially ones who are in the cryptocurrency field. The company has built quite enough equity and liquidity to remain stable but also invest in R&D at appropriate speed. As the controller it would be imperative to look at market conditions and governmental climate on cryptocurrency that could have an effect on the ROI within that segment.

Chelsea Diggs ACC-660-Q2026 Controllership 23TW2 2-2 Memo: Financial Health Report Works Cited Edward Lowe Foundation. (2023, December 17). Edward Lowe Foundation . Retrieved from Edward Lowe Foundation: https://edwardlowe.org/how-to-analyze-your-business-using-financial-ratios-2/ Global Data. (2023, December 17). GlobalData . Retrieved from GlobalData Plc 2023: https://www.globaldata.com/company-profile/visa-inc/#:~:text=Visa%20Inc%20(Visa)%20is %20a,through%20digital%20payments%20and%20information.

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