Analyzing Financial Statements

In order to ascertain how well a company is performing, analyses must be done in regard to the business being stable, including its’ ability to pay debts, how much cash or other liquid assets are available, and whether the organization is viable enough to continue operations. These analyses typically look at income statements, balance sheets, and statements of cash flow, where current and past performance will be studied with the goal of predicting how the company will perform in the future.

Must be 8 to 10 double-spaced pages in length (not including the title and reference

“Financial Statements…provide key information for internal and external decision making.” (Horgren, et al., 2015). Through analysis of the financial information of both JB Hi-Fi and Dicksmith, I have found that investing within JB Hi-fi would be a more profitable and beneficial for shareholders. Moreover not only does JB hi-fi’s financial information (Appendix 1) show that return on Shareholder’s equity is close to 48% of each dollar

This is the assessment of the historical and future performances of the two companies in order to fully project internal and external factors that will affect the forecasts. The purpose is to identify trends, year to year changes, in order to assess whether the two companies’ performance are stable or sporadic and highly volatile.

Overall the liquidity of the company is very stable, THI working capital is healthy and the company is able to support its short term business needs in an efficient manner.

Financial data from past periods of a company, provides a perspective for future outcomes. Investors give proper attention to different ratios. In this report I am analyzing the financial position and financial performance of AT & T, a US. Telecommunication Company. The objective and conclusion of this analysis will be, if is either good or not to invest in the company.

Also, according to its leverage ratios, the company’s debts are not only very high, but are also increasing. Its decreasing TIE ratio indicates that its capability to pay interests is decreasing. The company’s efficiency ratios indicate that despite the fact that its fixed assets are increasingly being utilized to generate sales during the years 1990-1991 as indicated by its increasing fixed asset turnover ratio, the decreasing total assets turnover indicate that overall the company’s total assets are not efficiently being put to use. Thus, as a whole its asset management is becoming less efficient. Last but not the least, based on its profitability ratios, the company’s ability to make profit is decreasing.

The aim of this report is to recommend whether or not a publicly traded company has been is worth investing in. The company chosen in this case is JPMorgan & Chase which is a large financial institution. This report is going to use a financial rational formed by the analysis of various financial metrics.

The “financial statements are formal reports providing information on a company's financial position, cash inflows and outflows, and the results of operations” (Hermanson, p.22). There are four main components that make up a financial statement. The four parts are, balance sheet, income statements, cash flow and, statement of owner’s equity. The balance sheets role is to define the company’s assets liabilities and revenue of the business. The income statement shows the income within the company. Cash flow reviews the position of the company by cash payments and receipts. Lastly, the statement of owner’s equity shows the amount of earnings, stock and other capitals of people in the company. (Hermanson, p.34-35).

Overall the long term solvency position of the company satisfactory and less risky, because managerial policies kept the repercussion of recession ( increase in interest rate) in mind and hence reduced its reliance on debt financing This gives it a secure position from the point of view of long term creditors.

Our choices led to a constant increase in net income over the three years. Short term debt increase by approximately 100% percent but steadily reduced over the next three years. We were happy with the positive growth of the company and the fact that we were able to pay off most of the initial short term funding required by the increase in working capital requirement. Overall the current situation of the company in 2018 is good, although the total value created is less than 20% of that created in phase 1. From this we learned that the value of the firm can be significantly increased more through a reduction in working capital requirement than through increasing the firm’s sales and net income.

Financial crises like dot-com bubble in the late 1990s and the housing market crash in the late 2000s prompted investors, and firms, to reconsider the criticality of financial discipline. Transparency would be necessary to entice investors to spend money again, thus a firm’s financial statements became their marketing tools. These examples reinforce the importance of financial statements’ relation to the financial wellbeing of a company. This paper serves as a report on the purpose and aspects of the various financial statements and their applicability to the performance of a firm.

It’s noticeable how the company’s operations have been deteriorating as they are having a more difficult time translating sales into cash. Their A/R turnover is not where it needs to be, and in line with that, their liabilities are increasing as well. The company has also been inefficient with the use of their assets as their current activity ratios are not up to par with the industry standards.

Financial Statements basically show the historical performance or record of the company at some previous point of time. By the time when financial statements are made public, changes are many economical areas such as market conditions, currency exchange rate and inflations can change the values of assets and liabilities. In this case there often exist discrepancies between book value of assets and their market values.

At the end of the financial or business year of all companies, the company management prepares and publishes their financial statements and makes them available for their shareholders and other stakeholders. This is done so that the shareholders and all other stakeholders are aware of the financial condition of the company and how it is operating in terms of financial and operational success. All these people require being aware of all this information because it is the primary source of data that helps a stakeholder understand the existing and expected future condition of the company in terms of finances. When this information is obtained, the stakeholders are able to judge this information to determine any decisions that are to be made in order to improve and grow their investments in the company (Mustakallio, Autio, & Zahra, 2002). If a company is not in a sound position, which is witnessed through the operations of the company elaborated in the financial statements published by the company, the investors show reluctance to invest their money in such a company on which return is very low and risk of losing the money is high.