Analyzing the Financial Health of EA

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The overall financial health of Electronic Arts is relatively poor. The figures in this paper all come from MSN Moneycentral, for ease of comparability over the past five years. As a positive point, the company has seen its revenues increase in FY 2012, but they are still below the level of 2009, which was a high for the company. The decline in revenue during both 2010 and 2011 resulted in significant changes at the company, including multiple rounds of layoffs and office closures. The company was not profitable during the 2008-2011 period but returned to profitability during 2012. The main culprit for the lack of profitability was "unusual expense", which is basically writedowns of overvalued assets. In addition, the company's gross profit during the years of loss was not strong enough. In 2009, for example, which was a high-water mark for revenues, EA had a gross margin of 49.5%. Last year, it was 61.4%. An examination of the company's cash flow from operating activities confirms that its margin improvements have helped its finances. In FY 2009, it earned just $12 million from operations, compared with $277 million last year. Improving margins is a positive sign, but coming after several years of weak margins and net losses, EA needs to sustain this positive trend before any celebrations can be made. With respect to the company's balance sheet, the company is in a decent financial position despite the losses. In terms of liquidity, the company has remained liquid
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