Financial Ratio Analysis Report

The following report is a brief comparative analysis of two of Australia’s largest deposit-taking financial institutions (FI), Australia and New Zealand Banking Group Ltd. (ANZ) and Westpac Banking Corporation (Westpac). This report seeks to identify which of the FIs has a greater aggregate return per dollar of equity and thus establish the highest performer, or most profitable, of the two. The Return on Equity Model (ROE) (Koch & MacDonald,

Gross Profit Rate: The average year on year increase in gross profit rate over the past 10 years was 19.85% (Annexure 2, Table). This indicator peaked in 1999 at 32.54% and gradually reduced over the past 6 years and ended at 11.83% for the 2005 financial year which is the lowest over the last 9 years. This is of major concern as it seams that the company can’t stop the deterioration in the gross profit rate.

The Rate of Return on Total Assets is the ratio that shows the earnings of a company including

I. Gross profit margin ratio is 25% means that the company is much more efficient in the production and distribution of its product.

Profitability measure earning ratio to the cost incurred and one of the formulas are the profit margin which looks at the net income / net sales. Amazon numbers for 2008 645/19166=3.37% and in 2007 476/14835= 3.21% this looks how sales at Amazons are converted into profit, the bottom line. Another is asset turnover and it deals with how Amazon uses it assets to generate sales and the formula is 19166/8314+6485/2=2.60 times it makes a sales for every dollar it had invested in assets for 2008. In 2007 14835/6485+4363/2=2.74 times these are very good number of asset turnovers. Return on assets deals with how profitable the company is and its formula is: 645/8314+6485/2= 8.71% for 2008 and in 2007 476/6485+4363/2= 8.78 % very profitable numbers. Return on Common Stockholders Equity is how much income is generated for the Stockholders and 645/1197+2675/2=.33 is generated for 2008 and 476/1197+476/2= 58.5 for 2007 and it was an excellent year for Stockholders . Earning per share is the net profit earned on each share of common stock. It reveals the amount the business earned on their stock share investments: 645/428+416/2=1.52 for 2008 and for 2007 476/416+414/2=1.15, is also good. Price ratio is a glimpse into the future of the company. Price Earning

The profit margin ratio demonstrates the ability of a company to increase the percentage of net income earned for every dollar of sales. For example: “this ratio shows the percentage of each sales dollar earned as net income”. (Harrison Jr., Horngen, Tomas, 2013) The Hershey Company was able to increase the profit margin ratio from 10 percent in 2012 to 11 percent in 2013. The increase in profit margin from the previous year 2012 shows that the performance of the company is increasing which means that revenue is increasing or expenses are decreasing. Furthermore, The Hershey Company is managing their performance efficiently and this is directly reflected in profit margin ratio.

The Gross Margin ratio represents the percent of total sales revenue that TCI retains after incurring the direct costs associated with producing the goods and services sold by them. It helps us distinguish, as much as possible, between fixed and variable costs. With a 20%, 15%, or 10% projected increase in sales, for 1996, we calculated TCI’s GM ratio to be 41.85% , and in 1997 to be 41.84%. This means that around 42% of TCI’s sales dollar is available to pay for fixed costs, like its potential long-term debt to MidBank, and to add to profits.

Current ratio is type of liquidity ratio. It is a financial tool used to measure a company’s ability to pay off its short-term debts with its short-term assets. A company’s current ratio is expressed by dividing its current assets by its current liabilities. A higher current ratio means the company is more capable of paying off its debts. If the current ratio is under one, this suggests the company is unable to pay off its obligations if they were due at that point (Investopedia, 2013). Companies that have trouble collecting money for its receivables or have long inventory turnovers can run into liquidity problems because they are unable to lessen their obligations.

Liquidity is a financial term used to determine the ability of a company to pay off its short-term debts, which will be due within the next year or in an operating cycle. In another word, liquidity is a very important indicator to evaluate a company’s financial health. Liquidity ratio shows a comparison between the most liquid assets and short-term obligations of a company. A higher liquidity expresses that the company has not only a better ability to pay off its short-term debts but also a greater amount of cash for an unexpected needs. In another word, when a company has a low liquidity, the company may face a risk to pay its short-term debt and struggle to fund its long-term operation. The current ratio is one of the most common and useful terms used to measure the liquidity of a company. It suggests the capability of a company to pay back its liabilities with its assets. The current ratio is computed by dividing current assets by current liabilities. According to a financial

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Ratios are important in any type of business, because ratios are sued all the way across the board. many financial ratios are used for the purpose of credit analysis, to see where a company stands financially. The three types of ratios are liquidity, solvency, and profitability. Within these main ratio types there are also 8 other basic types of ratios.

“The current ratio is a liquidity and efficiency ratio that measures a firm’s ability to pay off its short-term liabilities with its current assets” (Current Ratio 2018). Since current liabilities are often due in less than a year, the current ratio plays a signifcant role in measuring the company’s liquidity. In other words, the company’s window of opportunity to obtain the funds necessary to cover current liabilities is short. Furthermore, the company relies on its ability to secure its most liquidable assets, which include: cash, cash equivalents, and marketable securities, and then being able to convert them into short-term funds. If the company is unable to obtain the necessary funds to cover its short-term obligations, the company may

Importance: This shows company’s ability that how perfectly they can pay off its current liabilities with only cash and cash equivalents

During this period, the Return on Assets increased from 5.7% in 2012 to 34.6% in 2013. This implies the number of cents earned on each dollar of assets increased from 2012 to 2013. This shows that the business has become more profitable. Equally, the Return on Equity also increased from 12.0% in 2012 to 46.5% in 2013. This similarly implies that the company in 2013 was more efficient in generating income from new investment. This, also can be attributed to the sale of the Digital Business Brand which enabled the company appraise its strategic plan.

Financial results and conditions vary among companies for a number of reasons. One reason for the variation can be traced to the characteristics of the industries in which companies operate. For example, some industries require large investments in property, plant, and equipment (PP&E), while others require very little. In some industries, the competitive productpricing structure permits companies to earn significant profits per sales dollar, while in other industries the product-pricing structure imposes a much lower profit margin. In most low-margin industries, however, companies often experience a relatively high rate of product throughput. A second reason for some of the