Oracle Financial Ratios

Asset (or capital) turnover ratio measures how many times the capital employed was turned over during the year to achieve the revenue which fact indicates the efficiency of the company’s deployment of its assets. The above tables show that even though the two companies surpass the rank of one hundred percent which means that their capital employed was

Total asset turnover : This ratio measures the efficiency of a company’s use of its assets

Accounts receivable turnover measures how many times a company can turn its accounts receivables into cash. This ratio shows how well the company is collecting credit sales from its customers. The equation for accounts receivable turnover

Ratio analysis is a very useful tool when it comes to understanding the performance of the company. It highlights the strengths and the weaknesses of the company and pinpoints to the mangers and their subordinates as to which area of the company requires their attention be it prompt or gradual. The return on shareholder’s fund gives an estimate of the amount of profit available to be shared amongst the ordinary shareholders; where as the return on capital employed measures an organization 's profitability and the productivity with which its capital is utilized. Return on total assets is a profitability ratio that measures the net income created by total assets amid a period.

Ratio analysis is a tool brought by individuals used to evaluate analysis of information in the financial statements of a business. The ratio analysis forms an essential part of the financial analysis which is a vital part in the business planning. There are 3 different ways of assessing businesses performance and these are: solvency, profitability and performance. Ratio analysis assists managers to work out the production of the company by figuring the profitability ratios. Also, the management can evaluate their revenues to check if their productivity. Thus, probability ratios are helpful to the company in evaluating its performance based on current earning. By measuring the solvency ratio, the companies are able to keep an

The rate of return on common shareholders’ equity ratio is an indication of a company’s ability to generate income for each dollar invested by its

Ratio analysis shows the correlation within certain figures of financial statements, like current assets and current liability, and is used for three types of company needs- within, intra- and inter-company. Association can be shown in proportion, rate, or percentage and can evaluate company’s liquidity, profitability, and solvency. Liquidity ratios show company’s ability to pay obligations and fulfill needs for cash; profitability ratios show wellbeing and success for the certain time period; and solvency ratios show company’s endurance over the years.

An increasing current ratio for the financial year 2013 to 2015 is a positive indicator and shows that the company over the years has secured more current assets than its current liabilities. It shows that the company is solvent. The value is (have not finish?? Please complete it )

This ratio demonstrates how efficiently the business is using inventory (or raw materials) in the production cycles. Having to much inventory can be expensive to the business in carry costs (cost to hold and manage that excess inventory), spoilage (not being able to use some inventory or having it become obsolete before being utilized) or interest if it has been financed, etc., etc.

Microsoft Corporation’s profitability ratios: Figure 2. From 2012 to 2013, Microsoft Corporations profit margin increased roughly 5%, although there was a slight decrease from 2013 to 2014, the profit margin still increased nearly 2.5% overall. Their return on assets experienced a decrease of over 1% due to a sizeable increase in inventory on the books, similar to Apple Incorporated. Microsoft Corporation’s return on equity also decreased by nearly 1% between 2012 and 2014 due to sizeable increases in the amount of equity held in the company.

The calculation of ratios is the calculation technique for analyzing a company’s financial performance that divides or standardize one accounting measure by another economically relevant measure. Financial ratios can be used as a tool to demonstrate financial statement users for making valid comparisons of firm operating performance, over time for the same firm and between comparable companies. External investors are mostly interested in gaining insights about a firm’s profitability, asset management, liquidity, and solvency.

The financial data of company does not tell us the entire position of an organisation and its performance over the year or certain period of time for comparative purposes. Therefore, the use of ratios

The efficiency ratios include the collection period ratio, sales to inventory ratio, assets to sales ratio, sales to net working capital ratio, and the accounts payable to sales ratio. The collection period ratio measures how long it takes to receive payments that are owed to the company (Investopedia, n.d). To find this ratio, the financial statement for Office Depot needs to be evaluated to find the amount of accounts receivable and sales for 2012 and 2013. After that data is found, the account receivable is divided by sales. The resulting amount is then multiplied by 365 in order to find the collection period. In 2012, Office Depot's collection period was 27.44 days. In 2013, Office Depot's collection period was 43.28 days. The sales to inventory ratio is the next efficiency ratio, it shows how long it takes for the company to exhaust its inventory. (Investopedia, n.d). The sales to inventory ratio can be found by dividing the annual net sales by the amount of inventory. Office Depot's sales to inventory ratio in 2012 equaled 10.18; and in 2013 it equaled 6.20. The assets to sales ratio measures how much money a company can bring in for selling its assets (Investopedia, n.d). This ratio is found by dividing the amount of total assets by the net sales. In 2012, Office Depot's assets to sales ratio was 37.5%. In 2013, there was a big

Gross Profit Margin (%): This ratio indicates the business ability to control its production cost or manage the margins that a company makes on products it buys and sells. The gross margin represents the limit beyond which fall in sales prices are outside the tolerance limit.

Company D has higher current ratio and quick ratio which is higher 2.43x and 2.3x respectively. This was because Company D had higher cash and short term investment which was 55.6% while Company C only has 1.4%. It proves that Company D is financially conservative and it matches with the second described company.