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,
Ratio analysis is a very powerful method of analyzing the status of a company by manipulating the audited financial statements. They are a yardstick of doing a performance evaluation of the firm’s financial condition. A deeper understanding of the ratios by an investor offers them more knowledge on the working of the firm and the best investment they can undertake. The financial ratio gives a relationship of two or more accounting variables through arithmetical expressions (Beck, 2009). They offer a standard for comparison of firms’ growth and performance as well as with competitors, more so, they offer the firm a clean bill of health.
In article “The Analysis and Use of Financial Ratios: A Review Article” by Barnes (1987), financial ratios are discussed. The discussion on financial ration is about the purpose of financial ratios. The purpose of financial ratios is to aid management 's efficiency of planning and implementing actions based on prediction outcomes through coefficients and deviations. The financial ratios are used in design projects because the advantages outweigh the disadvantages. Barnes (1987) suggest using debt and performance ratios. Debt ratios indicated the percentage of a the assets verse debt. The formula is total debt divided total assets. Performance ratios indicated different aspects of cash flow. There are many different performance ratios.
Apart from the level of financial accounting, the ratio is one measure of performance can be made by the organization. Ratio is intended to make a comparison between two or more of a decision. The ratio of interest is to have a profound meaning which, when it is compared with other ratios. Examples of such ratios can reinforce an opinion on the
Based on my full ratio analysis, the first reason would be due to the ratio of rate of return on net sales. The rate of return on net sales for the current year 2011 is 2.4% compared to the previous year 2010 is 10.3%. There is a decreased difference of 7.9% ratio which is an indicator that the company's operational efficiency is fragile.
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
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.
Ratio analysis will be used to measure the profitability, liquidity and efficiency of the named business and to analyse the performance of the business using ratio analysis.
20.20% in 2011. The company's operating margin has declined 374 basis points (bps) over 2011 which may indicate
The analysis of the net income of the company shows that the net income increased by 11.20% in 2014 and reduced by 5.59% in 2015. This shows that the 8.31% increase in revenue in 2015 has been accompanied by a reduction in the net profit. The profit in 2015 however, remains to be higher than that of 2013. The reduction in net profit could be due to a greater increase in costs than revenue.
The Study of the ratio analysis technique to financial statements offers potential in expanding insight into specific strengths and weaknesses of a company financial situation. The primary objective of financial analysis is to provide information useful for decision making.
The table above shows that despite the increase in sales and number of employees, cash flow has fallen by more than half, profit from operations is down and profit for the year is even lower. There is no significant change in debt. The only bright figure is the capital expenditure which according to their strategy is as a result of expansion in other regions. (Annual reports, 2011 pg 2). The CEO’s statement that “The growth of Kesko's business operations strengthened in 2011 …Profitability improved” (annual reports, 2011 pp 6) suggest that there has been worse performance in previous years. A look at previous years’ annual reports will confirm that.
Results of data found that three ratios were decreasing gradually between 2013 and 2015. Particularly, the return on assets dropped rapidly in the areas of profitability.
This paper examines financial ratio analysis by defining, the three groups of stakeholders that use financial ratios, the five different kinds of ratios used and their applications, the analytical tools used in analysis, and finally financial ratio analysis limitations and benefits.
Ratio analysis is generally used by the company to provide some information on how the company has performed during that year, so that the parties involved including shareholders, lenders, investors, government and other users could make some analysis before making any further decision towards that particular company. As mentioned by Gibson (1982a cited in British Accounting Review, 2002 pg. 290) where he believes that the use of ratio analysis is such an effective tool to evaluate the company’s finance, and to predict its future financial state. Ratios are simply divided in several categories; these are the profitability, liquidity, efficiency and gearing.