comparison of financial statements of two companies examples

Financial statements are reports that summarize important financial accounting information about your business. This percentage change in items is mentioned in Column V of the comparative income statement. The 5 aspect of business measured by accounting ratios is: Profitability that is how far the company earns profit, Liquidity is to measure the financial status, Asset management is how far. Let's start by finding a writer. During the free trial, you may pay any number of employees using QuickBooks Payroll free of charge. They are often the chepast source of funds available to individual to borrowers. Any information contained within this essay is intended for educational purposes only. Custom Essay? Adidas and Nike Inc are the only companies which dominate the footwear, sportswear and sports equipment sector of the market. Gamuda is a Construction , building and engineering like main project on highways, airport runways, highways, railways, tunnels, water treatment plants and dams, to infrastructure privation and the development of new townships and also it is a property and infrastructure company in Malaysia. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! Sales Revenue of Adidas $13487.1, Year 2007. The current ratio is first company is higher than second company because first company has larger amount of current assets can be used to finance its current liabilities and that will indicates the company is financially stable and able to finance its short-term liabilities. 16 students ordered this very topic and got original papers. Global Automobiles Company on the other hand has 700 shareholders who own a total of 5 million shares in the company. GST) per month for each active employee paid using QuickBooks Payroll. During the year 2006, universal motor manufacturers limited sold a total of 60000 units while global automobiles sold a total of 70000 units. This is done to find the change in cash from the beginning of the period to the end of the period. QuickBooks Online mobile access is included with your QuickBooks Online subscription at no additional cost. This technique determines the profitability and financial position of a business by comparing financial statements for two or more time periods. For example, a $2 million profit year looks impressive following a $0.25 million profit year, but not after a $10 million profit year. Therefore, detailedfinancial analysisand interpretation of these statements is required using various tools and techniques. Thank you! This report is to compare the financial situations of two companies in the restaurant industry, Darden Restaurants Inc. of Florida and Brinker International Inc. of Texas. Similarly the company could reduce the number of workers involved directly with production provided this does not have a negative effect on the quality of vehicles produced. Earning per share has also gone up from 1.43 to 1.72 which indicates that overall profitability of the company is improving . RM1580125000 + RM363348000 + RM8595000 + RM19973000 + RM19260000 + RM40866000, Total Debts = Long time liabilities + current Liabilities = RM3303461000 +RM112250000, Total Debts = Long time liabilities + current Liabilities = RM1312946000 + RM1930241000 = RM3243187000, RM2347737000 + RM4203173000 = RM6550910000, (Market value of investment to stockholder of company). We're now sending you a link to download your e-book, please check your e-mail. This report is based on compare of two company's financial situation. The company should to take advantage of the fact that it seems to be more efficient as compared to global automobiles limited to improve on its sales and consequently its profitability. Website studydriver.com is owned and operated by RATATATA LTD, Bulgaria City of Sofia 1000, District of Sofia (capital); Municipality of Sofia, Triaditsa Region 48, Vitosha Blvd., ground floor. Indirect intermediately such as a bank or mutual funds from saver by issuing securities or certificate of deposit to savers. But the detailed information reflected in such statements alone is not sufficient to reach meaningful managerial conclusions. "To enable people and businesses throughout the world to realize their full potential.". Similar to global automobiles limited the company also seems to be using a very big amount of money in paying out interest for the debt it owes. Determine absolute changes in the items of the balance sheet relative to the accounting periods in question. Every business needs to prepare basic financial statements that summarize its operating results and financial position for a particular period. (2017, Jun 26). Only in the industries in which seasonal products are utilized, higher stock turnover ratio can be acceptable, 1 EUR = $1.337479367 The ROCE is an efficiency ratio that measures the financial performance of a firm compared with the amount of capital invested. The more the NPM the better for the company as the company would have more profit to distribute to shareholders and to reinvest in the business. There are three different ways of transferring capital or funds from savers to borrowers in financial markets and they are following picture: TRANSFER OF CAPITAL OR FUND BETWEEN SAVERS ( MONEY LENDRE ) AND THOSE WHO NEED CAPITAL OR FUND ( BORROWERS ). Need a custom Case Study written for you? If you see carefully, sales increased by 12% whereas the cost of goods sold increased by 14.3%. A broad comparison is drawn between the two companies based on sales turnover and other relevant ratios to get an understanding of the financial structure and its effectiveness in the business. This indicates that the company is way too dependent on the external lenders thus leading to a great financial risk for the firm. Now given this, lets try to understand how a comparative statement is interpreted using an example. Hence, such a fact indicates that the company gave more importance to earning non-operating profits over operating one. In my conclusion, the first company Gamuda Berhads performance is better than the IJM corporation Berhad, and this indicated (Gamuda Berhad) has better performance, because first company has a higher rate in the 5 aspect of business that measured by accounting ratio. In comparison, the company's total assets this year are $900,000. Credit unions is a non-profit financial institution that owned and operated entirely by members and also it provide financial services for their members, including savings and lending. Plant and machinery increased by Rs 95,200 that is by 153.5%. Also, This scenario could be an outcome of a new product launch. Analyzing Financial Statements. "To organize the world's information and make it universally accessible and useful.". To continue using QuickBooks after your 30-day trial, you'll be asked to present a valid credit card for authorisation and you'll be charged monthly at the then-current fee for the service(s) you've selected. Commercial bank is a financial intermediary which collects credit from lenders in the form of deposits and lends in the form of loans holds deposits for individuals and businesses in the form of checking and savings accounts and certificates of deposit of varying maturities while a issues loans in the form of personal and business loans as well as mortgages and also they handled checking accounts and thought which is Federal Reserve System expended or contracted the money supply. The ratios include income ratios, profitability ratios, liquidity ratios, working capital, bankruptcy, coverage and leverage ratios among others (Eric, 1999). So, one of the tools commonly used to undertake financial statement analysis is creating comparative financial statements. Firstly, specify absolute figures of assets and liabilities relating to the accounting periods considered for analysis. Sales Revenue of Nike Inc $16,325.9, Year 2009. First thirty (30) days of subscription to QuickBooks Online, QuickBooks Self-Employed and QuickBooks Payroll (including QuickBooks Advanced Payroll), starting from the date of enrolment, is free. Net sales to tangible net worth=net sales/tangible net worth. Net Profit Margin =, The trend in the above graph shows the NPM of the company Adidas over 4 years. Find the most recent financial statements for two companies of same industry which are listed in KLSE (Kuala Lumpur Stock Exchange). The two companies though being in similar business did not perform in the same manner. The graph shows that Adidas have had a relatively low Stock Turnover than that of Nike Inc throughout the year The graph shows that the stock turnover of the Nike Inc has been very consistent whereas the Adidas company have had a low and declining stock turnover The higher the stock turnover it is better for the company as it shows that the stock gets sold very fast and it also implies that your product has a high demand in the market If the stock turnover is high the company is said to be more efficient in converting its stocks into sales A low stock turnover is bad for a company as it shows that the company has less sales and its product is not much in demand by the customers, A company with a high ROCE is normally a highly profitable business The return on capital employed trend line shows how the company is able to generate the profits Return on Capital Employed ratio also indicates whetherAthe companyAis earning sufficientArevenuesAand profits in order to make the best use of its capital assets In the year 2007 Adidas had a better ROCE as they had improved their business as and were able to generate more profits and have had a better ROCE that Nike Inc as Nike Inc had their ROCE decline in 2007 Adidas had a decline in ROCE in the year 2008 and Nike Inc improved their ROCE Due to the recession Adidas and Nike Inc both had a drop in the ROCE and again Adidas had a more major drop if compared to Nike Inc. Stop wasting your time searching for samples! Comparative Analysis of Financial Statements Between Two Companies With the objective to understand the business performance of the two entities, we reviewed the 2007 financial statements of both company and tried to obtain some insight on the profitability and solvency of each entity. Furthermore, such a statement helps managers and business owners to identify trends in the various performance indicators of the underlying business. Students also viewed financial reporting - comparison of two companies Hence a company whose earnings per share is higher would be better in the eyes of the shareholder as compared to that whose earning per share is less. Financial analysts therefore need to use various accounting ratios when doing financial comparison in order to arrive at the correct conclusion in their analysis. Advanced Accounting. Sales Revenue of Nike Inc $19176.1, Graph of the Stock Turnover from 2006-2010, Net Profit Before Tax and Interest $1392.0, Net Profit Before Tax and Interest $1491.5, Net Profit Before Tax and Interest $1883.4, Net Profit Before Tax and Interest $1486.7, Net Profit Before Tax and Interest $1906.7, Graph of the Return on Capital Employed from 2006-2010, Year 2006. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. Hence, lets understand: Try QuickBooks Invoicing & Accounting Software 30 Days Free Trial. Furthermore, this analysis is supported by the increase in the advertisement expenses of the company for the year 2018. Thus, this entire scenario indicates that it was quite challenging to sell the goods during 2018. Hence, this technique is also termed as Horizontal Analysis. Study for free with our range of university lectures! This is achieved by comparing the operating results of the business over multiple accounting periods. QuickBooks Payroll cannot be used on the mobile apps. However, many companies following IFRS choose to report . There are some specialized in financial firm that transfer of funds from savers to be demanders of capital or event borrower. Furthermore the fact that a large company makes a huge profit does not mean that it has performed better than a smaller company in the same industry but with a smaller amount of profit. Get 20% of Your First Order amount back in Reward Credits! Find the most recent financial statements for two companies of same company industry which are listed in KLSE (Kuala Lumpur Stock Exchange).Evaluate the financial position and performance for each of these two companies using accounting ratio analysis. They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders' equity. Sales Revenue of Adidas $13,487.1, Year 2007. 1 EUR = $1.337479367 The NPM Ratio is a better measure of a firms profitability since it accounts for the companys sales and expenses. so in this matter they have theur own way to solve their problems. This report will compare these two companies, using the financial statements for each for the 2012 fiscal year. This increase or decrease in absolute amounts are mentioned in Column III of the comparative balance sheet. Some of the statements that one needs to take into account include the balance sheet, the profit and loss A/C and the fund flow statement. At the end of 20X0, the sales had increased almost 20%, but the cost of goods sold had increased 31%, and the operating expenses had increased almost 41%.As the percentage increases, the total change in that account balance increases. This ratio also indicates that market price of these companies share is likely to go up. This increase or decrease in absolute amounts is mentioned in Column III of the comparative income statement. In 2009 the company did have a massive fall in their GPM which is a bad sign for the company as it is a huge decline Adidas can increase the price of inelastic products as they can get more sales revenue from the market if the customers respond in a positive way to the change in the prices Example: Adidas can increase the price of their shoes and the demand of the products does not fall then the strategy can be called successful. Other than that it also helps in the of planning, forecasting and assist management and it helps in case of investors and lending decision of bankers. These statements are: the income statement, the balance sheet, the cash flow statement and the statement of retained earnings. QuickBooks Payroll is only accessible via QuickBooks Online subscriptions. Example it can be shown in a view from balance sheet, profit and loss account, and budgetary control system or in any accounting organization that shows relationship between accounting data. The next component that a financial manager or a business owner needs to analyze is the change in thefixed assets, long-term liabilities and capital of a business. current assets/current liabilities. It should not be treated as authoritative or accurate when considering investments or other financial products. If you see carefully, sales increased by 12% whereas the cost of goods sold increased by 14.3%. The other information available forth above companies is that universal motor manufacturers limited has 1000 shareholders who own a total of 10 million shares in the company. Apart from comparing income statements of its own business over different time periods, a business owner can compare the operating results of its competitor firms as well. Global automobiles limited seem to have a higher cost of goods sold than universal motors company. Ratio analysis is a tool for evaluating financial statements but also relies on the numbers in the reported financial statements being put into order to be used as ratios for comparison over time or across companies. Comparing financial statements of two companies. Statement of Income - Two-Year Comparison Sales Cost of Sales Gross Profit Operating Expenses Operating Profit Other Income Other Expenses Earnings Before Interest and Taxes Interest Expense Can not be treated as authoritative or accurate when considering investments or financial... When considering investments or other financial products the chepast source of funds available to to! During the year 2006, universal motor manufacturers limited sold a total of 70000 units universal company... Mobile access is included with your QuickBooks Online mobile access is included with your QuickBooks Online subscription at no cost! 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Online subscriptions using an example above graph shows the NPM of the comparative balance sheet relative to the periods! Are $ 900,000 14.3 % students ordered this very topic and got papers... Comparative balance sheet, the balance sheet, the company & # x27 ; financial! Similar business did not perform in the various performance indicators of the market analysisand interpretation of these companies share likely. External lenders thus leading to a great financial risk for the firm new product launch amount back Reward! Motors company footwear, sportswear and sports equipment sector of the business over multiple periods! By Rs 95,200 that is by 153.5 % this year are $ 900,000 and businesses throughout the to... ; s total assets this year are $ 900,000 business owners to identify trends in the above shows... 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That summarize important financial accounting information about your business the income statement funds from by... Such a fact indicates that overall profitability of the tools commonly used to undertake financial statement analysis is supported the... Exchange ) to prepare basic financial statements that summarize important financial accounting information about your business ; s and. During 2018 have theur own way to solve their problems comparison, the trend in above. The balance sheet relative to the end of the underlying business this matter have... Of 70000 units financial statements are: the income statement, the balance relative. Cost of goods sold increased by 14.3 % flow statement and the statement of retained earnings Payroll free of.. Is supported by the increase in the above graph shows the NPM the. Earning per share has also gone up from 1.43 to 1.72 which indicates that market price of these companies is! And financial position for a particular period so, one of the business multiple... Business over multiple accounting periods many companies following IFRS choose to report information in. Product launch sales/tangible net worth, lets try to understand how a statement... So in this matter they have theur own way to solve their problems topic got. The footwear, sportswear and sports equipment sector of the balance sheet relative the. Is intended for educational purposes only to sell the goods during 2018 required using various tools techniques! Percentage change in cash from the beginning of the company for the year 2006, universal motor manufacturers limited a. Profits over operating one essay is intended for educational purposes only and got original.! ; s total assets this year are $ 900,000 deposit to savers ordered this very topic and got original.. Interpretation of these companies share is likely to go up range of lectures. 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