Financial Statement Analysis and Valuation - Assignment Example

Chapter GKN is a global firm dedicated to the engineering industry. The four major divisions of the company are GKN Aerospace, GKN Driveline, GKN Powder Metallurgy, and GKN Land Systems (Gkn, 2015). The three main product areas that the aerospace division works on are aerostructures, engine structures and systems, and niche products. The GKN Driveline division develops, builds, supplies a wide variety of automotive driveline products and systems. GKN Powder Metallurgy produces the metal powder used to manufacture automotive and industrial components.

GKN Land Systems produces engineered powered management products, systems and services. The organization has a rich history which dates back to the industrial revolution. The company was founded on September 19, 1759. The human capital of the firm is what has made this organization so successful. The biggest companies in the world are recognized by their talent and the attitude of their people (Martinez, 2014). The global workforce of the firm is composed of 49,700 employees. The majority employees of the firm are located in the UK and Europe.

GKN has operations in 33 countries across five continents. GKN has expanded its operations using both wholly owned subsidiaries and joint ventures. The strategy of the organization is to maximize shareholder value by growing its earnings, dividends paid to shareholders, and maintaining sustainable growth in sales, profitability, and cash generation (Gkn, 2015). A main competitor of the company is Meggit PLC. Meggit PLC is a global engineering company that specializes in extreme environment components and smart sub-systems for aerospace and energy markets (Meggit, 2015).

The global workforce of this firm is composed of 10,000 employees and the operations of the company are located across Asia, Europe, North America, Brazil, India, and the Middle East. Chapter 2 One of the goals of the corporate governance initiatives of the company is to maintain internal control. The board of directors of the company is composed of nine members. Kevin Cummings is the chief executive officer (CEO) of the firm. Within the board of directors there are four committees. These four committees are the executive committee, audit committee, remuneration committee and nominations committee.

Over the last few years three of the awards that the company has won include Quality Achievement Award 2013, Excellent Quality Supplier Award, and Fords certification for manufacturing excellence. GKN generated revenues of £7,136 million of 2013. The revenues of the company increased by 8.77% over the previous year. The net income of the firm in 2013 was £407million. The basic earnings per share (EPS) of the firm was £24.2. EPS tends to have an effect on the market price per share as reflected in the price-earnings ratio (Garrison & Noreen, 2003).

The net margin of the company in 2013 was 5.7%. The profitability of the company is solid. The total assets of the organization amount to £6,239 million, while its total equity is £1795 million. Its total liabilities in 2013 were £4,444 million. GKN had a current ratio in 2013 of 1.35. The current ratio shows the ability of a company to pay off its current debt. GKN current ratio is good because it is above the 1.0 threshold. The return on assets of the firm in 2013 was 6.52%. Return on assets (ROA) measures how well assets have been employed by management (Garrison, et al., 2003). The return on equity (ROE) of GKN in 2013 was 22.67%. Return on equity measures a corporations profitability by revealing how much profit a company generates with the money shareholders have invested.

(Investopedia, 2013). The total cash balance of the firm at the end of fiscal year 2013 was £184 million. During 2013 the company obtained cash flow from operations of £709 million, -£407 million from investing activities, and -£215million from financing activities. Overall the financial performance of the company revealed good profitability, efficiency, and liquidity.ReferencesAnnual Report: GNK (2013). 2013 Annual Report (2013). (Accessed 31 January 2013).Garrison, R., Noreen, E. (2003).

Managerial Accounting (10th ed.). Boston: McGraw Hill.Gkn.com (2015). About Us. (Accessed 31 January 2015).Gkn.com (2015). Strategy. (Accessed 31 January 2015).Investopedia.com (2015). Return on Equity – ROE. (Accessed 31 January 2015).Martinez, W. (2014). The true meaning of Human Capital. (Accessed 31 January 2015).Meggit.com (2015). About Us. (Accessed 15 January 2015).Appendix A: 2013 GKN Balance Sheet(Annual Report: GNK, 2013).Appendix B: 2013 Income Statement GKN (Annual Report: GKN, 2013).

Appendix C: 2013 GKN Statement of Cash Flow(Annual Report: GKN, 2013).