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Financial performance comparison - Essay Example

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Its sales are much higher than Brown-forman’s sales total of $3,946 million. The net income of Anheuser Bush in 2014 was $11,302 million, while Brown-foreman had a net income in the same period of $659 million. The net…
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Download file to see previous pages The ROA of Brown-foreman was better than Anheuser Bush. Return on equity (ROE) when compared to return on assets, measures the extent to which financial leverage is working for or against common stockholders (Garrison & Noreen). Brown-foreman’s ROE of 32.43% was superior to the 20.83% return on equity of Anheuser Bush.
The earnings per share (EPS) metric is the portion of a company’s profit allocated to each outstanding share of common stock (Investopedia). The EPS of Anheuser Bush in 2014 was $5.54, while Brown-foreman had a lower EPS in the same period of $3.08. The current ratio shows the ability of a company to pay off its short term debt. A current ratio is considered good if is above the 1.0 threshold. Anheuser Bush had a current ratio of 0.62, while Brown-foreman had a current ratio of 1.02 in 2014. The working capital shows whether a company can pay off its current liabilities solely using its current assets. The working capital of Anheuser Bush was -$8,867 million, while Brown-forman had a working capital of $106 million. Based on these two ratios the liquidity of Brown-forman is superior of Anheuser Bush.
The debt ratio shows how much leverage a company uses. In 2014 Anheuser Bush had a debt ratio of 0.62, a figure that is 0.12 higher than Brown-foreman. The desirable outcome is to have a lower debt ratio, thus Brown-foreman outperform Anheuser Bush in this financial metric. The inventory turnover shows how many times a company sold its inventory during a year. Anheuser Bush sold its inventory 6.31 times during 2014. Brown foreman only sold its inventory 1.04 times during the year. Average sale period measures the number of days taken to sell the inventory one time. It takes Anheuser Bush 57.88 days to sell its inventory, while it took Brown-foreman 352.61 days.
The financial performance of both companies was good since both firms generated positive income during 2014. When comparing the ...Download file to see next pagesRead More
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