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Financial analysis in case studies - Essay Example

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Finance department forms the large section of any business entity. The financial section includes the income statement, cash flow statements and balance sheet. For large companies,…
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Financial analysis in case studies
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FINANCIAL ANALYSIS Effective financial ment analysis is core to effective business management decision making. Finance department forms the large section of any business entity. The financial section includes the income statement, cash flow statements and balance sheet. For large companies, these financial statements will contain several years of history together with projections. The balance sheet and the income statement may good on the paper, but without proper business strategies the business might quickly go under. Financial ratios give the detailed position of the company at any given point. Most investors will analyze the financial ratios of the company before making a decision whether to invest or not in the company. To demonstrate this point, the following financial ratios for Inbev, Heineken and Molson will be taken into consideration.
1) Return on asset (ROA)
The ROA shows the profitability of a firm’s assets in generating revenue.
ROA = 
Annual Net Income
Average Total Assets
2009
Inbev =4,613.0/112,525.0=0.40995
Heineken =1288/11442=0.11256
Molson=720.40/1707.90=0.42180
2010
Inbev = 4,026.0/ 114,342.0=0.0352
Heineken =1384/11354=0.1219
Molson= 707.70/ 2,220.90=0.3187
2011
Inbev = 5,855.0/ 112,427.0=0.0521
Heineken =1476/11511=0.128
Molson= 676.30/ 2,118.00=0.3193
2) Return on sales= Net income (before interest and tax)/sales
Return on sales is a financial analysis that measures the firm’s operational efficiency
2009
Inbev =9,936.0/36,758.0=27.03%
Heineken =1,428/14,701.0=9.7%
Molson=717.50/4,426.50=16.21%
2010
Inbev = 11,016.0/36,297.0=30.35%
Heineken =1,967/16,133.0=12.192%
Molson= 809.00/4,703.10=17.201%
2011
Inbev = 12,492.0/39,046.0=31.10%
Heineken =2089/17,123.0=12.19%
Molson= 774.20/5,169.90=14.98%
3) Net working Capital ratio
Net working capital ratio measures a companys efficiency and its short-term financial health.
2009
Inbev =10853-14254=-3401
Heineken =4153-5356=-1203
Molson=1,707.90-1,580.90=127
2010
Inbev = 12597-15720=-3123
Heineken =4318-5623=-1305
Molson= 2220.90-1,333.90=887
2011
Inbev = 12323-19644=-7321
Heineken =4708-6159=-1451
Molson= 2,118.00-1,277.20=840.8
4) DEBT-TO-EQUITY RATIO
The debt-to-equity measures the relative proportion of shareholder’s equity and debt used to finance a company’s assets.
Debt-to-equity ratio=total debt / total equity
2009
Inbev =47005/33171=1.417
Heineken =7312/5647=1.3
Molson= 1713/7079=0.242
2010
Inbev = 41886/38799=1.08
Heineken =8031/10220=0.786
Molson= 1960.70/7798.80=0.251
2011
Inbev = 34478/0.84
Heineken =8166/10092=0.809
Molson=1961.80/7647.90=0.257
5) ASSET COVERAGE RATIO
Asset coverage ratio determines a companys ability to cover debt obligations with its assets after all liabilities have been satisfied. It is calculated as follows
Asset Coverage Ratio = ((Total Assets – Intangible Assets) – (Current Liabilities – Short-term Debt)) / Total Debt Obligations
2009
Inbev = ((112427-25165)-(14254-28)/47005=1.55
Heineken = (20180-1702)-(5356-0.00))/7312=1.795
Molson= ((12021-4534.70)-(1,580.90-0.00))/ 47005=0.126
2010
Inbev = ((114342-23359)-(15720-1016))/41886=1.821
Heineken =(26662-3577)-(5623-0.00))/8031=2.174
Molson= (12697-6455.10)-(1,333.90-0.00))/ 41886=0.118
2011
Inbev = ((112525-23818)-(19644-2295))/34478=2.07
Heineken = ((27127-3305)-(6159-0.00))/8166=2.163
Molson= ((12423-4586)-(1,277.20-0.00))/ 1961.80=3.34
47,005.0
41,886.0
34,478.0
Work cited
Bragg, Steven M. Financial Analysis: A Controllers Guide. Hoboken, N.J: Wiley, 2013. Internet resource. Read More
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