Search
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

# Analysis of Financial Statement - Essay Example

Summary
We are pleased to inform you that our findings about the company's financial data from the year 1998 to 2001are completed. We are dispatching you this document for you to see the results and evaluate the company's success on the basis of this result. During these years, net profit margin has fallen drastically…

## Extract of sampleAnalysis of Financial Statement

Download file to see previous pages... The cost of sales/sales ratio have increased from 0.48 to 0.55, which shows that company's cost of sales have increased which resulted in gross profit to decline and as a result net profit also declined. Similarly, Research and Development/sales ratio also increased for 0.10 to 0.11 which resulted in increase in expenses and declined profits which ultimately caused net profit margin to fall. Below is the computation table for net profit margin:
Based on the above figure, we can see a declining net profit margin trend for the company. Threatened by this we would like to advice the company to diversify their product range so that the effect of decline in net profit is minimized. In other words the declining trend in one industry will be offset by a booming trend in another industry.
We from experience can suggest that return on shareholder's equity can be an effective in assessing the return on your investment. Return on equity actually tells you how much profit your investment is yielding. From the year 2000 to 2001 there has been a downward trend for the company. This is because the profits between these two year decline whereas investment or shareholder equity in the business decreased. The major reason why shareholder equity has seen a trend is because of decline in profits. These profits declined because expenses increase. Both Research and Development and Cost of Sales increase causing the profits to decline and shareholders equity to fall. Here is our computation for Return on Shareholder's equity. (Investopedia, 20 June)
Return on Shareholder Equity= Net Income/ Shareholder Equity
For the year 2000 = 1854/7309 = 0.253 or 25.3%
For the year 2001 = 927/10586 = 0.087 or 8.7 %
The reason behind change in this ratio is changes in prices of the stock and change in price net income per share ratio. This ratio is suggesting that investors are expecting higher profits and growth in earning per share ratio. This has resulted in market demand for stock to rise and prices of stock to inflate and thus resulting in higher P/E ratio.

2) P/E Ratio = Stock Price/Earning per share Diluted
1998= (111/4)/0.24 = 115.625
1999 = (163/4)/0.31 = 131.45
2000 = (281/2)/0.55 = 255.45
2001 = (91/2)/0.27 = 168.51
There was first drastic increase in Price to Book Value Ratio in 2000. This can be due to because the investors value your company highly and despite having low book value they are willing to pay high price for your shares. This is a good sign and show that company has good name in the market and investors value your company highly. However, in 2001, this ratio declined. This shows that company is no more the investor's heaven or investors have shifted away from investing in your company. This can be due to the fact that investors think that your company will be profitable and demand for the share of company decline and your share market value fell, so as this ratio as investors are turning away from investing in your company which is a bad sign. (Frank Wood)
Click to create a comment
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Financial Statement Analysis
However, the financial statements of a company provide the absolute figures (amounts in currency units). These amounts of financial statements can be used for comparison in respect of the past performance of the company. But what if an analyst wants to compare the financial performance and position of a company with other competitor or with the industry?
15 Pages(3750 words)Essay
Financial statement analysis
The ratio analysis has been performed with the help of the financial information present in the company’s financial statements. Different types of ratios have been calculated and divided into three categories, namely, liquidity ratios, activity ratios and profitability ratios.
7 Pages(1750 words)Essay
Financial Statement Analysis
Vodafone’s profitability is obviously less desirable than France Telecom. Based on net profit margin for years 2006, 2005, 2004 and
6 Pages(1500 words)Essay
Financial Statement Analysis
Task II contains the comparative financial analysis of both companies under three sub- headings, namely, profitability, liquidity, and activity performance (that also include an
18 Pages(4500 words)Essay
FINANCIAL STATEMENT ANALYSIS
The brand of the company particularly targets 15 to 25 years old males and females covering mainly the U.S. and Canada and having retail stores hovering around 929 with an online store as well. Low-rise jeans,
1 Pages(250 words)Assignment
Financial Statement Analysis
According to the discussion financial statement analysis is differentiated from other approaches fundamentally because its main function is to assess the financial condition of an organization based on its financial statement. Several types of analyses can explain an organization’s financial condition.
3 Pages(750 words)Essay
Financial statement analysis: assets
Each proposal is evaluated for ethical basis. This is unethical as it misrepresents the actual stature of the company. Its gives a false sense of security. The overdue accounts will appear
1 Pages(250 words)Essay
Financial statement analysis
In addition, Boeing has a focus on the defense sector and at the same time through its subsidiary, Boeing Capital the business finances airplanes. Looking at both the current and cash ratios for S&S Air, we find that they are slightly below the
3 Pages(750 words)Essay
Financial Statement Analysis
In 2012, Mulberry experienced a huge drop in sales. It dropped from 68.84% to 38.47%. The growth in sales for the company shows a downward trend and in 2013 it dropped to -1.97%. However, in 2014 it increased to -1.01%. This reduction in
4 Pages(1000 words)Essay
Financial Statement Analysis
The aim of this essay is to identify and select any two companies from the same industry and perform financial analysis of their past four years with a view to evaluating such published accounts. For clarity to be attained, this essay will use
10 Pages(2500 words)Essay
Let us find you another Essay on topic Analysis of Financial Statement for FREE!
+16312120006