...Industry Averages and Financial Ratios Paper Manuelita Blow FIN370 Ms. Christine Gordon University of Phoenix March 13, 2015 Industry Averages and Financial Ratios Paper This paper will be discussing Target, a publicly-traded company. This paper will be Locating the SIC code for the company's industry, Finding Targets ratios for the company using the Dun & Bradstreet® Key Business Ratio link in the University Library. This paper will also be assuming that the inventory ratio is based on a traditional inventory system, but globalized markets and the supply chain make it critical to adopt lean principles to create a more efficient system. This paper will also be discussing what a change to a Just- In- Time inventory system would have if adopted by Target and Financial ratios will be calculated and the ratios will be compared with the appropriate industry. Assume According to "Just In Time Vs Traditional Inventory System." (2014), “Traditional inventory systems, seek to have enough inventory on hand so that production may continue even in the face of unexpected shortages or shipping delays. The ideal goal of JIT (Just in Time) manufacturing is to have precisely the right amount of components or materials on hand at any given moment, with as little idle inventory as possible. In a factory run perfectly according to the JIT model, every component delivered to the factory would go directly from the loading dock to the assembly line”. ("Just In Time Vs Traditional Inventory...
Words: 803 - Pages: 4
...Wal-Mart’s Industry Averages and Financial Ratios Paper Wal-Mart Stores, Inc. maneuvers trade warehouses in countless structures worldwide. The business functions in three sections comprising of Wal-Mart International, Wal-Mart U.S., and Sam’s Club. “It operates discount stores, supermarkets, supercenters, hypermarkets, warehouse clubs, restaurants, apparel stores, drug stores, and convenience stores, as well as various retail websites, such as walmart.com and samsclub.com.“ (Retrieved by: http://finance.yahoo.com/q/pr?s=WMT) Wal-Mart has an inventory ratio that is based on a traditional inventory system, but desire a change to a Just-In-Time inventory system. Analyzing Wal-Mart’s financial ratios provide an outlook on the financial health of the company. Furthermore, the financial ratios are compared to other industry ratios including profitability, solvency, and efficiency. Wal-Mart Stores, Inc. “As of June 5, 2014, it operated approximately 11,000 stores under 71 barriers in 27 countries; and ecommerce websites in countries.” (Retrieved by: http://finance.yahoo.com/q/pr?s=WMT) In 1945, Wal-Mart was originated and its headquarters is located in Bentonville, Arkansas. Wal-Mart Stores, Inc. SIC Code is 53119901. The company line of business is department stores, but often considered variety stores and miscellaneous general merchandise stores. Wal-Mart Stores, Inc. NAICS is 452112 or 452111. On the other hand, Wal-Mart Stores, Inc. deals with a number of items...
Words: 996 - Pages: 4
...Industry Averages and Financial Ratios Paper FIN/370 RUNNING HEAD: INDUSTRY AVERAGES AND FINANCIAL RATIOS 2 ACME is looking for a bank loan to provide it with increased capital for its heater business. When deciding whether or not a company, like ACME, is financially healthy and would provide a return on the invested capital there are many tools available. By using a company’s financial statements, such as their balance sheet, we can get a small view of the heath of said business. Now by applying financial ratios and measurements towards the balance sheet, we can view the bigger picture which allows us to make a decision with far less risk in the end. First and foremost, let's discuss each ratio expressed on these financial statements as to better understand the context of how we use them to make decisions in the modern business environment. The current ratio measures the proportion of current assets to current liabilities, with this comes a rough measurement of a company’s financial health by giving us an idea of its ability to pay back its liabilities with its assets.. The acid test, or quick ratio, is a measurement designed to show a company’s ability to use cash assets to pay for short-term liabilities. Where the debt ratio measures the total debt of a company to its total assets allowing us to see what proportion of assets are financed by debt. Times interest earned...
Words: 880 - Pages: 4
...Financial Condition Analysis Chapter 17 ANSWERS TO END-OF-CHAPTER QUESTIONS 17.1 a. Financial statement analysis, which focuses on the data contained in a business’s financial statements, is designed to assess the financial condition of the business. Operating indicator analysis, which focuses on operating (as opposed to financial) variables, attempts to identify the underlying operating parameters that contributed to the assessed financial condition. b. Of course, it is extremely important to understand a business’s financial condition, because any future plans must be supported financially. However, it is equally important, especially for managers, to understand what operational actions are required to ensure that the business maintains the financial condition needed to accomplish its mission. 17.2 Analyses that examine historical data provide managers and investors with an appreciation of the business’s current condition, which is important. However, the future is more important than the past, and the most important use of a historical analysis is as a springboard for preparing for the future. When plans are being made, pro forma (forecasted) financial statements are prepared and analyzed, so that managers can gain insights regarding the impact of alternative strategies on the business’s financial and operating condition. 17.3 The inventory turnover ratio indicates how well a business is utilizing its inventories. It tells managers how many dollars of sales...
Words: 3811 - Pages: 16
...the practical work field practices and provide students superiority over Financial Statement Analysis. This report on performance comparison was prepared through a comprehensive ratio analysis of the financial statements of Standard Bank Limited (SBL). The historical trends of these ratios were used to make inferences about a SBL’s financial condition, its operations and its investments attractiveness. 1.2 Objective of the Study To compare financial performance of Standard Bank Limited in FYs 2012 & 2013 as well as to compare overall performance of these two years with industry average. The basis of the study objectives are classified into two parts, Board objectives and Specific objectives. Broad Objectives * The board objective of this paper is comparative analysis of financial statements of FYs 2012 & 2013. Specific Objectives * To analyze Balance Sheets of FYs 2012 & 2013 * To analyze Income Statements of FYs 2012 & 2013 * To determine profitability ratios * To determine valuation ratios * To compare findings with industry average 1.3 Methodology of the study The research type is analytical research. The method of analysis is quantitative. * We used secondary data collected from Annual Reports 2012 & 2013 of SBL. * We analyzed and calculated the ratios in Microsoft Excel. * We conducted an online survey to determine Industry Average. 1.4 Scope of the report * Analysis of...
Words: 2399 - Pages: 10
...1) Calculate the key financial ratios for Company High Profits Berhad for the year 2013. (20 marks) | Category | Financial Ratio | Formula | | | | | | | Liquidity | 1) | Current Ratio | Current Assets / Current Liabilities | | | | | | | | 2) | Quick Ratio | (Current Assets – Inventory) / Current Liabilities | | | | | | | | | | | | | 3) | Net Profit Margin | (Profit After Tax / Sales) x 100 | | | | | | | Profitability | 4) | Return on Total Assets | (Profit After Tax / Total Assets) x 100 | | | | | | | | 5) | Return on Equity | (Profit After Tax / Shareholders Equity) x 100 | | | | | | | Debt | 6) | Debt Ratio | (Total Liabilities / Total Assets) x 100 | | | | | | | | 7) | Debt-Equity Ratio | (Long Term Liabilities / Shareholders Equity) x 100 | | | | | | | | | | | | | 8) | Inventory Turnover | Cost of Goods Sold / Inventory | | Asset | | | | | | 9) | Fixed Asset Turnover | Sales / Net Fixed Assets | | Management | | | | | | | | | | | 10) | Total Asset Turnover | Sales / Total Assets | | | | | | | | | | | 2) Evaluate the financial performance of Company High Profits Berhad for 2013 against the Industry Average. (20 marks) | Category | Financial Ratio | Industry Average | | | | | | | Liquidity | 1) | Current Ratio | 2.05 | | | 2) | Quick Ratio | 1.43 times | | ...
Words: 3669 - Pages: 15
...Financial Ratio Analysis Introduction Based on the financial ratios calculated for Jackson Industries we feel there are five key areas of performance that must be analyzed and discussed. Those five areas of performance include: liquidity, asset utilization, financial leverage, profitability, and market value. Using the 2010 Industry Average for a wide variety of financial ratios we have come up with some conclusions about the company’s current standing as well as ideas for future growth and success. Liquidity To measure liquidity we focused mainly on three financial ratios that included the Current, Quick, and Cash Ratios. The Industry Average for all three of these ratios exceeded those of Jackson Industries. Jackson Industries’ 2010 Current Ratio was 2.39, which was slightly up from their 2009 ratio of 2.33. Still, this increase falls short of the Industry Average of 2.7. Unlike the Current Ratio, which improved from 2009 to 2010, both the Quick and Cash Ratios decreased slightly. The Quick Ratio for Jackson Industries in 2010 was .84, whereas the Industry Average was 1.00. Generally, the Quick Ratio is a more conservative measure than the Current Ratio because it excludes inventory, which can be harder to convert to cash at full price. With that being said, the fact our Quick Ratio is 16% lower than the Industry Average is worrisome. Finally, when looking at the Cash Ratio, which is the most stringent measure of liquidity, the lack of liquidity is even more exaggerated...
Words: 1517 - Pages: 7
...com/abstract=2065057 Financial Ratio Analysis of Square Pharmaceuticals Limited Asif Ahmed ACA Trainee Accountants KPMG in Bangladesh Rahman Rahman Huq Chartered Accountants 9 Mohakhali C/A Dhaka – 1212. ACA Student The Institute of Chartered Accountants (ICAB) CA Bhaban, Kazi Nazrul Islam Avenue Dhaka, Bangladesh Contact E-mail: asif.ahmed0001@yahoo.com Electronic copy available at: http://ssrn.com/abstract=2065057 Financial Ratio Analysis of Square Pharmaceuticals Limited 2 of 24 TABLE OF CONTENTS Page No. Executive Summary 3 Chapter 1 Introduction 4 - 6 1. Introduction 4 2. Objectives of Study 4 3. Scope of Study 5 4. Methodology of Analysis 5 5. Limitations or Problem Statement 6 Chapter 2 Key Financial Highlights 7 - 11 2.1. Overview of the Organization 7 2.2. Key Financial Highlights 7 Chapter 3 Ratio Analysis 12 - 19 3.1. Liquidity Ratio Analysis; 12 3.2. Asset Management Ratio Analysis; 13 3.3. Debt Management Ratio Analysis; 15 3.4. Profitability Ratio Analysis; and 16 3.5. Market Value Ratio Analysis. 17 Conclusion 20 Recommendations 21 Bibliography 22 Annexure 23 Financial Ratio Analysis of Square Pharmaceuticals Limited 3 of 24 EXECUTIVE SUMMARY This paper is mainly an analytical outcome of financial ratio analysis of Square Pharmaceuticals Limited and pharmaceuticals industry. Eleven (11) ratios are selected to judged the various aspects of efficiency of the company, including – Current ratio, quick/acid test ratio, inventory turnover...
Words: 4143 - Pages: 17
...assets/stockholders equity = 4,000,000/2,400,000 = 1.67 time Gulf Controls Inc. has a much higher then average profit margin with 10% vs. 6% and a slightly higher equity multiplier of 1.67x vs. 1.4x and a much lower then average total asset turnover giving a greater then the industry average return on equity 25% vs 21%. However, the /gulf’s higher equity multiplier indicates a higher level of financial risk. Question 10 a. Jackson’s current ratio is 1.88x vs the industry average of 2.5x. Jackson’s quick ratio is 0.66x compared to industry average of 1.1x. Jackson’s net working capital of $750,000. Overall Jackson’s liquidity is much lower then that of industry average. Based on comparison of the firms current ratio to that of the industry and the firm’s quick ratio to that of the industry, it appears Jackson may have excessive or slower moving inventory. b. The companies average collection period is 38.9 days compared to industry average of 35 days. Comparing inventory turnover ratio, the companies is 1.73x compared to industry average of 2.4x. This proves further evidence of Jackson’s inventory issues. Jackson’s total asset turnover ratio is 1.25x, which is below industry average of 1.4x. This is most likely because of the inventory problems and the somewhat higher than average receivables balance. c. The companies times interest earned ratio is 2.89x compared to industry average of 3.5x. The companies total assets to stockholder’s equity...
Words: 587 - Pages: 3
...a.) Ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms in the same industry. Managers use ratio analysis to identify situations needing attention; potential leaders use financial analysis to determine whether a company is creditworthy; and stockholders use ratio analysis to help predict future earnings, dividends, and free cash flow. b.) The 2011 current ratio is calculated by using the following formula: current assets/current liabilities= 2,680,112/1,039,800= 2.58:1 The 2011 quick ratio is calculated by using the following formula: current assets-inventories/current liabilities=2,680,112-1,716,480/1,039,800=.93:1 The higher the current ratio the better the company’s liquidity because it provides insight about a firm's ability to meet its short-term financial obligations; therefore after calculating the 2009, 2010, and projected 2011 current ratio using the current assets/current liabilities formula we find the following ratios: 2009: 1,124,000/481,600=2.33:1 2010: 1,946,802/1,328,960=1.46:1 projected 2011: 2,680,112/1,039,800=2.58:1 The projected 2011 balance sheet leads us to believe that the year 2011 will have more liquidity than in the previous 2 years. Ratios are very useful to managers, bankers and stockholders for various reasons...
Words: 592 - Pages: 3
...Urban Outfitters Financial Analysis Financial Accounting Introduction A financial ratio (or accounting ratio) can best be described as being “the relative magnitude of two or more selected numerical values taken from an organizations financial statements (Libby, Libby, Libby & Short, 2011),” that can be used to evaluate the overall financial condition of a corporation or other organization. Whether they are viewed by stakeholders within a firm, or current and potential stakeholders outside of the enterprise, financial ratios can used to compare the strength of a company against its own performance objectives, or in comparison to those of its leading competitors within the industry. Although there are a variety of financial ratios in use today, there are basically five main categories in which they reside: liquidity, efficiency, financial, profitability and dividend (Libby, Libby, Libby & Short, 2011). In this report, selected financial ratios, one or more taken from each of the aforementioned categories, will be used to compare the operational performance of Urban Outfitters for fiscal years 2009, 2010 and 2011. Liquidity Liquidity ratios, such as the current, quick, and cash ratios provide an interested party with insight into a firm’s ability to pay back its short-term liabilities (debts and payables) with its short-term assets (with cash, inventory, and receivables). For example, the current ratio tells you “how much...
Words: 1536 - Pages: 7
...iiste.org Financial Analysis of Selected Pharmaceutical Companies in Bangladesh Md. Tofael Hossain Majumder Department of Accounting and Information Systems, Faculty of Business Studies Comilla University, Comilla, Bangladesh. Email: tofael_cou@yahoo.com Mohammed Mizanur Rahman School of Business and Economics, Atish Dipankar University of Science and Technology Dhaka, Bangladesh. Email: mizancu@yahoo.com Abstract The Pharmaceutical industry plays a vital role in the socio-economic development of Bangladesh. But the net profit of this industry has decreased for the last few years. This study is designed to review the financial performance of this industry, to test its strengths and weaknesses. The financial performance of this industry is measured in terms of Ratio (Profitability, Liquidity, Solvency and Activity ratio) Analysis and in terms of Testing Financial Soundness by using Multivariate Discriminate Analysis (MDA) as developed by Prof. Altman. For the source of data mainly relied on Annual Reports and official records. It was observed from the study of the financial statement of the Pharmaceutical industry that the profit earning capacity, liquidity position, financial position and the performance of the most of the Pharmaceuticals are not in sound position and it was also observed that the most of the Pharmaceuticals has a lower level position of bankruptcy. The reasons behind this position of the industry are inefficiency of financial management...
Words: 13441 - Pages: 54
...Analysis of Ceramic Industry In Bangladesh Abstract This report applies performance evaluation of ceramic industry of Bangladesh and to test its financial soundness. The main aim is achieved through ratio analysis of the four selected ceramic companies in Bangladesh (Fu Wang, Shinepukur, Standard, Monno). Measurement of financial performance by ratio analysis helps identify organizational strengths and weaknesses by detecting financial anomalies and focusing attention on issues of organizational importance. The financial performance of this industry is measured in terms of profitability, solvency, efficiency and liquidity analysis and to test the financial soundness. The study covers the four ceramic companies listed on Dhaka Stock Exchange. The study has been undertaken for the period of five years from 2006-7 to 2010-2011 and the necessary data has been obtained from the audited annual report of the selected companies. The liquidity position was very weak in all the cases of the selected companies and thereby reflecting the difficulties in paying short-term obligation on due date. Financial stability of the selected companies has shown an upward trend. This study will help investors to identify the nature of financial performance of the ceramic industry of Bangladesh and will also help to take investment decision. INTRODUCTION Ceramic industry of Bangladesh is a booming sector and the growth potential of both domestic and foreign market...
Words: 11708 - Pages: 47
...06/29/2006 06:16 PM Page 150 FIRST PAGES 5 ANALYSIS OF FINANCIAL STATEMENTS Reviewing and Assessing Financial Information Starting Point Go to www.wiley.com/college/Melicher to assess your knowledge of the basics of financial statement analysis. Determine where you need to concentrate your effort. What You’ll Learn in This Chapter ▲ ▲ ▲ ▲ ▲ ▲ ▲ The five basic types of financial ratios How to use financial ratios properly in order to achieve financial growth When to use specific ratios in different situations How internally generated financing occurs The effect of ratio analysis on long-term financial planning How to read a financial statement The application of the cost-volume-profit analysis concept After Studying This Chapter, You’ll Be Able To ▲ ▲ ▲ ▲ ▲ ▲ Distinguish the three categories of ratio analysis Compare and contrast financial statements from different companies Examine the link between asset investment and sales growth Apply the major components of Du Pont analysis Analyze the quality of financial reports Use analysis methods to evaluate profit levels Goals and Outcomes ▲ ▲ ▲ ▲ ▲ ▲ Analyze and interpret financial statements Explain the categories of ratio analysis Perform the basic types of financial ratios Manage the application of ratios to evaluate business performance Prepare the requirements for external financing Evaluate the financial viability of particular business alternatives 2059T_c05_150-188...
Words: 12981 - Pages: 52
...Financial Health Of Merck Side 1 af 2 Merck and Co., Inc. appears to be a continued uprising pharmaceutical company but only financial ratios can determine what their financial situation truly is. In looking at company evaluation, the last two annual reports from previous years should be carefully analyzed before making any major decisions. Since Merck is a pharmaceutical company, it would probably be an excellent idea to compare this company to another in the same industry. Company Background Established in 1891, Merck discovers, develops, manufactures and markets vaccines and medicines to address unmet medical needs (Merck, 2009). In addition, the company devotes extensive efforts to increase access to medicines through far-reaching programs that not only donate Merck medicines but also help deliver them to the people who need them. The company’s operations are principally managed on a products basis and are comprised of two reportable segments: the pharmaceutical segment and the vaccines segment (Annual Reports, 2008). Financial Ratios In order to figure out how the success of a company’s operations is, it is essential to put the financial ratios to work. Comparing ratios to those of a company in the same industry is an excellent way to see if success is happening and if success is in the future. The most common types of ratios are liquidity and profitability. The first liquid ratio that will be used is the current ratio. Current Ratio The current ratio is determined...
Words: 1136 - Pages: 5
