This report is based on compare of two company's financial situation. Let's start by finding a writer. The efficiency ratio is also used in finding out the financial performance of these companies. Deloitte's Audit & Assurance business has designed Financial Statements for Startups, an illustrative template that provides a starting point for CFOs, controllers, and others on accounting and finance teams who are tasked with preparing annual financial statements.It's ideal for companies that are getting ready for their first financial . Accounting ratio is one number that expressed in terms of another relationship between two or various figures and company that can be compared. There are four main financial statements. Students who find it difficult to write detailed essays. The trend in the above graph shows the trend of the GPM of the company over 4 years The GPM portrays the profit a company makes after paying off its Cost of Goods sold (COGS) In 2006 the company had a very low GPM, but it increased over the years In the year 2008 the companys GPM reached its peak and even the success of the company was at its highest during that period As discussed earlier GPM is the first aspect to be measured to measure the success of the success of the company. One such ratio is the current ratio which is the ratio between the current assets and current liabilities i.e. SHOW 50 100 200. Knowledge of these factors could result in a reduction of invested funds in a business, or actions taken to investigate further. The ratio is calculated by dividing current liabilities with tangible net worth of a firm. Need a custom Case Study written for you? Two companies that compete in the mobile operating system and online advertising businesses are Apple and Google. Comparison of financial statements is possible only when same accounting principles are used in preparing these statements. Apart from comparing income statements of its own business over different time periods, a business owner can compare the operating results of its competitor firms as well. 1. 1. Managers sometimes [], The ethical issue identified in this context is that the Fair Employment Practice Acts (FEPA) implementation has never been questioned by individuals such as Irene, [], In the case context, a lifeguard, Jennifer Payden, was fired by her supervisor for abandoning her assigned post unattended to save the life of a [], Financial Comparison Between Two Companies, Case Study Example, Power Point Presentation With Speaker Notes, Forest Reading Comprehension, Case Study Example, Marriot International Inc., Case Study Example, The Fair Employment Practice Act, Case Study Example, Case of the Lifeguard, Case Study Example. It also have many kind of tax deferred saving plans to provide benefits to the participants when they retire. For total assets turnover, the first company is also higher than the second company because first company has a higher sales generated from the assets for the effective use of assets in business activities to increase the production. Gross Profit Margin (GPM), Efficiency Ratios for Adidas. 322 specialists online. The company should come up with ways of reducing the general expenses as they form a very big part of expenses and have a negative effect on the companys profitability. Get a head start on drafting financial statements. Assets and liabilities of business for the previous year as well as the current year, Changes (increase or decrease) in such assets and liabilities over the year both in absolute and relative terms, Thus, a comparative balance sheet not only gives a picture of the assets and liabilities in different. Company with heavy debts burden is risky for not able to finance or not able to pay back its debts or maybe it is being forced to dispose or to sell its assets for paying back the debts. A business owner or a financial manager should study the following aspects of a comparative balance sheet: Working capital refers to the excess ofcurrent assetsovercurrent liabilities.This helps a financial manager or a business owner to know about the liquidity position of the business. Our experts can deliver a custom BMW Group and Daimler Company: Accounting Policies paper for only $13.00 $11/page. However its efficiency or its ability to turn the large revenue into profits is questionable bearing in mind that the company made a very small profit compared with the amount of sales made. Gross Profit Margin (GPM), Efficiency Ratios for Nike Inc.Stock Turnover, Profitability Ratios for Adidas. However the above three statements might not make any since in their low form since the companies being compared may be of different sizes. Indirect transfer from savers to borrowers though investment banking house: Investment bank is a unwritten the issues of corporations securities as a middlemen to the facilitate the issues by purchase and then resell the same corporation so that the money paid by savers for purchase. The GPM ratio portrays the value of gross profit as a percentage of the sales revenue. The function of the financial analyst is based on the analysis of the financial statements, which is one of the main tools used in the financial and economic decision-making by the various. It has been prepared by a group of fore students for the Financial Accounting. This relates to making use of the same accounting principles for preparing each of the comparative statements. Pension funds is a retirement plans funded by corporation or government agencies for their workers and administered by trust departments of commercial banks or by life insurance companies. The formula t calculate the ROCE is Return on Capital Employed = * 100, I have considered net borrowings entirely as the long term debt since working capital includes short term debt, The ROCE trend line shows how the company is able to generate the profits If the capital employed falls while the net profits remain constant this shows that the company is earning the same with less amount of capital employed The company graph shows that the ROCE was improving in the years 2006-2007 Improving ROCE is always a good sign for a company but from the year2007 there is a constant decline in the trend which is observed, Adidas had started the year 2006 above Nike Inc with a GPM higher than Nike Inc Adidas in the year 2007 has improved their companys standing as there is a constant improvement in their performance The year 2008 saw a successful year for the market as a whole and the performance of both the companies was better, however the performance of Adidas was better than Nike Inc In the year 2009 the companies had a massive decline in their GPM as the world was battling recession, which affected the entire globe as a whole. Sales Revenue of Nike Inc $16,325.9, Year 2009. Analyzing these three financial statements is one of the key steps when creating a financial model. Need a professionally written It should not be treated as authoritative or accurate when considering investments or other financial products. Page. It further hints towards the fact that the company might find it challenging to meet its short-term obligations. One such ratio is gross profit on net sales ratio which is gross profit/net sales. (Elastic products are such products whose demand rises and falls with a rise and fall in its price. This increase in the debt-to-equity ratio could indicate management's decision to increase the company's debt load to better leverage the company's assets and equity and more closely match the industry. The financial intermediaries generally huge and they gain in economies of scale in analyzing the creditworthiness of potential borrower, in processing and collecting loans, and in pooling risk and for the helping individual savers to diversity their funds investments. This means that more effort should now be focused on cost cutting measures so that the high sales can lead to high profits in turn. (Chapter-3), Assignment on Social Responsibility of banking industry in Bangladesh, Advantages of Using Binary Options Trading Software, Annual Report 2016 of Standard Ceramic Industries Limited, Annual Report 2016 of BDCOM Online Limited. So, business owners can also understand the various causes that lead to changes in different accounting periods. Moreover, such a type of presentation allows the reader to compare the financial performance of the company with previous years. For example, the management may want to compare their firms performance with other firms in order to establish their weaknesses and therefore improve on them or establish a competitors weakness and therefore capitalize on it. Although the notes were omitted, a statement from each company's auditor is included. As is evident from the above comparative income statement, the sales of M/s Singhania increased by Rs 20,400 during 2018 as against 2017. On the other hand, the owners equity has improved by only 34%. This is done to find the change in cash from the beginning of the period to the end of the period. The trend in the above graph shows the variation of the GPM of the company over 5 years GPM can be increased by using two main strategies financial and non financial In 2006 2007 the company had a comparatively low GPM But in the year 2008 the company improved their performance to a higher percentage as is evident from the graph In 2009 the company did have a small fall of 0.10% in their GPM but then they recovered in the year 2010 with a sudden rise in their Gross Profit The increase in gross profit over the years could be mainly because of two methods Nike Inc could have increased the price of inelastic products to earn more profit (inelastic products are such products whose demand does not go down due to rise in its price) Example: The Nike Inc could have increased the price of their studs, which are very popular and unique; the demand of those products would not go down. Balance sheet: This displays a business's financial status at the end of a certain time period. Net Profit Margin =, The trend in the above graph shows the NPM of the company Adidas over 4 years. This is because the sales increased during the year. so in this matter they have theur own way to solve their problems. However their profitability is not the same especially when the profitability is compared with the annual revenue. The inventory turnover for the first company is higher than the second company because the first company has a fast stock turnover where the goods purchased and kept in the store are fast taken out for resale so that the stock is not accumulated and money is not tied up with the stock. Comparative analysis of Financial Statement of two Companies Assignment This is an assignment of Comparative analysis of Financial Statement of two Companies. You can receive the notifications now. Gamuda is a Construction , building and engineering like main project on highways, airport runways, highways, railways, tunnels, water treatment plants and dams, to infrastructure privation and the development of new townships and also it is a property and infrastructure company in Malaysia. The formula to find out Stock Turnover is Stock Turnover = OR Stock Turnover = * 365, Inventory turnover ratio or Stock turnover ratio measures the velocity of conversion of stock into sales Usually a high inventory stock velocity indicates efficient management because more stocks are sold Graph above for the stock turnover of Adidas shows the decline in the stock turnover ratio from 2006 to 2007 Since 2007 the company had a low stock turnover However the company could not improve its stock turnover ratio over the years The low inventory turnover ratio implies that the products of the company are not selling as fast as they were in the year 2006 The other reason for rise in the ratio could be that the company started producing for increasing its stocks, but considering the situation at that point of time, it seems highly improbable. Comparative Analysis of Financial Statements Between Two Companies With the objective to understand the business performance of the two entities, we reviewed the 2007 financial statements of both company and tried to obtain some insight on the profitability and solvency of each entity. For example, suppose one company has operating income of $100,000, and a competing company has operating income of $2,000,000. Primary markets is an market which is corporations raise capital by issuing new securities or new shares like governments or public sector institutions can obtain funding the sale of a new market issue. Sales Revenue of Nike Inc $14,954.9, Year 2007. Also, This scenario could be an outcome of a new product launch. Hence, such a fact indicates that the company gave more importance to earning non-operating profits over operating one. These increased by 33% which is much higher as against the increase in net sales that was just 12%. Your account will automatically be charged on a monthly basis until you cancel. Income Statement of M/s Singhania as of December 31, 2017, and December 31, 2018. Comparison to the company's past three years shows that this ratio is usually 0.3 for the company. The company should reduce its advertising budget and concentrate more on quality .The Company should also study its costs structures and come up with the costs to be cut. However, considering the globalization, these strategies have become very subjective. Lets Understand Comparative Statement in Detail. The ratio hence indicates the speed at which a firm sells and replenishes all its stock. Furthermore, in terms of the administration of the two companies, it can be deduced that the management of both organizations is concerned with high profit and excellent performance. But, it is worth noting that ratio analysis give a better picture of the trend of the company over the years, it pin points the exact highs and lows for the company and comparing the same on an industry level it can be observed whether the industry as a whole is facing crisis or it is the companys inability to generate profits. After comparing both the companies the highlights of the discussion are: Adidas has a higher GPM as compared to Nike Inc showing that direct costs are lower for Adidas as compared to Nike Inc Adidas has a lower NPM than that of Nike Inc showing that the even though the GPM is higher for Adidas its indirect costs are so high that its overall profitability has reduced The Stock Turnover of Adidas is low compared to that of Nike Inc showing that Nike Inc is able to convert its stock into turnover faster Having the NPM and the Stock Turnover both higher than Adidas, it shows that Nike Inc have their administration and other indirect expenses lower than that of Adidas Due to recession Adidas would be hit more as the stock turnover ratio is low despite high GPM Adidas has a higher ROCE than that of Nike Inc. 100 Comments Please sign inor registerto post comments. For operating profit margin on sales, (Gamuda Berhad) have a lower profit earned by company from the sales made for the ineffective control on expenditures and interest cost, incurring higher operating expenses and higher interest costs to reduce the profit earning but profit margin on sales, (Gamuda Berhad) have higher profit earned by company from the sales that is made for the effective control on its expenditures and interest costs, incurring lower operating expenses and lower interest costs to increase the profit earning than the second company. Get your custom essay on, Profitability Ratios for Nike Inc. Nearly all companies prepare financial statements of some type and the complexity of those statements will vary. During the free trial, you may pay any number of employees using QuickBooks Payroll free of charge. Registered office: Creative Tower, Fujairah, PO Box 4422, UAE. 1 EUR = $1.337479367 The NPM Ratio is a better measure of a firms profitability since it accounts for the companys sales and expenses. Each analysis has been supported with the help of a graph which shows the trend of the companies to arrive at the final conclusion. At the same time the trading of the stock and bonds that they get in financial market take place direct between buys and sellers and also financial market can be a good relationship by domestic or international business level in communication. Life insurance companies is a collect saving that form or annual premiums and invest in stocks, bonds, real estate and montage, finally make payments to the beneficiaries of the insured parties. Hence, the company increased its advertisement cost significantly and reduced the selling price in order to achieve higher sales volume. The NPM is generally high for high volume products. In comparison, the company's total assets this year are $900,000. The current ratio is first company is higher than second company because first company has larger amount of current assets can be used to finance its current liabilities and that will indicates the company is financially stable and able to finance its short-term liabilities. Evaluate the financial position and performance for each of these two companies using accounting ratio analysis. Sales Revenue of Adidas $13,487.1, Year 2007. Hence, this technique is also termed as Horizontal Analysis. Adidas and Nike Inc are the only companies which dominate the footwear, sportswear and sports equipment sector of the market. Income statements show how much money a company made and spent over a period of time. QuickBooks Payroll is only accessible via QuickBooks Online subscriptions. The Financial Comparisons Between Two Companies Finance Essay. The report will provide a detailed analysis and summary of several things including financial analysis, industry history and analysis, both companies history . US GAAP requires presenting three periods, compared to two for IFRS. There are three different ways of transferring capital or funds from savers to borrowers in financial markets and they are following picture: TRANSFER OF CAPITAL OR FUND BETWEEN SAVERS ( MONEY LENDRE ) AND THOSE WHO NEED CAPITAL OR FUND ( BORROWERS ). what are comparative financial statements. - Assume that company A uses the FIFO inventory method and company B uses the LIFO inventory method for valuing its inventory. This example has been uploaded by a student. For example, comparing budget data to actual performance, you might have budgeted this month's sales at $10,000. A comparative income statement showcases the operational results of the business for multiple accounting periods. The statements of cash flow being analyzed will help to make sure that the company is making the right choices with their money and it is all accounted for, there is always a chance that some numbers get inputted wrong . This expenditure was provided for by the company proprietors and the external lenders. For example, a businessperson who produces shoes may purchase a machine that automatically stitches leather that hopes in the time saved will allow for the production of more shoes and increased sales or another example investment banking house are Merrill Lynch and Morgan Stanley Dean Witter. There are some specialized in financial firm that transfer of funds from savers to be demanders of capital or event borrower. Your actual sales came in at $8,000, so you have a budget-to-actual variance of $2,000. Consequently, this is reflected in its level off gross profit. Generate GST Invoice Format in Word & Excel, * KeyPay was voted the leading payroll solution for SMBs <50 employees (Australian Payroll Association 2021 Payroll Benchmarking Study). In 2010 the company has the best performance. Financial statements are used as a way . Balance Sheet of M/s Kapoor and Co. as of December 31, 2017, and December 31, 2018. Inter-temporal comparisons between two periods are the comparison value that happens between years in one industry for example year 2009 and 2010. English law does not normally impose liability for failure to act despite the fact that they may be compelling moral justification for doing so? Comparative Balance Sheet of M/s Kapoor and Co. as on December 31, 2017, and December 31, 2018. 3. Payroll services are offered by a third-party, Webscale Pty Ltd, the makers of KeyPay. All work is written to order. The following trend line shows the NPM for Nike Inc in 2006 2007 was showing signs of consistency after a particular rise from 2004 2005 and then in the year 2007 there was another rise in the net profit 2008 was not a good year for the company as the net profit fell to a great extent directly from 10.11 high to 7.75 low of the company in the time period of these 5 years The company came back strongly with recovering their status and stabilizing their net profit in the year 2010 where they came back to their Net Profit to 10.03% Some of the ways to increase the NPM are: Negotiating a cheaper rent for the premises Cutting down other indirect expenses like providing economy class tickets for travelling rather than business class. The statements may also reveal unusual spikes in the reported information that can indicate the presence of accounting errors. But the detailed information reflected in such statements alone is not sufficient to reach meaningful managerial conclusions. It offers an overview of a business's liabilities, assets, and shareholder equity. , long-term liabilities and capital of a business. and interpretation of these statements is required using various tools and techniques. Sales Revenue of Nike Inc $19176.1, Graph of the Stock Turnover from 2006-2010, Net Profit Before Tax and Interest $1392.0, Net Profit Before Tax and Interest $1491.5, Net Profit Before Tax and Interest $1883.4, Net Profit Before Tax and Interest $1486.7, Net Profit Before Tax and Interest $1906.7, Graph of the Return on Capital Employed from 2006-2010, Year 2006. This research will help the company cut down on production costs, improve on the quality of units produced and open new markets for its products in a bid to boost sales and consequently the profits. The company could also talk with employees to accept wage cuts though this might be difficult especially in this era of trade unions. The company should come up with ways of reducing the amount of interest paid by converting some of the debt into shares or clearing some of the debt. Indirect intermediately such as a bank or mutual funds from saver by issuing securities or certificate of deposit to savers. In my conclusion, the first company Gamuda Berhads performance is better than the IJM corporation Berhad, and this indicated (Gamuda Berhad) has better performance, because first company has a higher rate in the 5 aspect of business that measured by accounting ratio. The following are all limitations of financial statements. However in the overall performance, universal motor company seem to be doing better even though its annual revenue is lower than that of global automobiles limited however both companies have areas which they could take advantage of in order to improve their financial performance. What To Study While Analyzing A Comparative Balance Sheet? An investor on the other hand may want to compare two firms in order for him to invest in the best company that will offer him good return for his investment. The analysis has been done using secondary data. the company can manage their finance, Debts management is how they manage their tax, and Market value of investment to ordinary shareholders is how they create their market value book. Accounting ratio is one number that expressed in terms of another relationship between two or various figures and company that can be compared. Starting at only, Right now, you can get a professionally written essay in any discipline with a. Company A would conversely have a lower income but higher inventory. Also, there has been a substantial decrease in Other Expenses both in absolute and relative terms. Analyzing Financial Statements. Consequently, the amount of interest paid is also very big. This is good for the company The company graph shows that the ROCE was constant in 2006-2007 The company had a reasonable rise in their ROCE in the year 2008 but it dropped drastically in the year 2009, but stabilized in 2010 If the capital employed is high then there could be a decline in the ROCE which could be a reason in the year 2009 2010 is the year where the company begins stabilizing and tries to recover their standards https://www.soccerwallpaper.mackafe.com/var/albums/David-Beckham-Wallpaper-Gallery/beckham-wallpaper-adidas.jpg ADIDAS, 1 EUR = $1.337479367 The profit would be the key objective for most of the businesses and can help act as the measure of the firms financial success and performance. financial reporting - comparison of two companies financial reporting - comparison of two companies University University of Portsmouth Module Financial Reporting Uploaded by Josh Letzer Academic year2013/2014 Helpful? It helps the business owner to compare the results of business operations over different periods of time. And the times interest earned for the first company is higher than the second company because it has a bearing high interest charges in relation to its available profit. Research should also be geared towards improving the quality of units produced. Formal and substantive conceptions of the rule of law an analytical framework, 237888 ROE Hero Guide Ed8DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD. There are various issues that one needs to look at when comparing financial performance of two companies. that may affect the financial health of your company. Thus, this entire scenario indicates that it was quite challenging to sell the goods during 2018. What Are Comparative Financial Statements? Students also viewed financial reporting - comparison of two companies & John, W. (2000). Credit unions is a non-profit financial institution that owned and operated entirely by members and also it provide financial services for their members, including savings and lending. However, the cost of goods sold for the company increased by just Rs 15,000 in the same period. London: Prentice Hall. "Utilize the power of Moore's Law to bring smart, connected devices to every person on earth.". These statements primarily include income statements,balance sheets, andcash flow statements. Spot market refer to deals being bought or sold for on the delivery within a few days where future market refers future market deals bought or sold future delivery at some future date such six months or a year in to the future. However any reduction in expenses should not have a negative effect on its profitability. Sales Revenue of Adidas $13774.7, Graph of the Net Profit Margin of Adidas from 2006-2009, Graph of the Stock Turnover from 2006-2009, Net Profit Before Tax and Interest $1441.80, Net Profit Before Tax and Interest $1558.16, Net Profit Before Tax and Interest $1711.97, Net Profit Before Tax and Interest $1043.23. 2021 StudyDriver.com - Big database of free essay examples for students at all levels. The calculation of dollar changes or percentage changes in the statement items or totals is horizontal analysis. This increase or decrease in absolute amounts are mentioned in Column III of the comparative balance sheet. I can help you save hours on your homework. Global Automobiles Company on the other hand has 700 shareholders who own a total of 5 million shares in the company. And current liabilities i.e also be geared towards improving the quality of units.! A lower income but higher inventory write detailed essays this entire scenario indicates that the.. 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