Premium Essay

Interpreting Financial Statements

In: Business and Management

Submitted By tiopipo
Words 1052
Pages 5
Financial ratios can be defined as indicators of the performance of a company in a given period or comparing two or more periods and also comparing the performance of the company with competitors to evaluate the overall financial situation of both companies.
For this review we will compare two periods of Walmart Inc., and one period of Target to revise the financial performance of those two companies, the ratios are: Current ratio Walmart Target 2014 2013 2013 Current Assets 61,185,000 59,940,000 16,388,000 Current Liabilities 69,345,000 71,818,000 14,031,000 0.88 0.83 1.17
We can see that Walmart have current ratio below one meaning that all existing current assets will not be sufficient to pay off the current debt.
Target have a better ratio than Walmart it means they have 1.17 of current assets of every dollars to pay off their current liabilities. Quick ratio Walmart Target Current assets-inventory 16,327,000 16,137,000 8,485,000 Current liabilities 69,345,000 71,818,000 14,031,000 0.24 0.22 0.60
This ratio shows that Walmart have only 0.24 to pay every dollar of current debt, it means it does not include the inventory to pay off the current liabilities.
In this case the ratio is better than Walmart even though is not at least equals to 1 it is in better shape than Walmart having 0.60 compares to 0.22 in the year 2013. Inventory Turnover Walmart Target Cost of goods sold 358,069,000 352,297,000 50,568,000 Inventory 44,858,000 43,803,000 7,903,000 7.98 8.04 6.40
This ratio shows the numbers of times the inventory turned in a year calendar. In this case Walmart have a better position than Target showing a better ratio meaning that Walmart turns the inventory more times in a year. Days sales of inventory Walmart Target 365 days...

Similar Documents

Premium Essay

Interpreting Financial Statements

...Interpreting Financial Results FIN 571 May 18th, 2015 Eric Hohl Apple Inc. Apple Inc. is one of the most reputable electronic companies on the market today. Their competitors are Samsung, Motorola, and LG. Of those three Samsung is one of their most important competitor. Looking over the financial statement from 2011 to 2014 they have been seeing a huge increase in revenue, cost of goods sold, their gross profit, and operating income. They began to see an additional expense in 2013 and 2014. Apple Inc. seen a huge loss in 2014 on sales of investments. The other areas that Apple Inc. began to see a huge trend would be EBT, Income Tax Expense, Earnings from Continuing Operations, and Net Income. According to their financial statements they are above their industry competitors in return on assets, gross margin, EBITDA Margin, Growth over Prior Year, and Diluted EPS before Extra. The areas where they were lower in industry comparison would be return on equity, return on capital, SG&A Margin, Accounts Receivable Turnover, Fixed Assets Turnover, Inventory Turnover, Current Ratio, Quick Ratio, Total Liabilities/Total Assets, Receivables, Inventory over prior year, Capital Expenditures, and Levered Free Cash Flow. In some of these area of inventory comparisons from Apple Inc. Samsung was actually holding up better in their receivables, Capital Expenditures, Inventory, and Return on Equity. Apple Inc. Financial Statement |Currency in ......

Words: 740 - Pages: 3

Premium Essay

Analyzing and Interpreting Financial Statements

...Module 4 Analyzing and Interpreting Financial Statements QUESTIONS Q4-1. Return on investment measures profitability in relation to the amount of investment that has been made in the business. A company can always increase dollar profit by increasing the amount of investment (assuming it is a profitable investment). So, dollar profits are not necessarily a meaningful way to look at financial performance. Using return on investment in our analysis, whether as investors or business managers, requires us to focus not only on the income statement, but also on the balance sheet. Q4-2.B ROE is the sum of an operating return (RNOA) and a nonoperating return (the effective use of financial leverage – specifically, leverage multiplied by the spread). Increasing leverage increases ROE as long as the spread is positive. Financial leverage is also related to risk: the risk of potential bankruptcy and the risk of increased variability of profits. Companies must, therefore, balance the positive effects of financial leverage against their potential negative consequences. It is for this reason that we do not witness companies entirely financed with debt. Q4-3. Gross profit margins can decline because 1) the industry has become more competitive, and/or the firm’s products have lost their competitive advantage so that the company has had to reduce prices or is selling fewer units or 2) product costs have increased, or 3) the sales mix has changed from higher margin/slowly......

Words: 4611 - Pages: 19

Premium Essay

Interpreting Financial Statements for Business Acquisition

...on health related circumstances of physical labour. other systems used include the CAD computer aided design which assist engineers in the design aspect of manufacturing. MPM (management process manufacturing) is popular at Daimler, is gathers the methods and technologies used in the manufacturing thus assisting the management accounting department with reducing work in progress. _ EXPLAIN WHAT IS MEANT BY STRATEGIC POSITIONING AND IDENTIFY THE STRATEGIES USED BY THE COMPANY TO ACHIEVE ITS POSITION the modern management strategies used include the merger between Daimler-Benz and Chrysler an equal competitor in 1998 the merger of the two corporations resulted the corp ranking to be the with in the world of automobile internationally. financial the merger was not pleasing with the profit remaining constant and the...

Words: 777 - Pages: 4

Free Essay


...Running head: AUDITING Auditing Joey Willoughby OMM622 Financial Decision Making Instructor: Wayne Hollman August 11, 2014 Auditing This inquiry will exemplify what the staff should anticipate auditors to do should auditors come into a division as part of an organizational – wide audit prior to issuing an audit opinion for the organization’s financial report. What precisely can an auditor ascertain from the examination of an organization’s financial report, and what can the audit provide? According to Merriam-Webster, 2014 an audit is a stylized scrutinization and verification of an organization’s or individual’s financial reports or financial position. This procedure is deemed crucial for the verification of the exactness of an organization’s financial reports. Based on information provided by Epstein, 2014 the audit process incorporates three instrumental gradations, interpreting the extent of the audit, executing fieldwork, and finally writing the audit report. In interpreting the extent of the audit, the auditor essentially has an encounter with top management and an internal council of the board of directors. The audit may embody a consummate inspection of the......

Words: 703 - Pages: 3

Premium Essay

Corporate Finance Potter

...ACCOUNTING IN CONTEXT POTTER I LIBBY I LIBBY I SHORT ACCOUNTING IN CONTEXT BRADLEY N. POTTER University of Melbourne ROBERT LIBBY Cornell University PATRICIA A. LIBBY Ithaca college DANIEL G. SHORT Texas Christian University Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis Bangkok Bogotá Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto Copyright © 2009 McGraw Hill Australia Pty Limited Additional owners of copyright are acknowledged in page credits. Every effort has been made to trace and acknowledge copyrighted material. The authors and publishers tender their apologies should any infringement have occurred. Reproduction and communication for educational purposes The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10% of the pages of this work, whichever is the greater, to be reproduced and/or communicated by any educational institution for its educational purposes provided that the institution (or the body that administers it) has sent a Statutory Educational notice to Copyright Agency Limited (CAL) and been granted a licence. For details of statutory educational and other copyright licences contact: Copyright Agency Limited, Level 15, 233 Castlereagh Street, Sydney NSW 2000. Telephone: (02) 9394 7600. Website: Reproduction and communication for other purposes Apart from any fair dealing for the...

Words: 7672 - Pages: 31

Premium Essay


...ACCOUNTING (STATEMENT ANALYSIS) 222/525 PRACTICE TEST SOLUTIONS SECTION A SECTION B Multi-Choice Questions True/False Questions | 1. |E | | |1. |T | | 2. |E | | |2. |F | | 3. |E | | |3. |T | | 4. |C | | |4. |T | | 5. |E | | |5. |T | | 6. |D | | |6. |F | | 7. |C | | |7. |F | | 8. |D | | |8. |T | | 9. |B | | |9. |T | | 10. |C | | |10. |T | | 11. |E | | |11...

Words: 567 - Pages: 3

Premium Essay


...University of Minnesota Carlson School of Management Spring 2014 ACCT 2050 - Introduction to Financial Accounting Professor Yu Gao CSOM 3-283 Tel: 612-624-1075 Email: Class: Section 003: Tuesday, Thursday: 11:50 am-01:30 pm, CSOM L-114 Section 006: Tuesday, Thursday: 03:45 pm-05:25 pm, CSOM L-110 Office Hour: Tuesday, Thursday: 3:00 pm – 3:40 pm, CSOM 3-283 or by appointment COURSE DESCRIPTION The course provides an introduction to the financial accounting and reporting process from the perspective of external decision makers. The course focuses on fundamental accounting concepts and principles. Students will learn how the economic transactions of an enterprise are reported in the financial statements and related disclosures. The goals of the course are to provide students with a basic set of skills that can be used to compile and analyze financial statements and to prepare students for more advanced financial statement analysis courses. COURSE MATERIALS |Text Book |Financial Accounting 7th edition; Robert Libby, Patricia Libby and Robert Short; McGraw-Hill Irwin;| |(Required) |2010. | | |Connect Access Code | I do not recommend old editions of this book, but you make the final decision. You are......

Words: 2830 - Pages: 12

Premium Essay

Financial Statements Paper

...Financial Statements Paper Fantasia Friend ACC/280 April 27, 2011 University Of Phoenix Accounting is the technique through which a person creates a report of business dealings and makes records regarding the fiscal infrastructure of the organization. Three key activities of accounting, determining, documenting, and communicating economic activities, assist bestow the health of this company to external and internal people. The main goal is to determine and document activities which have a fiscal effect on the organization and to assist control, compute danger, and take decisions. All activities are categorized in fiscal words, as per the financial assumption, and placed to a particular account in the journals, and then the ledger. Such is the procedure of bookkeeping. The data created from bookkeeping may then be utilized to produce correct and timely financial statements. The two key divisions of accounting incorporate managerial accounting as well as financial accounting. Managerial accounting assists people deal with finances. It gives inner records to assist people take decisions and predict wants regarding their organization. Financial accounting helps the outer people since it gives economic and financial details for them about whether or not the organization complies with rules, laws, and regulations. To know a company, a person has to understand the figures. The four fiscal reports let a close look at the figures an organization produces. The 4......

Words: 755 - Pages: 4

Free Essay


...accounting as an area of studying has out lead its importance because with two or three weeks of training, a computer programmer can prepare financial statement using computer application. A. What extend do you agree or disagree with this statement? B. In not less than two and less than five pages, write an essay on this issue. SOLUTION I disagree with the motion that a computer programmer can prepare financial statement on his own. To set the issue burning, let us consider who an accountant is and the role he or she performs in an organization as compared to a computer programmer. An accountant is anyone who monitors and records the flow of money through a business or an organization. He or she verify the accuracy of all monetary transactions and to make sure that all these are legal and follow correct guidelines. Accountants may choose to work private individuals and help them with their financial decisions, tax returns or other money related issues. The accountant practises accountancy and accounting which is the disclosure, measurement or provision of assurance about financial information which help investors, tax authorities, managers and others who make decisions about allocating their financial recourses. Part of the job description of an accountant in a small firm may include the responsibility for keeping all financial records. These records include accounts payable, retail sales and any other information relating to investment held by the company. These......

Words: 1379 - Pages: 6

Premium Essay

My Date

...drastically impacts the position of an accountant. The information required by a company to make decision to make sure it is moving forward is provided by accounting. Both managerial and financial accounting plays a big role by working along to ensure the growth of the organization is in the right path. However, both managerial and financial accounting has its own purpose of improving an organization or a business. “Earlier financial accounting experiments typically sought to determine whether specific accounting policy choices would affect investors’ decisions.” (Pg778-experimental research) (122words) Role of Financial Accounting Every organization or business should be able to know their monetary progress or else they would never be able to evaluate if the business is profitable or the other way around. “The purpose of financial accounting is to provide users of financial statements with information that is useful for efficient decision making.”(accounting for intangible-pg102).It prepares the answers to financial accountants whom are always asked by investors on how the organization or business is growing. Financial accounting reports the financial activities on the balance sheet and income of the company and cash flow statement. It is one of the limbs in accountancy to prepare financial statements for external decision makers who are implicated in the investment of the business...

Words: 1026 - Pages: 5

Premium Essay

The Fair Presentation Requirements of International Accounting Standard 1 Will Undermine the Uk’s View of True and Fair across the world as the new technology allows this to be possible. The problem with this is that different countries have different ways of accounting standards, and therefore there is a problem on how to account standards. Hence, during the last years the debate on whether to use Fair presentation or the True and fair View is becoming a major concern. Fair presentation and the true and fair concept may seem as a similar concept, however, they do differ as well. While the former is the concept for United States, the latter is used in the UK, EU, Singapore, Australia and New Zealand. The IASB job is to prepare a “high quality global accounting standard that requires transparent and comparable information in general purposes financial statements”. According to the International Accounting Standard Board (IASB) the fair presentation is the concept which should be used, while the UK’s company act believe it’s the true and fair view ( TFV). The latest version of International accounting standard (IAS1) was brought into action from July 1998. This adopted both concepts, and it “required fair presentation and disclosure of compliance with IAS and a limited true and fair view override if compliance is misleading” . Fair presentation comes from the word GAAP (Generally accepted accounting principles) and first appeared in 1939. “Fair presentation requires the faithful representation of the effects of transactions, other events, in accordance with the definitions and......

Words: 1713 - Pages: 7

Premium Essay

Annual Report

...Discussion 2 Accounting Week 3 The Annual Report All publicly traded entities have an obligation to report financial highlights and objectives annually. It may seem strange that these reports include information that could be viewed as an advertisement for the company, until you consider that these reports are aimed at many different stakeholders—including shareholders, potential investors, other companies in the same industry, the media that covers that particular industry, and financial analysts. Consider the various uses of the public annual report. Then, select two different audiences who might view the annual report. For each group, state which sections seem most relevant and which sections seem least useful. Next, locate an annual report for a company other than FedEx. Compare FedEx’s approach with the approach of the other company. What, if any, are the differences? Which did you find most effective, and why? Post a response to the above by Day 3. Before posting, please review the "Discussion posting guidelines" under Course Assignments in the Syllabus. Be sure to support your work with specific citations from this week's Learning Resources and any additional sources. Read a selection of your colleagues’ postings. Respond by Day 5 to two or more of your colleagues' postings in one or more of the following......

Words: 1020 - Pages: 5

Premium Essay

Accounting Process

...transactions and events: This is the first step of accounting process. It identifies the transactions of financial character that is required to be recorded In the books of accounts. Transactions is transfer of money or goods or services from one person or account to another person or account. 2. Measuring: This denotes expressing the values of business transactions and events in terms of money 3. Recording: It deals with recording of identifiable and measurable transaction and events in a systematic manner in the books of original entry that are in accordance with principles of accountancy. 4. Classifying: It deals with periodic grouping of transactions of similar nature that appear in the books of original entry into appropriate heads by posting or transfer entries 5. Summarizing: It deals with summarizing or condensing transactions in a manner useful to the users. This function involves the preparation of financial statements such as income statement, balance sheet, statement of changes in financial position and cash flow statement 6. Analyzing: It deals with the establishment of relationship between the various items or group of items taken from income statement or balance sheet or both. Its purpose is to identify the financial strengths and weakness of the enterprise. The above six present day scenario are generally performed using software packages 7. Interpreting: It deals with explaining the significance of those date in a manner that the end...

Words: 544 - Pages: 3

Premium Essay

Theory Accounting and Practices2

...1) Accounting Conceptual framework provides accountants with a constitution regarding the recording and reporting of financial information. Conceptual framework comprises the theoretical structures, including various assumptions, principles or rules, companies follow when conducting operations. A common use of conceptual framework is in the corporation’s corporate governance. The Financial Accounting Standards Board defined its conceptual framework as 'a coherent system of interrelated objectives and fundamentals that is expected to lead to consistent standards'. That is not the rules but guidelines. 2) Accounting theory is an assumptions, methodologies and frameworks used in the study and application of financial principles. The study of accounting theory involves a review of both the historical foundations of accounting practices, as well as the way in which accounting practices are verified and added to the regulatory framework that governs financial statements and financial reporting. 3) The historical side of accounting practices: Historically, the first form of accounting practices was bookkeeping. Bookkeeping resulted from a need of ancient traders in Chaldean, Babylonian, Akkadian, and Assyrian civilizations. Those ancient traders developed advanced trading practices to track their costs and incomes. This of course, led to record keeping as the best. Belkaoui states that the earliest known form of record keeping dates back to 3000 B.C. which was found in Old......

Words: 1181 - Pages: 5

Premium Essay

Financial Statements

...Financial Statement Relationships Interpreting the results from the financial statements is critical. However, understanding how the financial statements are linked, and how a set of numbers from one statement can change the set of numbers from another statement is fundamental to the success of the company. Interrelationships The four financial statements income statement, retained earnings statement, balance sheet, and statement of cash flows are connected because one set of numbers, either a balance or an entry, is reflected on another statement. According to Kimmel, Weygandt, and Kieso, (2011) the retained earnings statement is connected to the income statement because the bottom line of the income statement (net income) is added to the beginning retained earnings amount. This is used to determine the ending retained earnings. The ending retained earnings are then reflected on the balance sheet under owner’s equity. The net income becomes the first line of cash on the cash flow statement as the cash flows from operations. The balance sheet starts with the cash at the end of the year under current assets as reflected on the statement of cash flows. The cash flow statement connects all three financial statements as the statement begins with the net income from the income statement, then the cash at the end of the year becomes the first line of cash on the balance sheet. Relationship Between the Financial Statements Income statements, retained earnings statement,......

Words: 579 - Pages: 3