Generally, a company's comparative statements show . For testing the financial strength of the companies, I have tried to use the revenue and profit ratios. For instance the company can make use of locally available raw materials instead of importing the materials. Consider the following balance sheets of M/s Kapoor and Co as on December 31st, 2017 and December 31st, 2018 for the illustration. 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. Copyright 2003 - 2023 - UKEssays is a trading name of Business Bliss Consultants FZE, a company registered in United Arab Emirates. 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. Such inferences would then result in actions as planned by the stakeholders. The company could also talk with employees to accept wage cuts though this might be difficult especially in this era of trade unions. Similarly the company could reduce the number of workers involved directly with production provided this does not have a negative effect on the quality of vehicles produced. A professional writer will make a clear, mistake-free paper for you! It also have many kind of tax deferred saving plans to provide benefits to the participants when they retire. In 2021, the debt ratio is 27.8%. QuickBooks reserves the right to change pricing, features, support and service at any time. You are free to use it as an inspiration or a source for your own work. 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. An active employee is one who has been paid at least once in the billing month. You can convert this difference to a percentage of the base year by dividing $300,000 by $600,000, which equals 0.5. This was on account of the huge addition made to the plant and machinery by the company in the given accounting periods. Page. Financial Comparison Between Two Companies, Case Study Example 2022-10-31 . Example it can be shown in a view from balance sheet, profit and loss account, and budgetary control system or in any accounting organization that shows relationship between accounting data. The Balance Sheet of an organisation is a statement showing its financial position on a particular date. Furthermore, it is evident that the cost of goods sold for the company improved as an outcome of increased sales volume. 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. Financial market means it is a organization and people who be found to borrow money from those having some valuable metals to be exchanged at efficient by market price and also they refer to the stock market, wall street, even markets. Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. The balance sheet will be the specific area of comparison. Key Highlights The three core financial statements are 1) the income statement, 2) the balance sheet, and 3) the cash flow statement. This percentage change in items is mentioned in Column V of the comparative income statement. The main aim of my commentary is to investigate the financial performance of Adidas and Nike Inc which are two rival companies. Ratio analysis is a two-step process. The limitations of financial statements are those factors that a user should be aware of before relying on them to an excessive extent. During the year 2006, universal motor manufacturers limited sold a total of 60000 units while global automobiles sold a total of 70000 units. London: Prentice Hall. The more the NPM the better for the company as the company would have more profit to distribute to shareholders and to reinvest in the business. Sales Revenue of Nike Inc $16,325.9, Year 2009. Saving and loan association is a specializes in accepting savings deposits and making mortgage and other loan like collect funds from many small savers and lend out the money to house buyers and other kind of borrowers and it more significant economic function of the saving and loan association to create liquidity in capital markets. Accounting and Finance for Non-Specialists. They also designed to meet objective in different types of savers and they used as interest bearing checking account such as money market funds. Thus, a comparative balance sheet not only gives a picture of the assets and liabilities in differentaccountingperiods. The GP M ratio is expressed as percentage with the help of the formula. 322 specialists online. 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. QuickBooks Online and QuickBooks Payroll are accessible on mobile browsers on iOS, Android, and Blackberry mobile devices. Company A would conversely have a lower income but higher inventory. These increased by 33% which is much higher as against the increase in net sales that was just 12%. Formal and substantive conceptions of the rule of law an analytical framework, 237888 ROE Hero Guide Ed8DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD. Get a head start on drafting financial statements. The purpose of accounting ratio is simplifies the comprehension of financial statements and condition by successful and unsuccessful firm. Assets. 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. The Financial Comparisons between Two Companies Finance Essay. Balance sheet: This displays a business's financial status at the end of a certain time period. The next component that a financial manager or a business owner needs to analyze is the change in thefixed assets, long-term liabilities and capital of a business. Two companies are compared and contrasted. Your account will automatically be charged on a monthly basis until you cancel. GPM ratio shows the value of gross profit as a percentage of the sales revenue. 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. The ROCE is also an indicator of the profitability of a company. The calculation of dollar changes or percentage changes in the statement items or totals is horizontal analysis. Market price per book value for the first company is higher than the second company, this indicates that the company share price has inequitably risen up above its real asset value or book value and being not realistic to stockholders. 2008 was a good year for the company as here the company showed good signs of improvements and performed better than the years 2006, 2007 and 2009 in all cases 2010 was the best year so far as the company has made improvements and has earned the maximum in this year. The distribution strategy of each company 7-8 7. Using video conferencing instead of flying over to other destinations unless need be Reducing other overhead expenditure which can be cut down, say for instance, making a policy to shut down the computers, air conditioners/heaters when they are not in use, 1 EUR = $1.337479367 Stock Turnover ratio would measure the number of times a firm sells its stocks within a time period. 2021 StudyDriver.com - Big database of free essay examples for students at all levels. Consequently, the amount of interest paid is also very big. (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. Ratio analysis makes it possible to measure the effectiveness of any kind of business. Using video conferencing instead of flying over to other destinations unless need be Reducing other overhead expenditure which can be cut down, say for instance, making a policy to shut down the computers, air conditioners/heaters when they are not in use, Stock Turnover ratio would measure the number of times a firm sells its stocks within a time period. 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. The three basic financial statements are (1) balance sheet, which shows firms assets, liabilities, and net worth; (2) income statement, which shows how the net income of the firm is arrived and (3) cash flow statement, which shows the inflows and outflows of cash caused by the firms activities. Capital markets is who deals for securities where companies and governments can intermediate or long-term debts in a periods of one year or more than one years and also it include stock market. Other techniques include: This article talks about Comparative Financial Statements Analysis. US GAAP requires presenting three periods, compared to two for IFRS. Peter, A. & John, W. (2000). 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. One such ratio is gross profit on net sales ratio which is gross profit/net sales. The present research has been conducted for comparing the financial statements of two different companies from pharmaceutical industry. All else being equal, company B's financial statements would most likely show less income because of a higher cost of goods sold. The debts ratio for the first company is higher than the second company because the first company has a heavy debts burden with larger amount of debts and bearing high interest cost. The following comparative information is provided for company A and B wherein company A uses the LIFO method while company B uses the FIFO method for valuing inventories. Other than that it also helps in the of planning, forecasting and assist management and it helps in case of investors and lending decision of bankers. What the companies should do in order to improve their financial performance: The company seems to be doing well as far as making sales is concerned. 22 Your actual sales came in at $8,000, so you have a budget-to-actual variance of $2,000. 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. Watch on. The company did not make more sales as compared to global automobiles limited and therefore, it has a higher efficiency. Comparative analysis of Financial Statement of two Companies Assignment This is an assignment of Comparative analysis of Financial Statement of two Companies. If you see carefully, sales increased by 12% whereas the cost of goods sold increased by 14.3%. Than it used the fund collected to purchase and hold the securities as investment and the funds transferred from saver intermediary when pay money to financially exchange for receiving certificate of deposit . They are often the chepast source of funds available to individual to borrowers. Note Furthermore the fact that a large company makes a huge profit does not mean that it has performed better than a smaller company in the same industry but with a smaller amount of profit. The two companies we study are: Reed Elsevier and Thomson, in the filed of information and publishing. This analysis helps each of the stakeholders to understand the long-term financial position of a business. Income Statement of M/s Singhania as of December 31, 2017, and December 31, 2018. Joining of three company enterprising local construction IGB Construction Sdn Bhd was incorporated in 1981, Jurutama Sdn Bhd was incorporated in 1970 as Soon Tat Construction Sdn Bhd and Mudajaya Sdn Bhd incorporated in 1965 as Chye Hin Construction Co Ltd. IJM become grown in reputation and renown internationally in excellent ways of by achieving record by numerous awards. If you see carefully, sales increased by 12% whereas the cost of goods sold increased by 14.3%. Inter-firms comparison between two companies is a different accounting policies and rules and regulation that they created like in IJM BERHAD and GAMUDA BERHAD. Product registration required. 3. The income statements and balance sheets of the two companies information that are required for business performance and it obtain the required information from the related company financial reports via internet . It has been prepared by a group of fore students for the Financial Accounting. For acid-test ratio, first company is also higher than the second company is because that the first company has a larger amount of liquid assets that can be used to finance its current liabilities and the company has high liquidity to finance its short-term liabilities and financially stable. 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. It is prepared at the end of the accounting year after preparing the Statement of Profit . These statements primarily include income statements, Thus, the purpose of preparing these statements is to ascertain the profitability and financial soundness of a business. Every business needs to prepare basic financial statements that summarize its operating results and financial position for a particular period. Any information contained within this essay is intended for educational purposes only. 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