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. RM1580125000 + RM363348000 + RM8595000 + RM19973000 + RM19260000 + RM40866000, Total Debts = Long time liabilities + current Liabilities = RM3303461000 +RM112250000, Total Debts = Long time liabilities + current Liabilities = RM1312946000 + RM1930241000 = RM3243187000, RM2347737000 + RM4203173000 = RM6550910000, (Market value of investment to stockholder of company). As we can see in the comparative balance sheet above, the current assets of Kapoor and Co. have decreased by Rs 35,200 in the year 2018 over 2017. Changes in Long-Term Assets, Liabilities, and Capital, The next component that a financial manager or a business owner needs to analyze is the change in the. 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. You may cancel at any time. QuickBooks Online mobile access is included with your QuickBooks Online subscription at no additional cost. Get 20% of Your First Order amount back in Reward Credits! Copyright 2003 - 2023 - UKEssays is a trading name of Business Bliss Consultants FZE, a company registered in United Arab Emirates. The two companies though being in similar business did not perform in the same manner. If you have any questions, please contact our office at 800-968-0600 at your earliest convenience. The return on capital employed is used to prove the value the business gains from its assets and liabilities, a business which owns lots of land but has little profit will have a smaller ROCE to a business which owns little land but makes same profit. These three financial statements are intricately linked to one another. 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. Private market is all about transactions that worked privately and directly between two parties without going to public by independently and also they called breakup value market. 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. DISPLAYING: 1 - 50 of 488 Items. Looking for a flexible role? Accounting ratio is one number that expressed in terms of another relationship between two or various figures and company that can be compared. The ratio is calculated by dividing current liabilities with tangible net worth of a firm. This is an assignment of Comparative analysis of Financial Statement of two Companies. Analyzing Financial Statements. One such ratio is gross profit on net sales ratio which is gross profit/net sales. These increased by 33% which is much higher as against the increase in net sales that was just 12%. Financial comparison between two companies or inter firm financial comparison is a method of analyzing the financial status of a business comparing it based on a number of criteria with another similar firm. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! Consequently, the amount of interest paid is also very big. and interpretation of these statements is required using various tools and techniques. The calculation of dollar changes or percentage changes in the statement items or totals is horizontal analysis. Balance sheets show what a company owns and what it owes at a fixed point in time. Universal motor company had a net profit ratio of 5929/176558 or 0.03 while global automobiles had a ratio of 750/177260 or 0.004. This indicates that the company is way too dependent on the external lenders thus leading to a great financial risk for the firm. Comparative Financial Statements, as the word suggests, are the statements that show the financial numbers of more than one year (consecutive periods) of an entity. Financial comparison between two companies or inter firm financial comparison is a method of analyzing the financial status of a business comparing it based on a number of criteria with another similar firm. Moreover, such a type of presentation allows the reader to compare the financial performance of the company with previous years. Daniel, L. (1997). Comparative financial statements are quite useful for the following reasons: Provides a comparison of an entity's financial performance over multiple periods, so that you can determine trends. Comparative Balance Sheet of M/s Kapoor and Co. as on December 31, 2017, and December 31, 2018. You can find a skilled professional who can write any paper for you. so in this matter they have theur own way to solve their problems. The secondary data is available through the companys main home website where the annual financial reports of the company are available of 2006-2010 financial years for Nike Inc. For Adidas the analysis is done only by using the data from the financial years 2006 2009 as the annual report for the year 2010 is not published by the home website of the company yet. The GP M ratio is expressed as percentage with the help of the formula. So, one of the tools commonly used to undertake financial statement analysis is creating comparative financial statements. The two companies we study are: Reed Elsevier and Thomson, in the filed of information and publishing. Thus, a comparative balance sheet not only gives a picture of the assets and liabilities in differentaccountingperiods. What To Study While Analyzing A Comparative Income Statement? Comparing Sales With Cost of Goods Sold, Steps To Prepare A Comparative Income Statement. Sales Revenue of Nike Inc $18627.0, Year 2009. ales Revenue of Nike Inc $19167.1, Year 2010. 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. Sales Revenue of Adidas $13884.4, Graph of the GPM of Adidas from 2006-2009, Year 2006. Furthermore, there is a provision attached to comparing the financial data showcased by such statements. One such ratio is the current ratio which is the ratio between the current assets and current liabilities i.e. This represents a 50% increase in total assets from last year to this year. Students also viewed financial reporting - comparison of two companies The report will provide a detailed analysis and summary of several things including financial analysis, industry history and analysis, both companies history . This technique determines the profitability and financial position of a business by comparing financial statements for two or more time periods. The comparison has been done through vertical, horizontal and ratio analysis. https://shoesobsessions.files.wordpress.com/2008/08/ad-2-copia.jpg NIKE INC, Profit would be the main aim for many businesses and can help act as one of the methods to measure of the firms financial success and performance. Any information contained within this essay is intended for educational purposes only. By continuing, you agree to our Terms and Conditions. But that is not the case as sales value did not change to a greater extent. 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. The analysis has been done using secondary data. The statements may also reveal unusual spikes in the reported information that can indicate the presence of accounting errors. 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. Sales Revenue of Nike Inc $14,954.9, Year 2007. The Financial Comparisons between Two Companies Finance Essay. Statement of Income - Two-Year Comparison Sales Cost of Sales Gross Profit Operating Expenses Operating Profit Other Income Other Expenses Earnings Before Interest and Taxes Interest Expense The company should to take advantage of the fact that it seems to be more efficient as compared to global automobiles limited to improve on its sales and consequently its profitability. The NPM is generally high for high volume products. You can see that the company's total assets increased by $300,000. But for debts equity ratio, the first company is lower than the second company because the second company has a light debts burden with smaller amount of debts and bearing low interest. our extensive database of written samples to find the inspiration or research youre looking Leopold, B. Despite being small in size, global automobiles has been able to make higher revenue than universal motors limited. 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. Global automobiles limited seem to have a higher cost of goods sold than universal motors company. You can receive the notifications now. They typically include four main types of statements: the balance sheet, the income statement, the statement of cash flows, and the statement of shareholders' equity. Ratio analysis can be used by not only the management to know its status, but as it projects a trend, it can be used by prospective investors, government agencies etc. Income Statement. The main aim of my commentary is to investigate the financial performance of Adidas and Nike Inc which are two rival companies. 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. This percentage change in assets and liabilities is mentioned in Column V of the comparative balance sheet. ALowAprofit marginAratios can also suggest the business is unable to control production costs, or that a low amount of earnings are generated from revenues. 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. Consumer credit market is markets that deals with loans and autos and appliances, as well as loans for education and vacations and provide good services. Matter they have theur own way to solve their problems any information contained within essay! 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