Acc 561 Financial Statement Analysis

Financial Statement Analysis

Team B

ACC/561

November 08, 2016

Rebecca Carr

Financial Statement Analysis

In business, financial statements are a crucial component to being successful.  Financial statements tell the history of the firm and future fortunes.  "A company's financial statements provide various financial information that investors and creditors use to evaluate a business's financial performance" Way, 2016).  In the following assignment, Learning Team B will conduct a comparison of Ford Motors, Microsoft, JC Penny, Apple and Walt Disney World financials, viewing the profitability ratio, liquidity ratio and the solvency ratio (See Chart Below).  We will also explore which company would offer the best investment and employment opportunities.  [pic 1]

Financial Opportunity

Walt Disney World's solvency ratio is .18, the lowest rate of all five of the companies calculated and therefore, Team B would feel safe to loan them money (See Figure 1-3).  According to "My Accounting Course" (2016), Solvency Ratio measures a company's ability to sustain operations indefinitely by comparing debt levels with equity, assets, and earnings (Solvency Ratio).  Based on Walt Disney’s asset to debt ratio, we concluded that they have an extensive amount of leverage because they don’t have to rely on others to pay their bills, and the company makes enough money to pay all of their bills five times over.  Walt Disney World opened its doors in 1971 and had been a profitable business ever since.  Its profitability ratio is .1% indicating an upward profit (See Figure 1-1).

Investment Opportunity

Given Apple Inc's financial statement from the prior three years, it is clear that Apple is the company that has the highest return on a person's investment dollar.  In 2015 Apple earned $233,715,000 in profits.  In 2014 Apple it was $182,795,000 in profits.  However in 2013 Apple had $170,910,000 in profits.  There is a noticeable upward trend in earnings for at least the last three years.  Net income was $53,000,000 in 2015, up from 39,000,000 in 2014.  Also, of the company compared, namely, JC Penny, Microsoft, Ford and Walt Disney World.  Apple had the highest profitability ratio of all these companies.  Apple's profitability ratio was .18 percent.  Consequently, for every dollar Apple spent in assets, it yields $1800 in net income.  Thus, in spite of the economic vicissitude and ups and downs, Apple has maintained its leadership in the tech sphere.  For this reason, our team has chosen Apple as our company for the purpose of investing $100,000.

Employment Opportunity

If team B could work for any of the companies, we would want to work for Apple. By looking at the financial statements for 2015 you can clearly see that Apple's had the lead in profitability with a ratio of .18 percent, and net income is 53,394 for the same year. Even though they would have to liquidate some assets to pay off some short-term debts, it is our assessment that they would still be profitable in the long run. In the profitability chart below (See Figure 1-1) you can see that Apple leads the way. They have the biggest return on assets. Apple is the best company for converting investments into assets that will lead to profits. Also, with us living in the age of technology, where electronic devices are used in a wide range of areas, from education to business, and of course in our leisure time.  Tablets, computers, cell phone, etc., have dominated our society. Apple develops and designs new top of the line products just about every year. Making it a very marketable and attractive product to the people and giving its employees job security.