Financial Statement Analysis Paper

Current Ratio: Current ratio measures the capability of the company in paying current liability. Higher the current ratio, better the liquidity position of the company. Generally, a current

The current ratio measures a company’s ability to pay short-term and long-term obligations. This number is found by taking a company’s current assets and dividing it by current liabilities. Below are Walmart, Inc.’s and Costco Wholesale Corporation’s current ratio for the 2015 and 2016 fiscal year end. The industry average is also included for comparison.

In this paper I will identify the four basic financial statements, discuss how they are interrelated with each other, and why they are useful to managers, investors, creditors, and employees.

This Income Statement also known as the Earnings Statements or statement of operation, is one of the four Financial Statement used by accountants, business owner’s, and investors. The Income Statement provides a detailed look into how profitable a business has been over a designated period of time.

Firstly, the current ratio is used to determine the short-term to pay its maturing obligation and to have unexpected needs for cash. The current ratio’s formular is, current assets divided by current liabilities. According to Target 10-K Annual Financial Statement report, people

b. Current ratio—current assets divided by current liabilities; describes a company 's ability to pay its short-term obligations.

The company lost money almost every year since its leveraged buyout by Coniston Partners in 1989. The income generated was not sufficient to service the interest expenses of the company which stood at $2.62B in 1996. From Exhibit 1, we can say that interest coverage ratio computed as EBIT / Interest Expense was 1.31 in 1989 and has been decreasing over years and currently stands at 0.59. This raises a question of how the company can meet its interest payments without raising cash or selling assets.

The Net Present Value (NPV) for the difference between the proposed new strategies versus the current strategy of Best Buy is calculated as $3,595,128,932. This calculation is based on the estimated cash flows between 2015 through 2017, utilizing the difference between initial liabilities and new strategy liabilities as the initial investment. These values were calculated in the aforementioned section. In this case, the federal funds rate was utilized as the rate of return (the interest rate in the calculation). The new strategy produced a cost savings in terms of liabilities and additionally lower cash flows. Although

Current ratio is a financial ratio that measures whether or not a firm has resources to pay its debts over the next 12 months. Long term solvency ratio is a useful calculation for assessing the long term financial viability of an organization. The

Another problem connected to the securitization of loans is the fact that the required off-balance sheet transactions increase the difficulty of determining a company’s true leverage. While off-balance sheet transactions are not necessarily a bad thing, they do disguise the true debt of a company in that they make it appear as if the obligation to repay the security investors falls on the SPV rather than the originator (Pala). Furthermore, a movement of assets to an SPV can result in the appearance of a reduction of leverage, which may make a company appear more attractive to investors, or in the case of a bank, allow them to decrease their capital requirements when they have not in fact de-levered and have simply moved items off of their

Current ratio is a liquidity ratio that illustrates the ability of a company to cover short term liability by using short term assets. Based on the financial ratio analysis, current ratio of The Store is 1.26 times while Aeon is 0.67 times. Current ratio of The store is more than 1, it is within the favorable ratio, while current ratio of Aeon is below than 1, it showed that the current liabilities is more than current assets. Based on the ratio, Aeon may have problems to pay its debt. The store has a higher current ratio means the company has a better liquidity. However, in some cases it needs to look into current assets, because current ratio has included inventory, if inventory level is high, the firm will faces the problems of moving inventory from shelf. Sometimes, a high ratio indicates the company at a high risk too.

Assessing WMCHI’s ability to handle maturing debts or loan obligations through their internal financial strength, we notice a strong reliance on borrowed money rather on operating income. Although the margin of safety which provides creditors peace of mind only increased by 11 points in 2008, we can deduce that this improvement will somehow affect the level of shareholder income, i.e., the cash generated from operations might be spent for debt payment.

CURRENT RATIO show a company’s ability to pay its current obligations that is company’s liquidity. The current ratio position is lower for Honda at 0.33 than for Toyota at 1.22 in 2010. Honda has a large portion of receivables in assets both in trade, notes receivables and finance receivables. It has a huge portion of cash as well. This indicates the company has no problem in terms of generating a positive influx of assets. But in terms of liabilities it has a large portion of short term debt which makes almost 1/3rd of total Current liabilities. Also there is a significant portion of Long Term debt. The higher level of liabilities in the denominator reduces the overall ratio.

The current ratio is simply a different way to analyze the same elements contained in calculating working capital. This is calculated by dividing the company’s current assets by its current

Current Ratio is the relationship between a company’s current assets and current liabilities. This form of liquidity ratio also shows if the company can pay its current liabilities. A company’s current ratio can be formulated by dividing the current assets by the current liabilities. In 2016, Starbucks had a ratio of 1.05, which shows that the company has 5% cash and assets that could cover all current liabilities, thus it should not have any problems paying its current liabilities.