MS6014 Understanding the Numbers for Better Decisions

Shantel C. Chaney

MS6014 

Dr.Borg

Understanding the Numbers for Better Decisions

Profit maximization is the goal when starting a business. Profit maximization is spearheaded by the shareholders of a company. Financial management is profit maximizations main objective. Profit maximization aims to minizine profit loss. Profit maximization is a company’s blue print for its success/failure rate.

Apple is the company that I have selected for my financial ratio/ trend analysis. “Financial ratios can provide small business owners and managers with a valuable tool with which to measure their progress against predetermined internal goals, a certain competitor, or the overall industry”. (“Financial Ratios,”n.d.)
Liquidity–Cash in hand.

The current ratio should 1.0 for the short-term obligations to be met. For the last 3 years (2015,2016,2017). Both Apple and Samsung met their short-term goals for (2015,2016,2017). However, Samsung’s current ratios rate were a little higher which meant they were able to meet their short-term goal as opposed to Apple.

Apple Current Ratio

Current Ratio = Current Assets / Current Liabilities

                        = 128,645,000/100,814,000 (2017)

=1.28:1

Current Ratio = Current Assets / Current Liabilities

=321,686,000/79,006,000 (2016)

=4.07:1

Current Ratio = Current Assets / Current Liabilities

=$290,345,000/$80,610,000 (2015)

=3.60:1

Samsung Current Ratio

Current Ratio = Current Assets / Current Liabilities

                        = $136,283,800,000/$16,492,200,000 (2017)

=8.26:1

Current Ratio = Current Assets / Current Liabilities

= 262,174,324,000/ 54,704,095,000(2016)

=4.79:1

Current Ratio = Current Assets / Current Liabilities

= 242,179,521,000/ 50,502,909,000 (2015)

=4.80:1

Asset Turnover Ratio–Gives a breakdown on how a company intends to use their assets in the future.

Apples Turnover Ratio

Account Collection Period=Accounts Receivable/Annual credit salesx365

=35,673,000/60%=5,945,500/365 (2017)

=5,945,500×365=2.17:1

Account Collection Period=Accounts Receivable/Annual credit salesx365

=29,299,000/60%=48,831,666.7/365(2016)

=48,831,666.7×365=1.79:1

Account Collection Period=Accounts Receivable/Annual credit salesx365

=30,343,000/60%=50,571,666.7 /365(2015)

=50,571,666.7 x365=184:1

Samsung Turnover Ratio

Account Collection Period=Accounts Receivable/Annual credit salesx365

= 27,696,000,000/60%=46,160,000x365 (2017)

=46,160,000x365=1.68

Account Collection Period=Accounts Receivable/Annual credit salesx365

= 27,800,408,000/60%=162,480,245x365(2016)

=162,480,245x365=5.93

Account Collection Period=Accounts Receivable/Annual credit salesx36

= 28,520,689,000/60%=47,534,481.7x365(2015)

=47,534,481.7x365=1.73

For the past 3 years Apple has been more financially healthy than Samsung. In my findings I found that Apple was more financially healthy to buy and trade stocks.

Profitable Ratio-Is a barometer used to show how a company setup their earnings up vs their expenses.

Apple ROA

ROA = Net Income / Total Assets

=48,351,000/375,319,000 (2017)

=0.13

ROA = Net Income / Total Assets

=45,687,000/321,686,000 (2016)

=0.14

ROA = Net Income / Total Assets

=53,394,000/290,345,000 (2015)

=0.18

Samsung ROA

ROA = Net Income / Total Assets

=42,190,000,000/301,752,100,000 (2017)

=0.140

ROA = Net Income / Total Assets

=22,415,655,000/262,174,324,000 (2016)

=0.085

ROA = Net Income / Total Assets

=18,694,628,000/242,179,521,000 (2015)

=0.077

Apple was not as aggressive as Samsung when it comes to ROA. Because Apples Roa is lower than Samsung it would be safe to say that Apple was more financially fit for years (2015,2016,2017)

Financial Leverage Ratio– measure how a company is using their long-term debt.

Apple Debt Ratio

Debt ratio= total liability/total assets

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