Solved by verified expert:I attached 2 excel answers. make sure to include every thing. But I prefer the correct number answer from the excel named (first investment inc analysis) . But the excel label with (First investment for my friend) has more info and CHART not covered on the first one. So I want1- the info design like the word file (attached) . write the answers on word file include the numbers, tables , and charts. you may use some info from the file if needed.2- cover every table on the excel + rewrite the answers.3- I need one word file.4- do not use the same charts, change the color or the design.
first_investment_inc_analysis_of_financial_statements.xlsx
first_investments_for_my_frind_.xlsx
investment.docx
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First Investment Incorporated
Analysis of Financial Statement
All the numbers are in millions of USD except where stated days or times
Balance Sheet Ratios : Stability ( Staying Powr)
Income statements Ratios : Profitability ( Earning Power)
Assets Management Ratios : Overall Efficiency Ratios
Assets Management Ratios : Working Capital Cycle Ratios
Inventory Turnover
Inventory Turn -Days
Account Receivable Turnover
Account Receivable Turn-Days
Account Payable Turnover
Average Payment Period
Debt Capitalization
tated days or times
1994
Current Ratios
Current Assets
Current Liabilites
5,222.6
3,879.5
Quick Ratios
Cash+Accts.Rec.
Current Liabilities
2,908.3
3,879.5
Debt Ratios
Total Liabilities
Total Assets
5,593.6
9,369.6
Operating Margin
Operating Profit
Sales
995
13,413.1
Net profit
Sales
608.1
13,413.1
Sales
Total Assets
13,413.1
9,369.6
Net Profit Tax
Total Assets
1,000.7
9,369.6
Net Profit Before Tax
Net Worth
1,000.7
9,369.6
Net Profit
Total Equity
608.1
3,704.3
Net Margin
Sales-to-Assets
Return on Assets
Return on Investment
Return on Equity
Inventory Turnover
Mat. Sup. Ser. & Other cost
Inventory
6,966.7
2,257
Inventory Turn -Days
360
Inventory Turnover
360
3.087
Account Receivable Turnover
Sales
Account Receviable
13,413.1
2,593.8
Account Receivable Turn-Days
360
Accts.Rec.Turnover
360
5.171
Mat.Sup.Ser.&Other costs
Accounts Payable
6,966.7
696
360
Accts. Pay. Turnover
360
10.01
L ong term Liabilities
Long term Liabilities + Shareholders’ equity
1714.1
1714.1+3704.3
Account Payable Turnover
Average Payment Period
Debt Capitalization
1993
1985
1.3
4,485.4
3,492.4
1.28
2,842.6
1,566.9
1.8
0.7
2,573.9
3,492.4
0.7
1,352.4
1,566.9
0.9
60%
4,901.7
8,324.2
59%
2,152
4,300.6
50%
7%
954.8
11,575.3
8%
645.5
6,213.6
10%
5%
585.1
11,575.3
5%
355.1
6,213.6
6%
143%
11,575.3
8,324.2
139%
6.213.6
4,300.6
144%
11%
1,011.6
8,324.2
12%
690.2
4,300.6
16%
11%
1,011.6
8,324.2
12%
690.2
4,300.6
16%
16%
585.1
3,372.4
17%
355.1
2,107.2
17%
This ratios shows that the cmpany has lost
which reduced to 12% in 1993 and further r
This ratios is pretty stable over the years. H
3.1
5,690.5
1,986.2
2.9
3,063.4
1,136.9
2.7
117
360
2.865
126
360
2.695
134
5.2
11,575.3
2,177.1
5.3
6,213.6
1,062.5
5.8
70
360
5.317
68
360
5.848
62
10
5,690.5
673.5
8
3,063.4
376.2
8
36
360
8.449
43
360
8.143
44
31.63%
1409.3
1409.3+337204
29.47%
585.1
585.1+2107.2
21.73%
This ratios shows that the cmpany has lost its efficiency regarding converting its sales and thus retirn on assets is decresed over the y
This ratios is pretty stable over the years. However is slightly decreased in 1994 as compaed to 1993 and 1985 figure of 17%.
hus retirn on assets is decresed over the yesr. It was 16% in 1985
1994
Return on Assets
Return on Invested Capital
Return on Sharholder’s Equity
Net Income + Intrest ( 1- tax rate )
Total Assets
608 ,1
9369,1
Net income + Intrest (1- tax rate)
Long term liabilities +Shareholder’s Equity
608,1
1714,1+3704,3
Net Income
Shareholder’s Equity
608,1
3704,3
1994
Cash
Market Securities
Current receivables
Inventories
Investments
$314.5
$57.3
$2.257.0
2.257.0
1,004.8
As we can see, at 1993 and 1994 the company’s cash has decreased from $396.
an increasment in current receiables with $32 and their inability to collect mon
The company ‘s boom in investments over these two years in comparion with a
1993
1985
6.49%
585,1
8324,2
7,03%
355,1
4300,0
8,26%
11,22%
585,1
1409,3+3372,4
12,24%
355,1
585,1+2107,2
13.19%
16.42%
585,1
3372,4
17,35%
355,1
2107,2
16,85%
1993
$396.8
$25.3
$2,177.1
1.986.2
869.7
as decreased from $396.8 to $314.5 for many reasons, but the most important reasons is
r inability to collect money.On the other hand, the company has an boom in investment and market securities
ears in comparion with a declineing returenn on investments puts the company in a horiblal and faling position.
First Investment, Inc.: Analysis of Financial Statements
Comparison
1985
Ratios
Price Ratios
Price-to-Earnings
Price-to-Sales
Dividend Payout
Profitability Ratios
Return on Assets
Return on Equity
Profit Margin
Liquidity Ratios
Current Ratio
Quick Ratio
Debt Ratios
Debt-to-Equity
Interest Coverage
Efficiency Ratios
Asset Turnover
Asset/Stockholder’s Equity
1994
Difference
60.91%
0.057
61.03%
47.90%
0.045
47.89%
-13.01%
-0.012
-13.14%
8.26%
16.85%
5.71%
6.49%
16.42%
4.53%
-1.77%
-0.44%
-1.18%
1.81
1.09
1.35
0.76
-0.47
-0.32
1.02
1.96
1.51
2.62
0.49
0.66
1.44
2.04
1.43
2.53
-0.01
0.49
$16,000.00
$14,000.00
$12,000.00
1985
1986
1987
1988
1991
1992
1993
1994
Revenues
Revenue Growth
$
6,213.60
$
7,177.30
15.51%
$
7,741.20
7.86%
$
8,381.60
8.27%
$
9,425.30
12.45%
$
10,239.50
8.64%
$
11,575.30
13.05%
$
13,413.10
15.88%
1985
1986
1987
1988
1991
1992
1993
1994
Gross Profit Margin
28.40%
26.00%
25.34%
25.42%
26.13%
26.66%
26.44%
24.42%
$10,000.00
$8,000.00
$6,000.00
$4,000.00
$2,000.00
Gross Profit Margin
29.00%
28.50%
28.00%
27.50%
27.00%
26.50%
26.00%
25.50%
25.50%
25.00%
24.50%
24.00%
1984
1985
Return on Assets (ROA)
Return on Invested Capital (ROIC)
Return on Shareholder’s Equity (ROE)
Cash
Current Receivables
Marketable Securities
Investments
$
$
$
$
Implied Growth Rate
using a 48% Dividend Payout Rate
Debt/Capitalization
1994
314.50
2,593.80
57.30
1,004.80
1986
1993
7.03%
12.24%
17.35%
8.26%
13.19%
16.85%
Comparisons
1993
396.80 $
2,177.10 $
25.30 $
869.70 $
1985
1987
1988
1994
6.49%
11.22%
16.42%
Difference
$
(82.30)
$ 416.70
$
32.00
$ 135.10
8.54%
31.63%
Asset/Stockholders equity
Capital Asset Intensity
Sales Revenue/PPE
Days’ Receivable (Days)
Earnings per Common Share
Answer questions in case
Give recommendations to improve business
$
85
2.04
93
2.47
94
2.53
5.99
4.90
5.13
62.41
1.97 $
68.65
3.21 $
70.58
3.34
While Basic Industries Company has declined in many areas since 1985, their
growth in assets and equity has allowed them to keep a steady increase to net
income. Since 1992 the company has shown a revenue growth of about 14%
every year. On the downside, the company has since a drastic decline in gross
profit margin in the years 1993 and 1994. Over the tenyear span the company has
gotten better at their debt management, lowering their debt-to-equity ratio by
.49 and their interest coverage by .66
Revenue and Growth (Excluding ’89 & ’90
$16,000.00
18%
$14,000.00
16%
$12,000.00
14%
12%
$10,000.00
10%
$8,000.00
8%
$6,000.00
6%
$4,000.00
4%
$2,000.00
2%
$-
0%
1985
1986
1987
Revenues
1988
1991
1992
1993
1994
Revenue Growth
Gross Profit Margin
Chart Title
Return on Shareholder’s Equity (ROE)
1988
1989
1990
1991
1992
1993
1994
Return on Invested Capital (ROIC)
Average
7.26%
12.22%
16.87%
Return on Assets (ROA)
0.00%2.00%4.00%6.00%8.00%
10.00%
12.00%
1994
1993
1985
While looking at ’93 and ’94 the company’s cash has decreased, possibly due to an
increase in current receivables and their inability to collect money. At the same
time the company has an increase in marketable securities and investments. The
company’s increase in investments over these two years compared with a
declining return on investments puts the company in a declining state.
High ratio shows vulnerability to cyclical fluctuations. If sales drop, the company may not be able to cover the costs
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
not be able to cover the costs of their PPE.
Return on Assets
Reflects how much the firm has earned on the investment of all the financial resou
Return on Shareholder’s Equity Reflects how much the firm has earned on the funds invested by the shareholders
Return on Invested Capital
Represents the funds entrusted to the firm for relatively long periods of time.
t of all the financial resources committed to the firm. The numbers show that the company is becoming less efficient using the
sted by the shareholders. While the ROE has declined from ’93 to ’94, the ROE has stayed fairly consistent when comparing to
coming less efficient using their assets to produce income.
1. Liquidity ratios:
•
Current ratio:
Current Ratio = Current Assets / Current Liabilities
The current ratio for the year 1994 is 1.35, 1993 is 1.28, and 1985 is 1.81. This shows a decline
from 1985 to 1994 and this decline is 0.46. The current ratio measures the company’s ability to
pay its debts, which means the higher the ratio, the better. The company had the best current ratio
in 1985, then it declined in 1993, after that it raised again in 1993. The best year was 1985, then
1994, and the worst was 1993.
•
Quick ratio:
Quick ratio = (Current assets – Inventory) / Current Liabilities
The quick ratio for the year 1994 is 0.76, 1993 is 0.72, and 1985 is 1.09. There is a
decrease of 0.33 from the year 1985 to the year 1994 is a massive loss. However, the quick ratio
in 1994 compared to 1993 is better, and the company can liquidate its assets easily to cover its
liabilities. Nonetheless, when a company has a quick ratio that is less than 1, it means that the
company is unable to fully pay off its liabilities.
Liquidity Chart
1.90
1.81
1.70
1.50
1.30
1.35
1.28
1.10
1.09
0.90
0.70
0.76
0.72
1994
1993
0.50
Current Ratio
1985
Quick ratio
2. Profitability:
Profitability ratios are the ones that concern investors and creditors. They are the ones
that show the companies strength and profitability. Investors want to make sure that the company
makes high profits and have the ability to distribute dividends. And creditors want to make sure
the company can pay off its debts and loans.
•
Net profit margin
Net profit margin = Sales / Net profit
The net profit margin for the year 1994 was 4.5%, 1993 was 5.1%, and 1985 was 5.7%.
The company was in a better profitability position in the year 1985 because it had a higher
income percentage from its sales. Among the ten years, the highest net profit margin is in the
yeas 1985 with a net profit margin of 5.7%. Then comes the year 1992 with a profit margin of
5.2%. And the lowest among them would be the year 1989 with a net profit margin of 3.3%. In
the chart below, we can see that the net profit margin started to decrease from the year 1985 to
1989. Then it started increasing until 1992, after that it dropped till the year 1994.
Net profit Margin
6.0%
5.7%
5.5%
5.1%
5.0%
4.5%
5.2%
5.0%
4.5%
4.7%
4.7%
1987
1986
4.3%
4.0%
3.8%
3.5%
3.3%
3.0%
1994
1993
1992
1991
1990
1989
1988
1985
•
Return on equity:
Return on equity = Net income / Shareholder’s equity.
The return on equity for the year 1994 was 16.4%, 1993 was 17.3, and 1985 was 16.9%.
this profitability ratio calculates how many dollars a company makes through each dollar of
shareholder’s equity. The company had a significant increase from the year 1988 to 1993, then it
decreased in 1994. Investors do not prefer a decrease in this ratio because it shows that the
company has a low profitability compared to the shareholders’ equity.
Return on earnings
20.0%
18.0%
16.0%
16.4%
17.3%
17.2%
16.8%
16.1%
15.9%
1987
1986
16.9%
14.0%
12.9%
12.0%
11.5%
10.0%
8.0%
6.0%
4.0%
2.0%
1.5%
0.0%
1994
1993
1992
1991
1990
1989
1988
1985
3. Working capital ratios:
•
Account receivable to working capital:
Account receivables to working capital = Account receivables / (current assets –
current liabilities)
This ratio measures how the company depends on its working capital to collect its
receivables. The lower the ratio the better in this ratio because it shows the portion of the
receivables is appropriate in the current assets. According to the calculations, the year 1994 has a
ratio of 1.93, 1993 has a ratio of 2.19, and 1985 has a ratio of 0.83. This indicates that the best
years among those is 1985 then comes 1994 and at last 1993.
•
Inventory to working capital:
Inventory to working capital = Inventory / (Current assets – Current liabilities)
This ratio measures how the de dependency of working capital on the inventory. The
lower the ratio the better in this ratio because it shows a reasonable level of working capital and
that current assets have an appropriate portion of inventory. According to the calculations, the
year 1994 has a ratio of 1.68, 1993 has a ratio of 2.00, and 1985 has a ratio of 0.89. This
indicates that the best years among those is 1985 then comes 1994 and at last 1993.
Working capital ratios
2.50
2.19
2.00
2.00
1.93
1.50
1.68
1.00
0.83
0.89
0.50
0.00
1994
1993
Account recievable to working capital
•
1985
inventory to working capital
Assets turnover ratio:
Assets turnover = Sales / Total assets
The assets turnover for the year 1994 was 1.43, 1993 was 1.39, and 1985 was 1.44. All
three years had almost the same assets turnover ratio. Here, the company had the highest ratio on
1994. Which means that the company is operating its assets in a way that generates more
revenue.
Assets turnover
1.55
1.51
1.50
1.48
1.49
1.45
1.44
1.43
1.43
1.41
1.40
1.39
1.38
1.37
1.35
1.30
1.25
1994
•
1993
1992
1991
1990
1989
1988
1987
1986
1985
Equity turnover ratio:
Equity turnover ratio = Sales / Shareholders’ equity
The equity turnover for the year 1994 was 3.62, 1993 was 3.43, and 1985 was 2.95. The
equity turnover has been increasing from the year 1985 to 1988. After that it started to decrease
until the year 1992, then it started increasing again reaching the highest turnover in 1994. The
incensement is a good sign, it means that the company is generating revenues with its
investments.
Equity turnover
4.00
3.50
3.62
3.43
3.32
3.36
3.42
3.48
3.49
3.45
3.37
3.00
2.95
2.50
2.00
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
Conclusion:
According to financial analysis above, the company’s liquidity and profitability in 1985
was better that the years 1994 and 1993. However, the company shows better performance in its
assets turnover and equity turnover in the year 1994 compared to the year 1993.
According to the financial statements the company has experience a low retune on equity
that is because the company had a decrease in its net income. The company has also experienced
high expenses in the year 1994 according in its 10 years financial summary, which decreased the
net income.
…
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