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Accounting and Managerial Finance

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Accounting and Managerial Finance

 

Question 1

Introduction

This part of the report consists of the different kind of ratios that are used to analyse the financial statement of two companies and as well as the reasons for the change of the same during the entry of Donald Trump as the president of the United States and the effect of Brexit. The companies that are chosen for the analysis of the project are Apple Inc. from the United States and TESCO from the United Kingdom. These two companies will give a clear idea about the problems and solutions of the respected areas.

Apple Inc. is a company that deals with mobile phones, laptops and computer and as well as mobile accessories. This company also produces and develops software for the mobiles, laptops and computers. Their headquarters is situated in the United States of America. This company has evolved and developed very well over the last few years. They are developing a new hardware and as well as a software every year. This is a very good process for the company to dominate the world in the field of mobiles and laptops. They run worldwide in every countries. This is a very good success for the company. The CEO of the company is Tim Cook. He is a very responsible person and is doing a very good job in transforming the company.

TESCO Plc. is a company from the United Kingdom. This company acts as a retailer for different kinds of daily goods. TESCO produces and as well as sells different kinds of daily products. The headquarters is located in the United Kingdom. They operate throughout the world and is a multinational company. This company will state about the effects of the Brexit in United Kingdom.

With the help of these two companies the report will be formed so as to make the two effects very clear for the people to understand clearly about the effects.

Key Financial Ratios

Key Ratios

Formulae

2015-09

2016-09

2017-09

Gross Margin %

Gross profit/ Revenue

40.1

39.1

38.5

Operating Margin %

Operating profit/ Revenue

30.5

27.8

26.8

Earnings Per Share USD

(Net Income- Preferred Dividend)/ Number of common shares outstanding

9.22

8.31

9.21

Dividends USD

 

1.98

2.18

2.4

Payout Ratio %

Dividend/ Net Income

22.3

24.8

26.5

Profitability

 

2015-09

2016-09

2017-09

Tax Rate %

 

26.37

25.56

24.56

Net Margin %

Net profit/ Revenue

22.85

21.19

21.09

Return on Assets %

Net Income/ Average total assets

20.45

14.93

13.87

Return on Equity %

Net Income/ Shareholders Equity

46.25

36.9

36.87

Liquidity/Financial Health

 

2015-09

2016-09

2017-09

Current Ratio

Current Assets/ Current Liabilities

1.11

1.35

1.28

Quick Ratio

(Current Assets -inventories)/ Current Liabilities

0.89

1.22

1.09

Financial Leverage

Total Debt/ Shareholders Equity

2.43

2.51

2.8

Debt/Equity

Total Liabilities/ Shareholders Equity

0.45

0.59

0.73

 

Table 1: Key ratios of Apple Inc.

KEY RATIOS

Formulae

2015-02

2016-02

2017-02

Gross Margin %

Gross profit/ Revenue

-3.4

5.2

5.2

Operating Margin %

Operating profit/ Revenue

-7.7

1.8

2.1

Liquidity/Financial Health

 

2015-02

2016-02

2017-02

Current Ratio

Current Assets/ Current Liabilities

0.6

0.75

0.79

Quick Ratio

(Current Assets -inventories)/ Current Liabilities

0.42

0.59

0.64

Financial Leverage

Total Debt/ Shareholders Equity

6.25

5.09

7.12

Debt/Equity

Total Liabilities/ Shareholders Equity

1.51

1.24

1.47

Efficiency

 

2015-02

2016-02

2017-02

Receivables Turnover

   

219.49

56.74

Inventory Turnover

 

19.71

19.15

22.41

Fixed Assets Turnover

 

2.77

2.84

3.11

Asset Turnover

 

1.32

1.24

1.24

 

Table 2: Key ratios of TESCO Plc.

From the above two tables, it can be seen that here are different changes in the ratios. The first table indicates the ratios of Apple Inc. which is located in the United Kingdom. This company had an effect of the new president of America Donald Trump. This is because after his arrival as the new president he had made some huge changes in the rules and regulations of the country, which lead to the change in the workings of the organisation (Sekot, 2017). There were many restrict



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