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Financial Ratio Analysis
Financial Ratios AnalysisMaksim YorshBUS 303 M/W/F 11:00 AMSeptember 2, 2015Dr. Katherine E. HyattFinancial Ratios AnalysisIn this assignment, we are supposed to look at three financial ratios of different companies in the same industry, compare those ratios and figure out which company we should invest in based on the conducted analysis.First of all, I would like to define financial ratio. According to NetMBA (2010), financial ratios are mathematical comparisons of financial statement accounts or categories. These relationships between the financial statement accounts help investors, creditors, and internal company management understand how well a business is performing and areas of needing improvement.Financial ratios are the most common and widespread tools used to analyze a business financial standing. Ratios are easy to understand and simple to compute. They can also be used to compare different companies in different industries. Since a ratio is simply a mathematically comparison based on proportions, big and small companies can be use ratios to compare their financial information. In a sense, financial ratios dont take into consideration the size of a company or the industry. Ratios are just a raw computation of financial position and performance.0Ratios allow us to compare companies across industries, big and small, to identify their strengths and weaknesses. Financial ratios are often divided up into six main categories: liquidity, solvency, efficiency, profitability, market prospect, investment leverage, and coverage.        The method for analyzing and comparing the Business Financial Ratios will be the following:Gathering information from various sources on company’s financial data. Building a table for a visual comparison of that data as well as interpreting it.Comparing the major financial ratios of each company Analyzing what those ratios mean in terms of investingChoosing the company with the most favorable ratiosSummarizing and explaining our decisionThe companies I have decided to consider for this analysis are all very close competitors in fast-food industry. The analysis will discuss the financial ratios of McDonalds (MCD), Jack in the Box (JACK) and Dominos’ Pizza (DPZ).
Criteria/CompanyJack in the BOXMcDonaldsDomino’s PizzaExplanation of the ratioMeaning to investorWinnerStock Price per share in $81.7796.25108.70Price of the stock per shareNONEPrice to Earnings Ratio (P/E)31.0019.4433.37Shows how much stock investors are paying for each dollar of earnings.The lower the betterMcDonaldsPrice to Book Ratio(P/BV)9.837.02N/AUsed to compare a company’s market price to its book value.High P/E –stock is overpriced Low P/E may have greater potential for risingMcDonaldsDebt to Equity Ratio196.92116.62N/AShows how much the company is leveraged. How much debt in involved in business The lower the betterMcDonaldsOperating Profit Margin (OPM)12.1828.4117.53Shows operational efficiency and pricing power. Shows portion of revenue left after meeting variable costThe higher the betterMcDonaldsCurrent Ratio0.711.521.61Shows the liquidity position. How well the company is meeting its short-term liabilitiesThe higher the better. <1 is badDomino’s PizzaAsset Turnover Ratio1.150.773.48Shows how efficiently the management is using assets to generate revenueThe higher the ratio the betterDomino’s PizzaReturn on Equity25.9932.97N/AMeasures the return the return that shareholders get from the business and overall earningsThe higher the betterMcDonaldsDividend Yield1.47%  3.53% 1.14%Dividend per share divided by the share priceThe higher the betterMcDonalds Continue for 4 more pages » Read full document Download as (for upgraded members) Citation Generator MLA 7 CHICAGO (2015, 10). Financial Ratio Analysis. EssaysForStudent.com. Retrieved 10, 2015, from "Financial Ratio Analysis" EssaysForStudent.com. 10 2015. 2015. 10 2015 < "Financial Ratio Analysis." EssaysForStudent.com. EssaysForStudent.com, 10 2015. Web. 10 2015. < "Financial Ratio Analysis." EssaysForStudent.com. 10, 2015. Accessed 10, 2015. Essay Preview By: myorsh Submitted: October 4, 2015 Essay Length: 1,008 Words / 5 Pages Paper type: Essay Views: 450 Report this essay Tweet Related Essays Spartech Corporation: A Financial Ratio Analysis Spartech Corporation is a leading producer of extruded thermoplastic sheet and rollstock, polymeric compounds, and custom engineered plastic products. Their annual production capacity amounts to 1,090 Words  |  5 Pages Ibm Financial Ratio Analysis determine a company’s health and direction. These tools are better known as ratio analysis. Ratios are among the more widely used tools of financial analysis 318 Words  |  2 Pages Nike - Financial Ratio Analysis Nike, Inc. Financial Ratio Analysis In assessing the significance of various financial data, experts engage in financial analysis, the process of determining and evaluating financial 2,366 Words  |  10 Pages Financial Ratio Analysis Report of Ford Motor Company Any successful business owner or investor is constantly evaluating the performance of the companies they are involved with, comparing historical figures with its industry competitors, 1,668 Words  |  7 Pages Financial Ratio Analysis Report FINANCIAL RATIO ANALYSIS REPORT The fiscal year 2004 was a relatively soft year for Barnes & Noble, Incorporated (B&N). Blockbuster nonfiction books that came out 1,637 Words  |  7 Pages Similar Topics Boeing Financial Statement Analysis Ratio Analysis Statement Cash Flows Get Access to 89,000+ Essays and Term Papers Join 209,000+ Other Students High Quality Essays and Documents Sign up © 2008–2020 EssaysForStudent.comFree Essays, Book Reports, Term Papers and Research Papers Essays Sign up Sign in Contact us Site Map Privacy Policy Terms of Service Facebook Twitter