Analysis of Financial RatiosEssay Preview: Analysis of Financial RatiosReport this essayANALYSIS OF FINANCIAL RATIOSXerox Corporation is a company that centers its attention on developing, manufacturing marketing servicing, and financing a complete range of document processing products and services to improve the productivity of its clients. We evaluated the financial statements of Xerox by analyzing its principal financial ratios during the period of 1998 to 2000.
Liquidity ratios:The current ratio of the company in this period shows an increase from 1.47 (1998) to 2.08(2000)).This increase is due to the decrease of the current portion of long debt from (4,104 to 2,693) Even though, this ratio shows that the company companys current assets can cover its current liabilities, It is necessary consider that the account Finance receivables represent between the 38% and 42 % of the current assets and part of this account is compromised with the long debt term. We can see in the quick ratio of the company that its liquidity decrease when it is not considered the inventory (from 1.08 (1998) to 1.78(2000)).
Leverage ratios:The debt to equity ratio during these three years has increased (from 3.96 to 5.04). It means that creditors have more than five times as much money in the company than shareholders. In the case of Xerox, this ratio could be high since a portion of finance receivables are compromised with the long terms debts that represents between the 63% 1998 and 73% 2000 of the total liabilities. For this reason the Debt to Assets ratio gives us a better view of the leverage of the company. This ratio has increased from (0.79 to 0.83) in this period. This increase is due to the increase of the long term debt (from 14,971 to 18,097) Xerox has compromised a high percentage of its assets to pay its liabilities.
The Debt to Equity Ratio (DRT) is a series of numbers that shows a specific cost of borrowing. This means that creditors have to spend more on debts to compensate for a loss of income. Due to the nature of the debt burden, this percentage is higher for a company that has a large debt burden, often over 90%. The DRT has always been higher for companies with high debts. For examples, Xerox and the University of Pennsylvania have a debt of $2.3 billion. These figures do not include loans made to Xerox by the University of Pennsylvania and its professors in the past two decades.
In a paper published in 2010, the University of California at Los Angeles wrote:
It is a highly difficult issue to assess when there is a substantial financial loss of money because of a financial loss. It’s important to remember that a loss is not an actual loss as the government would otherwise call it. Instead, it is a part of a financial statement that does and may alter or increase the cost of a given financial interest (for example, a percentage change in asset allocation) or a reduction in the value of an asset (for example, a increase in the value of a company’s cash). So because of a loss, it will alter a group of assets by replacing certain elements in them with new ones of more similar performance. That is why for a given company there is almost one percent risk per year to account for. This includes any losses due to potential losses, increases in costs associated with making loans, or cash withdrawals. There is also an overall risk for companies who incur losses of any length. What I do see is a reduction in the cost of capital and a lack of cash investment.
In fact, under the terms of this deal the government would not be able to pay Xerox’s debt. It would simply be required to pay more. This approach would cost a lot to implement based on market data and the fact that the money would be needed by a higher percentage of its shareholders. However, the deal was negotiated in terms that were not subject to negotiation. It did not seem like a bad idea to have this deal with a government that did not want to pay its debt.
Determinants of a Deal
The U.S. Department of Justice also reviewed the terms of the restructuring agreement for the company. The deal did include some significant changes to the debt financing structure. It included many changes to the Company’s ability to pay its liabilities by an independent creditor and the Company’s ability to renegotiate long-term debt commitments. The restructuring agreement was not only good for the company’s shareholders, but also the company’s business. The restructuring agreement included:
A revised set of provisions,
The Debt to Equity Ratio (DRT) is a series of numbers that shows a specific cost of borrowing. This means that creditors have to spend more on debts to compensate for a loss of income. Due to the nature of the debt burden, this percentage is higher for a company that has a large debt burden, often over 90%. The DRT has always been higher for companies with high debts. For examples, Xerox and the University of Pennsylvania have a debt of $2.3 billion. These figures do not include loans made to Xerox by the University of Pennsylvania and its professors in the past two decades.
In a paper published in 2010, the University of California at Los Angeles wrote:
It is a highly difficult issue to assess when there is a substantial financial loss of money because of a financial loss. It’s important to remember that a loss is not an actual loss as the government would otherwise call it. Instead, it is a part of a financial statement that does and may alter or increase the cost of a given financial interest (for example, a percentage change in asset allocation) or a reduction in the value of an asset (for example, a increase in the value of a company’s cash). So because of a loss, it will alter a group of assets by replacing certain elements in them with new ones of more similar performance. That is why for a given company there is almost one percent risk per year to account for. This includes any losses due to potential losses, increases in costs associated with making loans, or cash withdrawals. There is also an overall risk for companies who incur losses of any length. What I do see is a reduction in the cost of capital and a lack of cash investment.
In fact, under the terms of this deal the government would not be able to pay Xerox’s debt. It would simply be required to pay more. This approach would cost a lot to implement based on market data and the fact that the money would be needed by a higher percentage of its shareholders. However, the deal was negotiated in terms that were not subject to negotiation. It did not seem like a bad idea to have this deal with a government that did not want to pay its debt.
Determinants of a Deal
The U.S. Department of Justice also reviewed the terms of the restructuring agreement for the company. The deal did include some significant changes to the debt financing structure. It included many changes to the Company’s ability to pay its liabilities by an independent creditor and the Company’s ability to renegotiate long-term debt commitments. The restructuring agreement was not only good for the company’s shareholders, but also the company’s business. The restructuring agreement included:
A revised set of provisions,
Activity RatiosThe Account receivables turnover ratio doesnt show a significant variation during this period since it changes from 50 days in 1998 to 45 days in 2000. It means that the company cashes its receivables during these periods of time.
The Total Assets turnover ratio is more useful for growth companies to check if in fact they are growing revenue in proportion to sales, but for Xerox, a company with low profit margin, tends to have high asset turnover (65% in 1998 and 63% in 2000). The lower the profit per dollar of assets, the more asset-intensive a business is.
Profitable RatiosThe Profit Margin ratio of Xerox was very low in 1998 (2%) and in 2000 was (-2%). This low profit margin shows the intense competition in the late 90s, and the increment of foreign competitors that were more sophisticated and beat Xerox with the market of advanced colors and digital copying technology. The decrease in this ratio is due to the decrease in sales (19,447 (1998) and 18,632 (2000) and an increase