Comparing Financial Ratio Analysis Between Two Companies Finance Essay

A financial report or the financial statement is known as an official record of the financial activities of a person, a business, or any other entity. In the British English also including the United Kingdom company rule; a financial statement is frequently mentioned as an account, even though the word “financial statement” is also mostly used, mostly by the accountants. In a business enterprise, all the related financial evidence, presented in a structured method and in a form that is really easy to copy and understand by others, are called the financial declarations. They normally contain four basic financial declarations, escorted by a management analysis and discussion.

Statement of cash flows: reports that shows the cash flow activities of a company, normally its operation, financing and investing activities.

Balance sheet: this is also referred as the statement of financial condition or position, reports that show the company’s assets, ownership equity, and the liabilities at a given period of time.

Statement of retained earnings: this explains the changes in the retained earnings of a company over its reporting period.

Income statement: this is referred to as a Loss and Profit statement, income reports of a company, profits, and expenses over a certain period of time. Loss and Profit account is provided with information on the process of the enterprise. These include the various expenses and the sale that acquired during the dispensation state.

For the large organizations, these statements are often difficult and may include a wide-ranging set of notes to the financial statements and analysis and management discussion. The notes are usually describing each item on the cash flow statement, balance sheet, and income statement in more detail. All notes to financial declarations are considered an integral part of the financial declarations.

Two companies are compared and contrasted. This will show the difference of everything between both these companies. It shows the different income ane different profits earned by these companies. It also shows that even different companies have many things that do not come in common.

FORMULA

TIME ENGINEERING BERHAD

WONG ENGINEERING CORPORATION BERHAD

Liquidity Ratios

Networking Capital=

Current Assets –

Current Liabilities

= 358618 – 113715

= 244903

= 51929026 – 1517900

= 50411126

Current Ratio=

_Current Assets__

Current Liabilities

358618 / 113715 =

3.15

= 51929026 / 1517900

= 34.21

Quick Ratio =

Current Assets – (Inventory+Prepaid Expense)

Current Liabilities

= 358618 – ( 72 + 35220 )

113715

= 358618 – ( 35292 )

113715

= ( 323326 )

113715

= 2.843

= 51929026 –

( 19423010 + 175601 )

1517900

= 51929026 – ( 21179021 )

1517900

= 3721752.23

Assets Utilization Ratios

Accounts Receivable Turnover

( Net Credit Sales +

Average Accounts Receivable)

= 256536 .

[ 64657 + (24970 / 2) ]

= 256536 .

( 64657 + 12485 )

= 256536

77124

= 3.32

N / A

Average Collection Period =

Accounts Receivable

Daily Credit Sales

= 24970 .

( 68643 / 365 )

= 24970

118.06

= 132.7

= 133 days

= 1777208 .

( 11995710 / 365 )

= 1777208

32864.96

= 54.08

= 54 days

Inventory Turnover Ratio =

Cost of Goods Sold

Average Inventory

= 64651 .

( 40964 / 2 )

= 64651

20482

= 3.16

= 63297596 .

( 19423010 / 2 )

= 63297596

9711505

= 6.52

Fixed Assets Turnover =

Net Sales .

Total Fixed Assets

= 999132

2248486

= 0.444

= 2370124 .

147201386

= 0.016

Leverage Ratio

Debt Ratio =

Net Sales .

Total Assets

= 999132

2248486

= 0.444

= 0.444 x 100

= 44.4 %

= 2370124 .

147201386

= 0.016

= 0.016 x 100

= 1.6 %

Equity Ratio =

Total Liabilities .

Stockholders’ Equity

= 1249165

959625

=1.301

= 15446858

129147162

= 0.120

Times Interest Earned Ratio =

Earnings Before interest and Tax

Interest Expense

= 106497

7218

= 17.53

= 18 times

N / A

Profitability Ratios

Gross Profit Margin =

Gross Profit

Net Sales

= 200887

999132

= 0.201

= 0.201 x 100

= 20.1 %

= 6900285

2370124

= 2.911

= 2.911 x 100

= 291.1 %

Return on Total Assets =

Net Income .

Average Total Assets

= 68643 .

( 2248486 / 2 )

= 68643

1124243

= 0.061

= 70197881 .

( 147201386 / 2 )

= 7019881

73600693

= 0.095

Return Common Equity =

Earning Available to Commons Stockholders

Average Stockholder Equity

= 39696

959626

= 0.041

N /A

Market Value Ratios

Earnings per Share =

Net Income-Preferred Dividends .

Total Common Shares Outstanding

= 24970

56490

= 0.442

N /A

Dividend Yield =

Dividend per Share

Market Price per Share

N / A

N / A

Conclusion

Those are the following latest reports of financial reports of two different companies. As what we can see above is that WONG ENGINEERING CORPORATION BERHAD (WECB) has better network and better income compared to TIME ENGINEERING BERHAD (TEB). But both companies are from the same industries. Both of these companies are in the engineering field. They both sell products regarding engineering.

By comparing these companies we can clearly see which company is much more successful and which is not. As you can see that the amounts of WONG ENGINEERING CORPORATION BERHAD is very high compared to TIME ENGINEERING BERHAD, but (WECB) has no income at all. They suffer from loss. Even though (TEB) has low income they do have some profit at the end of the day. This makes it clear that amount is not enough to make a company successful; a company needs skills to do so. Therefore the companies are compared and contrasted.