Over that past few Modules, you have analyzed the financial ratios/data for two different organizations, Microsoft and Apple. For the final paper, you will prepare a formal report that compares and co
Builder -2 (writing analysis) Debt to Asset Ratio Introduction- the debt to asset ration means that how much debt a company hold against their assets. We can say also defined that a total debt to total assets is allocation in the company. It is a financial ratio number which present the company debt liabilities against to their total asset values. We can also define as below as well- The debt ratio measures the amount of leverage used by a company in terms of total debt to total assets. A debt ratio greater than 1.0 (100%) tells you that a company has more debt than assets. Meanwhile, a debt ratio less than 100% indicates that a company has more assets than debt. We can also calculate the debt to asset based on the below formula Debt ratio=Total debt/Total assets While considering the debt to asset ration for apple and Microsoft as below which is less then 1.0 % and it means that company has more assets than debt . Conclusion- the conclusion is that if a company has less than 1.0 debt ratio means company is not having much debt on total organization and if a company has more then 1.0 (100%) means that company has debt value more than total company asset values which indicate that company has less chance of increasing the values/profitability because the company has to clear the dues partially combine with their growth values. The investor has to focus also the company has how big debt ratio while trying to invest or checking the company balance sheet .
Over that past few Modules, you have analyzed the financial ratios/data for two different organizations, Microsoft and Apple. For the final paper, you will prepare a formal report that compares and co
Builder – 5 Working Capital: Working capital is the difference between a company’s current assets, such as cash, accounts receivable (customers’ unpaid bills) and inventories of raw materials and finished goods, and its current liabilities, such as accounts payable. Sometimes it is also known as a net working capital (NWC). It is a measure of a company’s liquidity and refers to the difference between operating current assets and operating current liabilities. also, in other hands if I say that pointwise – A company has negative working capital If the ratio of current assets to liabilities is less than one. Positive working capital indicates that a company can fund its current operations and invest in future activities and growth. High working capital isn’t always a good thing. It might indicate that the business has too much inventory or is not investing its excess cash We can calculate the working capital by following the below formula- Working capital = Current Assets – Current Liabilities An example based on the builder template for both the companies Example based on the Microsoft balance sheet- Example based on the Apple balance sheet from the Builder assignment template- Conclusion: as per the stats from the apple and Microsoft , the apple is better than Microsoft because it working capital is low to Microsoft and it means that Microsoft WC has too much inventory . Current Ratio: The current ratio is a measure the capability of a business to meet its short-term obligations that are due within a year. The ratio considers the weight of total current assets versus total current liabilities. It indicates the financial health of a company and how it can maximize the liquidity of its current assets to settle debt and payables. It is also known as the working capital ratio. We can calculate the current ratio based on the below formula- Current Ratio = Current Assets / Current Liabilities And I can consider the example by following the builder template sheet for the two companies as below – Example based on the Microsoft balance sheet- Example based on the Apple data from the Builder assignment template- Conclusion: as per the data available for both the companies , it clearly shows that business currently has a current ratio of 2.52, meaning it can easily settle each dollar on loan or accounts payable twice and half. A rate of more than 1 suggests financial well-being for the company. There is no upper end on what is “too much,” as it can be very dependent on the industry, however, a very high current ratio may indicate that a company is leaving excess cash unused rather than investing in growing its business. The apple is better then Microsoft in current ratio. Quick Ratio : Quick assets are those assets that can be converted into cash within a short period of time. The term is also used to refer to assets that are already in cash form. Quick assets are therefore considered to be the most highly liquid assets held by a company. We can calculate the current ratio based on the below formula- Quick Assets = Current Assets – Inventories Now, considering the analysis template from builder sheet for the two companies as below- analysis based on the Microsoft balance sheet- Example based on the Apple data from the Builder assignment template- Conclusion- A high quick ratio is an indication that a company is utilizing its short-term assets effectively to meet its financial needs. As seen in the examples above for the apple and Microsoft where the quick ratio of Microsoft is greater than apple, so it means it has enough quick assets to cover all its current liabilities Companies should aim for a high quick ratio because it can help attract investors. It also increases the company’s chance of getting loans, as it shows creditors that it is able to handle its debt obligations.
Over that past few Modules, you have analyzed the financial ratios/data for two different organizations, Microsoft and Apple. For the final paper, you will prepare a formal report that compares and co
Builder-4 Free Cash Flow: Free cash flow as known as FCF, represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the non-cash expenses of the income statement and includes spending on equipment and assets as well as changes in working capital from the balance sheet. If I explain in other hands then it would like below explanations- Free cash flow (FCF) represents the cash available for the company to repay creditors or pay dividends and interest to investors. FCF reconciles net income by adjusting for non-cash expenses, changes in working capital, and capital expenditures (CAPEX). However, as a supplemental tool for analysis, FCF can reveal problems in the fundamentals before they arise on the income statement. We can use the below calculation to find the FCF – FCF = Cash from Operations – CapEx Cash Conversion Cycle: The Cash Conversion Cycle (CCC) is a metric that shows the amount of time it takes a company to convert its investments in inventory to cash. The conversion cycle formula measures the amount of time, in days, it takes for a company to turn its resource inputs into cash. We can also know as CCC sometimes to present in the short forms, herewith is the formula explain to calculate the CCC The cash conversion cycle formula is as follows: Cash Conversion Cycle = DIO + DSO – DPO DIO stands for Days Inventory Outstanding DSO stands for Days Sales Outstanding DPO stands for Days Payable Outstanding Now , we will compare the two top companies of data analysis and conclude that which company has good CCC. I will show first the example of Microsoft as below Example of Microsoft data Now let’s take a look of data from the apple builder sheet – Example of Apple data as per analysis and data provided we have DIO,DSO,DPO but in the real to calculate we have to first find out the values of all these and we should know each factor to find the ccc Conclusion- The cash conversion cycle formula is aimed at assessing how efficiently a company is managing its working capital. As with other cash flow calculations, the shorter the cash conversion cycle, the better the company is at selling inventories and recovering cash from these sales while paying suppliers. In this scenario, Microsoft is better then apple which is taking less time approximately -27 days to turn its initial cash investment in inventory back into cash while apple take -213 days.
Over that past few Modules, you have analyzed the financial ratios/data for two different organizations, Microsoft and Apple. For the final paper, you will prepare a formal report that compares and co
Builder – 3 Accounts Receivable Turnover: it is ratio to measure of financial values that how effectively company is collecting the revenues and how efficiently it is using its assets. Sometimes it is known as debtor’s turnover ratio. In this ration, the accounts receivable turnover ration measures the number of times over a given period that a company collects its average accounts receivable. we can calculate it by using the below formula – Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable Example based on the Microsoft balance sheet- Example based on the Apple balance sheet from the Builder assignment template- Conclusion- as we can see that both the companies have a different ratio where the Microsoft is good compare to the apple in account receivable ratio measurement. Days’ Sales in Receivables: Days sales receivables is a measure of the average number of days that it takes a company to collect payment for a sale. It is often determined on a monthly, quarterly, or annual basis it’s depend upon the company payment terms and conditions and their rules. In other hands it is also known as a Day sales outstanding (DSO) Generally speaking, higher DSO ratio can indicate a customer base with credit problems and/or a company that is deficient in its collection’s activity. A low ratio may indicate the firm’s credit policy is too rigorous, which may be hampering sales. In other hands, if I explain it then A high DSO number shows that a company is selling its product to customers on credit and waiting a long time to collect the money. This can lead to cash flow problems. We can calculate the day sales outstanding based on the below formula- DSO ratio = accounts receivable / average sales per day, or DSO ratio = accounts receivable / (annual sales / 365 days) Example based on the Microsoft balance sheet- Example based on the Apple balance sheet from the Builder assignment template- Conclusion- As we can see with both companies’ statics and number where apple has a little bad score compare to the Microsoft which conclude that apple is selling its product majorly on credit basis. Accounts Payable Turnover: The accounts payable turnover ratio is a short-term liquidity measure used to quantify the rate at which a company pays off its suppliers. Accounts payable turnover shows how many times a company pays off its accounts payable during a period. It is also known as AP (account payable) in short terms. A high accounts payable ratio signals that a company is paying its creditors and suppliers quickly, while a low ratio suggests the business is slower in paying its bills. This is a critical metric to track because if a company’s accounts payable turnover ratio declines from one accounting period to another, it could signal trouble and result in lower lines of credit. We can calculate the Accounts payable based on the below formula- AP ration=Net credit purchases/Average Accounts payable Example based on the Microsoft balance sheet- Example based on the Apple balance sheet from the Builder assignment template- Conclusion- as per both companies balance sheet and their AP ratio which stats that Microsoft takes much time compare to apple to clear the dues for their creditors in terms of payment or cash flows. Payable Turnover in Days: The accounts payable turnover ratio, also known as the payable’s turnover or the creditor’s turnover ratio, is a liquidity ratio that measures the average number of times a company pays its creditors over an accounting period. The ratio is a measure of short-term liquidity, with a higher payable turnover ratio being more favorable. we can calculate the accounts payable turnover in days, simply divide 365 days by the payable turnover ratio by below formula- Payable Turnover in Days = 365 / Payable Turnover Ratio Example based on the Microsoft balance sheet- Example based on the Apple balance sheet from the Builder assignment template- Conclusion- while compared to both the companies from the builder examples, it shows that apple takes a much time rather than Microsoft to pay the suppliers payments. Inventory Turnover: Inventory turnover is a financial ratio showing how many times a company has sold and replaced inventory during a given period. A company can then divide the days in the period by the inventory turnover formula to calculate the days it takes to sell the inventory on hand. Calculating inventory turnover helps businesses make better pricing, manufacturing, marketing, and purchasing decisions. We can calculate the Inventory turnover based on this below formula- ​Inventory Turnover=COGS/Average Value of Inventory Example based on the Microsoft balance sheet- Example based on the Apple balance sheet from the Builder assignment template- Conclusion- based on the inventory turnover from above calculations for Microsoft and the apple companies it shows that Microsoft has better scores to apple to clean or selling up the inventory over the annual performance. Days’ Sales in Inventory: Days Sales in Inventory (DSI), sometimes known as inventory days or days in inventory, is a measurement of the average number of days or time required for a business to convert its inventory into sales. In addition, goods that are considered a “work in progress” (WIP) are included in the inventory for calculation purposes The days sales of inventory (DSI) is a financial ratio that indicates the average time in days that a company takes to turn its inventory, including goods that are a work in progress, into sales. We can calculate the Inventory turnover based on this below formula- Formula: DSI = (Inventory / Cost of Sales) x (No. of Days in the Period) so before calculating the DSI, we have to find the inventory details turnover or inventory details by following the upper formula, here I am taking example from the builder sheet which shows the stats for the two different companies – Example based on the Microsoft balance sheet- Another example for the apple company as below- Apple example form builder sheet template- Conclusion: if we see the stats for both organizations, the number shows that Microsoft is better then apple to sales of Inventory (DSI) in whole year performance.