How do earnings trends compare in terms

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Reference no: EM133793117

Section: Research Report Based on Financial Analysis

Insight concerning the performance and financial condition of a company often comes from evaluating its financial data compared to other firms in the same industry. Assume that you are an analyst who is writing a research report on firms for general investors. Prepare a typed report based on your analyses of the following.

Required:
Obtain the most recent annual reports from three corporations in the same primary industry (e.g., healthcare, technology, real estate) and respond to the following questions:

How do earnings (net income and income from operations) trends compare in terms of both the direction (increase/decrease) and stability of income?
Which corporation has higher income from operations?
Describe why it may be important to consider income from operations in addition to net income.
(Hint: You can create the trends using three most recent years of income information. All this information should be available in the same most recent year of annual report. This is because GAAP requires companies to provide income statement information for the past two years along with the most recent year for comparison purposes)
Compare the three firms in terms of their current ratio. (Hint: Current ratio is calculated as current assets ÷ current liabilities. Read through the appendix 4B, summary of financial ratios, of chapter 4). Which of the three firms had the greatest liquidity (i.e. highest current ratio)?
Compare the three firms in terms of their accounts receivable turnover. (Hint: accounts receivable turnover is calculated as net sales÷ average net accounts receivable. Read through the appendix 4B, summary of financial ratios, of chapter 4). Which firm has the best liquidity of receivables?
Compare the three firms in terms of their asset turnover. (Hint: asset turnover is calculated as net sales÷ average total assets. Read through the appendix 4B, summary of financial ratios, of chapter 4). Which firm has the best utilization of resources?
Compare the three firms in terms of their return on assets (ROA). (Hint: ROA is calculated as Net income or Income from continuing operations÷ average total assets. Read through the appendix 4B, summary of financial ratios, of chapter 4). Which of the three firms had the greatest earnings relative to resources available (i.e. highest ROA)?
Which one(s) of the three firms would you recommend investing in based on the above analysis?

Reference no: EM133793117

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