Each student will select a company with a significant amount of publicly available information. This could be either a corporation or a non-profit - choose a business that you are keenly interested in! In each chapter you will need to find one topic/tool and apply it to this company. For example you could use their Income statement and Balance Sheet to calculate the major accounting ratios. You do not need to use all the ideas in a chapter - just one. For some topics and the chosen company it may not be possible to obtain the necessary information as it is proprietary. In this case you can come up with a hypothetical example using a hybrid of public and fictitious information. The company portfolio will be posted on Discovery and built up during the course.© BrainMass Inc. brainmass.com March 22, 2019, 3:22 am ad1c9bdddf
The company in question is the Ryder System, located within the industries noted as transportation, as well as equipment leasing. The analysis was intended to provide an over view of the firm in terms of the strengths and weaknesses, and come to some conclusion relating to the investment worthiness of the firm. Based upon the financial principle of maximizing shareholder wealth, it was determined that this firm would not provide the return on investment that most investors would seek - pays little more than can be earned on bonds and/or savings accounts. The analysis and discussion was intended to provide some insight into the nature of the the firm, as well as into their prospects for the future.
Before beginning the discussion of Ryder System, please note the attachments at the end consisting of Balance Sheet with horizontal analysis, Income Statement with vertical analysis, cash flow statement, annual financial data, stock price as of market close on Friday, October 9, industry averages, and industry ratios. It is important to note that all of the ratios provided have the formula attached so that you will have this information available if needed. The horizontal analysis basically consisted of two years based upon the data provided, and the vertical analysis consisted of 4 years - from 2010 to 2014.
Horizontal analysis is a form of analyzing the performance of a firm over a period of time. Essentially it consists of information gathered which reflects upon performance from one period to the next period - in this case covering 2014 and the first half of 2015. Vertical analysis consists of analyzing line items in order to determine their performance based as a percent of sales, with Sales being the 100% or base figure from which all other items are calculated. The theory is that all performance related items have as their base the need for sales growth in order to substantiate a sustainable business model. This type of analysis can also be used for forecasting purposes in order to project future performance and business requirements.
So let's review the performance of Ryder based on the following information:
Balance Sheet - horizontal analysis.
There are 5 categories of ratios provided for review:
* Current ratio which clearly reflects that Ryder is unable to meet its current obligations through the value of its current assets. Normally a firm is considered liquid or solvent if it can pay its current debts through liquidation of current assets. Ryder fails this test, reflecting a current ratio of .745, meaning that it has 75 cents in assets versus each dollar of current liabilities, or 75% ability to pay its current debts in cash. So it needs cash infusions in order to meet its current obligations. The quick ratio represents the same information, less inventory included within the formula --- this results in a greater disparity in ability to pay current obligations. A 1:1 ratio of current assets to current liabilities allows the firm to meet its current obligations - the industry average is a bit over this, so Ryder is short of the minimum by 25% in this area.
* Activity ratios measured by accounts receivable and inventory turnover. Accounts Receivables are collected, on average every 45 days, which does not allow Ryder to maintain enough cash for meeting current obligations. It desperately needs to improve this to 30 days, representing a 50% improvement and enhancing its ability to have more cash on hand.
Inventory turnover is reflected at approximately every 4 days, meaning that the trucks are in use every 4 days on average. There are no industry figures to compare this to, but from a sales standpoint, it reflects in modest growth in revenue of about 3-4%. In both trucking and leasing, it reflects the need to increase the use of the ...
This provides a discussion and analysis of the Ryder System from a financial management perspective, with recommendations and observations regarding investment options.