Comparison and Contrasting Financial Ratios
Please submit a 3 page word document in APA format with references comparing and contrasting the company ratios (See table 1.1) to one another and the industry. Make a determination of which company is in a better financial situation as part of your conclusion. Also discuss how each company compares to the industry averages.
See Financial Accounting Week 8 Written Assignment Attachment
I have completed the requested ratios (see table 1.1 in attachment). In addition, I have attached the appendices from which the numbers for the ratios have been obtained from. I am having trouble understanding what company is doing better than the other and how all of this relates Industry Average. From what I can gather, it appears that Urban Outfitters is doing better than American Eagle and the Industry Average. However, I am at a lost for how to word this possible discovery into three pages. I need a great deal of help to answer the questions asked above. The help is greatly appreciated.
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Attachments
- Financial Accounting Week 8 Written Assignment.docx
- Appendix_B.pdf
- Appendix_C.pdf
- Appendix D Industry Ratio Report.docx
Solution Summary
This attachment contains the purpose and methodology used in conjuction with the financial ratios of two companies.
Discuss how the account practices identified in exhibit below would affect your comparison for each of the six ratios in the list
Response is 685 words.
(question file attached for better format)
Question 1
Listed below are certain financial ratios used by analysts
Liquidity: current ratio: cash flow rom operations to current liabilities
Solvency: debt to equity; debt to assets
Profitability: return on assets: return on equity
Required assume that you are comparing the financial ratios of companies from two countries discussed in this chapter. Discuss how the account practices identified in exhibit below would affect your comparison for each of the six ratios in the list
France Germany Japan nertherlands UK US
Business combinations purchase or pooling purchase Purchase1 Purchase1 Purchase1 Purchase1 purchase
Good will Capitalize amortize Capitalize & amortize Capitalize2 & amortize Capitalize & amortize Capitalize & amortize Capitalize & impairment tested
Affiliated companies Equity method Equity method Equity method Equity method Equity method Equity method
Foreign currency translations current rate method temporal method Autonomous subsidiaries integrated subsidiaries Autonomous subsidiaries integrated subsidiaries Not used Autonomous subsidiaries integrated subsidiaries Autonomous subsidiaries integrated subsidiaries Autonomous subsidiaries integrated subsidiaries
Asset valuation Historical cost Historical cost Historical cost Historical cost current cost Historical cost and current cost Historical cost
Depreciation charges
Economic based
Tax based
Tax based
Economic based
Economic based
Economic based
LIFO inventory valuation Not used Not used Not used Not used Not acceptable used
Finance leases Not capitalized Not capitalized capitalized Capitalized Capitalized Capitalized
Deferred taxes accrued Accrued7 Accrued Accrued Accrued Accrued
Reserves for income smoothing Used Used No Some Some no
Question two
Listed below are certain financial ratios used by analysts
Liquidity: current ratio: cash flowf rom operations to current liabilities
Solvency: debt to equity; debt to assets
Profitability: return on assets: return on equity
Required assume that you are comparing the financial ratios of companies from two countries discussed in this chapter. Discuss how the account practices identified in exhibit below would affect your comparison for each of the six ratios in the list
Czeh repub China tawian mexico
Consolidated financial statements Required Required Required required
Statement of cash flows In notes Required Required Required
Business combinations purchase or pooling Purchase Purchase Purchase Both
Good will Immediate write off or capitalize and amortize 15 year maximum Capitalize and amortize 10 year maximum Capitalize and amortize 20 year maximum Capitalize and amortize 20 year maximum
20% to 50% owned affiliates Equity method Equity method Equity method Equity method
Asset valuation Historical cost Historical cost Revaluation allowed Constant purchasing power
Depreciation Economic based Economic based Economic based Economic based
LIFO Valuation Not used Acceptable Acceptable acceptable
Finance leases Not capitalized Capitalized Capitalized Capitalized
Deferred taxes Accrued Optional accrual Capitalized accrual Capitalized accural