Aspirant Group Analysis

Quick ratio Cash ratio

Capital intensity ratio Total asset turnover Equity multiplier Long-term debt ratio g. Times interest earned ratio h. Profit margin i. Return on assets j. Return on equity k. Price-earnings ratio

Standardized Financial Statements What types of information do common-size financial statements reveal about the firm? What is the best use for these common-size statements? What purpose do common-base year statements have? When would you use them?

Peer Group Analysis Explain what peer group analysis means. As a financial manager, how could you use the results of peer group analysis to evaluate the performance of your firm? How is a peer group different from an aspirant group? Du Pont Identity Why is the Du Pont identity a valuable tool for analyzing the performance of a firm? Discuss the types of information it reveals as compared to ROE considered by itself.

Industry-Specific Ratios Specialized ratios are sometimes used in specific industries. For example, the so-called book-to-bill ratio is closely watched for semiconductor manufacturers. A ratio of .93 indicates that for every $100 worth of chips shipped over some period, only $93 worth of new orders were received. In January 2001, the North American semiconductor equipment industry's book-to-bill ratio declined to .81, compared to .99 during the month of December. The ratio fell for six consecutive months and was down from 1.23 in August 2000. The three-month average of worldwide bookings in January 2001 was down 21 percent from the December 2000 level, while the three-month average of worldwide shipments was down 2 percent from the December 2000 level. What is this ratio intended to measure? Why do you think it is so closely followed? Industry-Specific Ratios So-called "same-store sales" are a very important measure for companies as diverse as McDonald's and Sears. As the name suggests, examining same-store sales means comparing revenues from the same stores or restaurants at two different points in time. Why might companies focus on same-store sales rather than total sales?

Industry-Specific Ratios There are many ways of using standardized financial information beyond those discussed in this chapter. The usual goal is to put firms on an equal footing for comparison purposes. For example, for auto manufacturers, it is common to express sales, costs, and profits on a per-car basis. For each of the following industries, give an example of an actual company and discuss one or more potentially useful means of standardizing financial information: a. Public utilities Large retailers Airlines

On-line services Hospitals

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Responses

  • Mikael
    Why might companies focus on samestore sales rather than total sales?
    7 years ago
  • chica
    How is a peer group different from an aspirant group?
    7 years ago

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