Course Project - Final Business Report

Ratio Analysis

Ratio Analysis of Blackberry and Apple

I. Liquidity ratios

Liquidity ratios measure the firm’s ability to meet current obligation. They include acid test and current ratio (Tamari, 2014).

a) Current ratio and Quick ratio for Blackberry limited (Milne, 2015).

Current assets/ current liabilities = Current Ratio

Current Ratio= $ 4,117 million/ $1,477 million

= 2.79

Quick ratio= (Cash + short-term investment + Account receivables) / Current Liabilities

= (65 +1273+ 621)/ (1,477)

= 1.33

b) Current ratio and Quick ratio for Apple Inc. (O'Grady, 2015).

Current assets/ current liabilities = Current Ratio

C.R = $ 67,891 M / $ 8,729 M

= 7.78

Quick ratio= (Cash + short-term investment + Account receivables) / Current Liabilities

= (14489 + 18607+ 10903) M/ ( $ 8,729 M)

= 5.04

II. Activity Ratios

a) Inventory Turn over

It shows the liquidity of inventory in a company

For Blackberry

= Cost of goods sold/ Average inventory

= $ 376 M/ $ 102 M

= 3.69

For Apple

= = $34354 M/ $ 2396 M

= 14.34

b) Receivables turnover

For Blackberry

= Net Sales/ Average Gross Receivable

= $ 793 M/ $ 621

= 1.28

For Apple

= $ 8010M/ $ 10,905 M

= 0.73

c) Days sales outstanding

For Blackberry

= (Ending Account Receivables x 365)/(Credit Sales)

= (621M X 365) / ($ 7 M) = 32, 380.7

For Apple

= ($10, 905 x 365) / ($6,555)

= 607.21

d) Fixed Asset Turnover

For Blackberry

= Net sales/Net Fixed Assets

= ($793M) / ($ 2389M)

= 0.33

For Apple

= ($ 58,010)/($ 193,303)

= 0.30

d) Total assets Turnover

For Blackberry

= Net Sales/ Average Total Assets

= ($793M)/ ($ 6506)

= 0.12

For Apple

= ($ 58,010M)/($ 261,194 M)

= 0.22

III. Profitability ratios

They measure how a company is able to generate earning relative to sales, equity and assets.

a) Gross Profit Margin

For Blackberry

= Gross profit/ Net sales

= ($ 148 M)/ ($793M)

= 0.19

For Apple

= ($ 13569)/($ 8010)

= 1.69

b) Operating Profit Margin

For Blackberry

= Operating income/net sales

= ($ 139M)/($793M)

=0.18

For Apple

=($ 58,010)/($ 8010)

=7.24

c) Net Profit Margin

For Blackberry

= Net income/Net Sales

= ($ 332)/($793M)

= 0.42

For Apple

=($ 13,569)/($ 8010)

= 1.69

d) Return On Assets (ROA)

For Blackberry

Net Income/ Average total assets

=($ 332)/($ 6506)

= 0.05

For Apple

=($ 13,569)/($ 261,194 M)

= 0.005

e) Return on Equity (ROE)

For Blackberry

Net Income/ Equity

=($ 332)/ ($ 3487)

= 0.095

For Apple

=($ 13,569)/($ 129,006)

=0.11

IV. Leverage Ratios

They indicate how creditors are protected incase a company goes to insolvency.

a) Debt to Equity Ratio

For Blackberry

Total debt/ Total Equity

=($ 218M) ($ 3487M)

= 0.06

For Apple

= ($ 23,159)/($ 129,006)

= 0.18

b) Debt Ratio

For Blackberry

Total Liabilities/Total Assets

= ($ 3171)/($ 6506)

= 0.49

For Apple

= ($ 132,188M)/($ 261,194 M)

= 0.51

V. Coverage Ratio

a) Times-Interest-Earned

It measures capacity of a company to meet payment of interests.

For Blackberry

EBIT/ Interest Expense

= ($ 410) / ($144)

= 2.8

References

Milne, A. A., & Walt Disney Company. (2015). Blackberry Annual Financial Report. .Place of publication not identified: Mouseworks.

O'Grady, J. D. (2015). Apple Inc Annual Financial Report. Westport, Conn: Greenwood Press.

Tamari, M. (2014). Financial ratios: Analysis and prediction. London: P. El