Accounting
vjayala
week3_learning_team_c.pptxFinancial Statement Analysis
VICTOR AYALA PAUL FULTZ CARLOS MORALES
Jeremy pierce
EcO/561
OCTOber 31, 2016
Professor ANDRES HINOJOSA
Good evening, we are learning team C. Today we will be covering accounting and the regulatory environment.
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Presentation Overview – Part I
In part I of Todays presentation
we will review and analyze calculations via
Northrop Grumman’s financial statements
In part 1 of todays presentation we will review and analyze the calculations via Northrop Grumman’s financial statements.
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Profitability Ratio
Measures the income and operating success of Northrop Grumman
OPERATING MARGIN (TTm) (%) 12.82
Net profit margin (ttm) (%) 8.96
Gross margin (ttm) (%) 23.59
Period Ended 12/31/15 12/31/14 12/31/13 12/31/12 12/31/11
Operating Margin 13.07 13.33 12.66 12.41 12.40
Net Profit Margin 8.46 8.63 7.92 7.84 8.02
Gross Margin 23.98 23.36 21.81 22.13 21.30
(Northrop, 2016)
The first financial calculation that we will review today is the profitability ration. It measures the income and operating success of Northrop Grumman.
The operating margin measure the percentage of revenues remaining after paying all operating expenses. It is calculated as the trailing 12 months operating Income divided by the trailing 12 months total revenue, multiplied by 100. Operating Income is defined as total operating expenses.
Net profit margin is also known as return on sales, this value is the income after taxes for the trailing twelve months divided by total revenue for the same period and is expressed as a percentage.
Gross margin value measures the percentage of revenue left after paying all direct production expenses. It is calculated as the trailing 12 months total revenue minus the trailing 12 months cost of goods sold divided by the trailing 12 months total revenue and multiplied by 100.
Across the bottom is presented a table with profitability ratios for the last 5 preceding accounting periods. Review of this information is essential for external sources such as lenders and investors.
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Liquidity Ratio
Measures the ability of Northrop Grumman to pay short-term debt and meet unexpected needs
Current ratio (mrq) 1.13
Quick Ration (MRq) 0.97
Period Ended 12/31/15 12/31/14 12/31/13 12/31/12 12/31/11
Quick Ratio 1.01 1.19 1.51 1.25 1.12
Current Ratio 1.16 1.32 1.63 1.39 1.26
(Northrop, 2016)
The second financial calculation that we will review is the liquidity ratio. It measures the ability of Northrop Grumman to pay short-term debt and meet unexpected needs.
The current ratio is the ration of total current assets for the most recent interim period divided by total current liabilities for the same period.
The quick ratio, also known as the acid test ratio, is defined as total current assets minus total inventory for the most recent interim period divided by total current liabilities for the same period.
A higher liquidity ratio indicates that a company is more liquid and has better coverage of outstanding debts.
At the bottom of this slide we have a internal comparison of Northrop’s liquidity ratios across the last five years. Comparing previous accounting periods allows internal company analyst and management to track changes in the business.
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Solvency Ratio
Measures the ability of Northrop Grumman to survive in the long-term.
The third financial calculation that we will review today is the solvency ratio. It measures the ability of Northrop Grumman to survive in the long-term.
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Calculations of Different Companies
As a team we Compare the profitability, liquidity, and solvency ratios of similar aerospace companies
The fourth financial analysis that our team will present is a review of calculations of similar aerospace companies. We compare their profitability, liquidity and solvency ratios.
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Company Comparison Spreadsheet
He we have a company comparison spreadsheet that presents the profitability, liquidity, and solvency ratios comparatively for all of the companies.
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Company with the Best Numbers
this company had the best numbers for each ratio
After review of the financial data our team noted at (X Company) had the best financial ratios in the industry.
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Presentation Overview – Part II
In part II of our presentation we evaluate the selected companies:
In the second half of our presentation we evaluate the following companies: (XXX, XXX, XXX).
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Financial Opportunities Presented by Companies
Evaluation of the financial opportunities
If we were going to lend money to one of the companies reviewed, it would be?
We based our decision on the following:
He we evaluate the aerospace companies financial opportunities. If we were to lend money to one of them it would be (xxx). We based our decision on the following: xxx.
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Investment Opportunity
Evaluate the investment opportunity presented by the companies
If we could invest $100,000 in one of the companies, which would the team select?
The basis for our decision was …
In the second part of our investment opportunity we recommend which company, based on the number, that we would invest $10,000 in personal investment funds to. The basis for our decision is as follows: .
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Employment Opportunities of These Companies
Evaluate the employment opportunities within the companies.
If we could work for any of the companies, which company would the team select?
Defend the team's decision
In our final slide we evaluate the employment opportunities of the big three aerospace companies. If we could work for any of them we would pick (XXX). Our decision was based on the following facts: .
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References
Northrop Grumman Corporation. (2016) Financial Info – Fundamentals – Ratios. Trading Statistics. Retrieved from http://investor.northropgrumman.com/phoenix.zhtml?c=112386&p=irol- fundRatios
Northrop Grumman Corporation. (2016) Financial Info – Fundamentals – Ratios. Balance sheet. Retrieved from http://investor.northropgrumman.com/phoenix.zhtml?c=112386&p=Irol- fundBalanceA
References
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