How to do Financial Accounting Ratio Analysis?


The financial accounting ratio is done for Fed Ex and UPS to understand the ratio calculation and interpretation in given example.

Profitability Ratios


The two ratios selected to do profitability analysis are covered in the below mentioned sections.

ROE

It stands for return on equity and is calculated by dividing net income with total equity. The analysis clearly shows that ROE is in increasing trend for UPS and is in decreasing trend for FDX due to increasing and decreasing income for both companies respectively as interpreted by our financial accounting homework help online interpreter.

ROA

It stands for return on assets and is calculated by dividing net income with total assets. The analysis clearly shows that ROA is in decreasing trend for both companies .However, the value is higher for UPS compare to FDX .


Liquidity Ratios

The two ratios selected to do Liquidity analysis are covered in the below mentioned sections.

Current Ratio

It is calculated by dividing Current Assets with current liabilities. The analysis clearly shows that it remains same for UPS and is in increasing trend for FDX due to increasing current assets in case of FDX as given below.
 

Quick Ratios


It is calculated by dividing Current Assets subtracted with inventory with current liabilities. The analysis clearly shows that it is in decreasing trends for UPS and is in increasing trend for FDX due to decreasing and increasing current assets respectively as given below.

Capital Structure Ratios

The two ratios selected to do Capital structure analysis are covered in the below mentioned sections.

Debt ratio

It is calculated by dividing total debt with total assets. The analysis clearly shows that it is in decreasing trends for UPS and is in increasing trend for FDX due to decreasing and increasing debts respectively as given below.

 

Equity ratio

It is calculated by dividing total Equity with total assets. The analysis clearly shows that it is in decreasing trends for both companies due to decreasing equity respectively as given below.


Efficiency Ratios

The two ratios selected to do efficiency ratios analysis are covered in the below mentioned sections.

Payables turnover ratio

It is calculated by dividing cost of goods sold with total payables as per our corporate finance assignment help experts. The analysis clearly shows that it is in decreasing trends for both companies due to increasing payables respectively as given below.


Receivables turnover ratio
It is calculated by dividing revenue with total receivables. The analysis clearly shows that it is in increasing trends for UPS and is in decreasing trend for FDX due to increasing and decreasing receivables respectively as given below.

Market Performance Ratios


The two ratios selected to do Market Performance ratios analysis are covered in the below mentioned sections.

P/E Ratios

It is calculated by dividing Market price per share with Earning per share. The analysis clearly shows that it is in increasing trends for both companies due to increasing market price over the years.


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