Identify two companies (from two different countries) that performed well in equity markets over past five years within the economies and industries that your group analyses in previous questions. Collect their last five years annual financial statements. Investigate the trend in various financial ratios of these firms. Analyse and interpret liquidity ratios, solvency ratios, asset utilisation and profitability ratios of these companies. Don’t just write text book definitions of these ratios; interpret the ratios in the context of the industry and economic condition. Based on your group’s analysis comment on the financial health of these firms and their future investment prospect.
The two companies selected are Apple Inc and Australia and New Zealand Banking Group Ltd (ANZ) which are into electronics industry and banking industry respectively. They are major players in the industry in their countries. Apple is based in US while ANZ is based in Australia. The financial ratio calculation of both the companies is shown in detail in the excel sheets. The figures of Apple has been shown in Billion $ (B) or Million $ (M). While for ANZ, they are shown in Million AUD. The ratio calculation however remains unaffected by the currency.
Following is the interpretation of the financial ratios of both the companies.
The profitability ratios of Apple show that the Return on Assets of the organization has been increased in last 5 years. The figure has increased to 31.6% in 2012 from 17.4% in 2008 which shows that the organization’s effectiveness of using its assets for generating returns has increased in last 5 years. On the other hand, this parameter for ANZ has remained close to 1% for this period which is very less than Apple. The reason behind that is that the organization is in banking sector ad has much more liabilities than organizations from other industries. The Return on Equity of Apple has also shown rise in these last years, from 33% in 2008 to 47% in 2012 which means that the organization has been able to use the shareholder’s equity lately for generating more returns as it was in 2008. The figure for ANZ is lower at around 20% in last 3 years. The figure is healthy but not as attractive as Apple. (Yee and Cheah, 2006, pp. 203-210)