Financial Statement Analysis

Financial Statement Analysis

Team A

ACC/561

March 17, 2011

Financial Statement Analysis

It’s important for business managers, regardless of size, to have an understanding of how the organization is functioning financially. Managers can use this information to plan for the future and a thorough understanding of financial statements is essential. A complete understanding of financial statements will assist managers to identify trends, monitor cash flow, increases and decreases in wealth and monitor the company’s performance in accordance with an established financial plan. This paper will compute the German company Siemens AG, Macy’s Department Store and American Airline’s quick and current liquidity ratios, the DuPont ratio, profit margin, asset utilization, and financial leverage. This paper will also describe how differences in the industries and different IASB and FASB measurement conventions affect presentations.

Differences in Industries

Manufacturing and retail industry income statements include the cost of all goods and services sold. Manufacturing and retail industries income statements also provide an itemized list of all goods sold. These itemized lists also serve as an inventory listing to track trend data that helps businesses determine budgets, levels of inventory, product satisfaction, etc. On the other hand, the service industry offers no tangible goods, to earn profit solely from services provided. Because there is no exchange of goods, service industry income statements include only the cost of the service provided. Thus the profit from the retail and manufacturing industries are the earnings from the sale of products minus expenditures, whereas the service industry is primarily garnering profit from the service provided minus minimal expense (Beginners Guide to Financial Statements, 2007)....