Financial Anaylisis

Final Report

Financial Analysis: Oracle and Salesforce

ACCT 540-702 Financial Accounting

SECTION-I: TEST OF PROFITABILITY

1. RETURN ON EQUITY

| 2014 | 2013 |

ORACLE | 23.663% | 24.486% |

SALESFORCE | -8.669% | -13.851% |

Return on equity is a measure of profitability on return for stockholders’ investment. A positive and high value is normally favorable as it indicates such firm is efficient at generating income on new investment.

As we examine both companies’ ROE ratio, we can see that ORACLE (OCLF) has a much higher return on equity yielding a 23.6 % when compared to SALESFORCE (CRM) -8.6% ROE. However, even though ORACLE’s ROE seems to be doing fine, we can appreciate a decrease performance of 1.3% when comparing 2013 and 2014 ROE ratio. In contrast, SALESFORCE shows signs of recovery in 2014 as it reduced its negative ROE value by 5.1 %. SALESFORCE ROE value was impacted by low profitability represented by net loss reported for two consecutive years.

2. RETURN ON ASSETS

| 2014 | 2013 |

ORACLE | 12.72% | 13.857% |

SALESFORCE | -1% | -4.864% |

The Return on Asset (ROA) is an excellent measure to assess the management’s ability to utilize assets and effectively generate earnings.

ORACLE’s ROA for 2014 was of 12.72% while SALESFORCE was -1%. ORACLE’s higher percentage reflects a much more efficient use of assets and higher profit than SALESFORCE. However, ORACLE’s asset management and profitability seemed to be in a downtrend as it experience a decreased of 1.13% from previous year.

On the other hand, SALESFORCE 2014 ROA of -1% seem to be an improvement from 2013 as it increased ROA by 3.86%. SALESFORCE experience a net loss on both years, which explains the negative ROA ratio. Contributing factors to SALESFORCE net loss in 2013 and 2014 include a vastly increased competition from giants such IBM, ORACLE, SAP, and Microsoft and several others small competitors. SALESFORCE market has also being affected by the current...