Introduction: introduction of the new product. For the Toyota

Introduction:

In this report, we compare the
financial ratios and percentages of five leading American based companies that
belong to the different industries in order to compare their financial standing
and their performance in the world market. All of the companies deal business
at international level and run their operations for many years. The company
that we select for this analysis include Starbucks, Volkswagen, Cisco, Toyota,
and Nike. Three-year data from the year 2015 to 2017 was used but one company
that is Volkswagen will not still publish its 2017 report so 2014-2016 data is
used of it for the comparison.

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Comparison

The comparison of the companies is
done on the bases of various ratios.

1.    
Revenue

Revenue growth is the growth in the
revenue of a company that is due to various reasons, either the increased sales
of the existing products in the existing markets or the entry to new markets or
the introduction of more products in the existing markets or new market.

The revenue growth for the Starbucks
is increasing but the rate of increase has decreased and there might be other
reasons for the reduction in the growth rate. These might be the economic
conditions or the slow reduction of the increase caused by the introduction of
the new product.

For the Toyota Company there is a
reduction in the growth rate of the revenue for the year 2015 and 2016 but in
the year 2017 the growth rate is negative and there is reduction in the sales.
This is because there is global reduction in the sale of those cars that use
gasoline engines and globally there is increase in the sale of the electric and
green vehicles. There might be other reasons including the pulling back of some
models from market. (O’Connor, 2017)

The Volkswagen is a car manufacturer
and is mostly operates in American and European markets. Its sales had
increased from 2014 to 2015 and then reduced in 2016. The change in the rate of
the increase is fluctuating and there are different reasons for the changes in
the revenue growth as the consumer spending patterns change and the tax rates
change which impact the prices of the cars.

Nike is a sports wear goods
production company and has lot products from foot wears to caps and shirts and
sports shorts. It is a multinational brand and has many different products in
the markets. Its sales growth pattern is average and there is fluctuation in
the sales of the company which is normal and there are no specific trends.

Cisco which has normal and average
sales. The revenue growth shows a specific trend and shows a normal variation.

Out
of all these five companies, the revenue growth of the Nike is the best
comparing to the other companies, as its growth was more stable and positive.

 

 

2.     Liquidity:

The liquidity ratio is used to
measure the company ability and efficiency to pay its debt obligations and also
measures its margin of the safety. It is used to compare companies and
industries in order to examine the strength of the company’s strategies in
comparison of their competitors in the market this is useful to set the
benchmarks goals. And also use to compare the company performance from previous
years. The ratio greater than 1 is considered more favourable but much high is
not good as it shows that company is not allocating its resources well. The
lower ratio indicates that the company ability to pay off its debt is not good.

 

Current ratio

Companies

2017

2016

2015

Starbucks

1.25

1.05

1.19

Volkswagen

0.88

0.98

Cisco

3.03

3.16

3.23

Toyota

1.03

1.13

1.09

Nike

2.93

2.80

2.52

 

The ratio of the Starbucks is
increasing each year. This shows that the company position to pay off its debts
is improving each year as the company current ratio increases constantly each
year. The ratio of the Volkswagen company is decreasing each year that
represent that the company able to pay off its debt is decreasing each year and
the company is not performing well this is not a good sign for company strength
and position in the market. The ratio of the Cisco is deteriorated from the
year 2015 to 2017 this show the company ability is low to pay off its debts and
if this position goes on like this the company will suffer huge losses in
future. The ratio of the Toyota company increases in 2016 but then the ratio is
decreased in 2017 this show the company is not maintaining its resources
properly in 2017. The ratio of the Nike is enhancing each year this show that
the company position to pay off its debts is improving from year 2015 to 2017
as the organization current ratio increases constantly each year.

Out of all these five companies the
liquidity ratio of the Nike company is improving most efficiently each year and
the worst position is Cisco company as their liquid position continuously
decline that will affect the company position and also affect its ongoing
business concern the companies like Cisco, Volkswagen and Toyota have to
improve it’s for its better performance in future.

3.     Profitability

 

The profitability
ratios of the companies are considered as the financial indicator that will be
utilized by the companies in order to assess and examine the business’s ability
and efficiency to generate the earnings as compared to their expenses and the
other relevant outlays that is incurred during the specific time period. For
these ratios, the more value is favourable as having the higher ratio relative
to the competitor’s ratio

The return on asset ratio of the
Starbucks is decrease in 2016 and 2017 as compared to 2015 and Nike ratio is
increases and the profitability position of the Nike is most efficient that is
because of its high-quality profit and high sales volume. The Volkswagen ratio
is also increase but is lower than the 2014 ratio. The ratio of the Toyota and
the Cisco is decreasing that show that the company is not using its asset
efficiently and as a result of this its sales and revenue reduces.

 

The return on equity is used to
measure the company ability to generate earning from its equity investment the
higher ratio is favourable as it shows that the company is investing its equity
efficiently. The return on equity ratio of the Starbucks and the Nike is
increasing that show the good profitability position of the company as compared
to other companies. The ratio of the Toyota is decline continuously and the
ratio of the Volkswagen and Cisco is fluctuating that shows the company
profitability position is not stable.

 

The profit margin ratio is the ratio
that tells us the profit as a ratio of the business and the ratio of the revenue
that the business generates. This ratio tells us that how much successful the
business is in controlling its operating expenses of the business. The profit
margin of Starbucks is decreasing slightly as this might be due to the
reduction in the selling price or increase in the operating assets. The profit
margin of Toyota is falling and there is a reduction in the profit margin in
2017 and is also low compared to others. This also might be the result of the
increase in the interest expenses that have increased. Margins of Volkswagen
have a dip and faced loss in the year 2015 and has rebound to a 2% profit in
2016, this margin is very low compared to the industry. The profit margin of
Nike has an increasing trend and the profits of Cisco have a fluctuating trend
increasing and decreasing over the years. (gurufocus, 2017)

 

4.     Leverage:

Leverage ratio is used to measure
the company ability to pay off its long-term debts. It measures the company
financial leverage. The higher debt to equity ratio is not favourable and the
higher interest coverage ratio is beneficial for the company.

 

 

 

Companies

Debt to Equity

Interest Coverage

 

2017

2016

2015

2017

2016

2015

Starbucks

0.72

0.54

0.40

0

0

121.86

Volkswagen

1.67

1.65

1.49

5.23

-3.56

8.74

Cisco

0.96

0.91

0.9

13.91

18.730

19.030

Toyota

1.75

1.78

1.79

67.94

80.61

120.26

Nike

0.31

0.17

0.1

83.81

244.32

151.18

 

The debt to equity ratio of the
Toyota company is favourable this show that company is utilizing low debt as it
is the most expensive source of financing and reduce the company profits
because of high interest rate and cost. The debt to equity ratio of other
companies are unfavourable which shows that these companies uses more debt and
because of this they pay high interest and their profit decline.

The
interest coverage shows the company ability to pay of interest the more value
is favourable that show company has more money as compared to interest expense.
The interest coverage ratio of Starbuck and Volkswagen is increasing and s
favourable whereas the ratio of the Cisco and Toyota is unfavourable and the
Nike ratio is unstable.

 

5.     Marketability
ratios

The market ratio estimates the
investors response of purchasing the company stock. The higher value is
favourable as it helps the company to attract more investors and maintain the
company position in the market.

The dividend yield is the return
that is generated by the business or the earning per share compared to the
value of the share. The yield tells us the value that the business is
generating and return that the investor gets on the investment that the
individual has performed. The dividend yield of Starbucks is acceptable and the
dividend of Volkswagen is 1% is low. The dividend yield of the Toyota is 2.96%.
Nike dividend yield is also very low and that of Cisco is also acceptable.

In terms of price earnings ratio, it
tells us the earning potential of the share and is calculated by the division
of the price of the share by the earnings per share. The price earnings ratio
tells us the earning potential of the share. The price earnings ratio of the
Starbucks is high compared to other companies. The Volkswagen has the lowest
price earning ratio either due to the reduced price of the share or the reduced
earnings. 

 

Conclusion:

Out of all these five companies the
liquidity ratio of the Nike company is improving most efficiently each year and
the worst position is Cisco company as their liquid position continuously
decline that will affect the company position and also affect its ongoing
business concern the companies like Cisco, Volkswagen and Toyota have to
improve it’s for its better performance in future. The profitability position
of the Nike is most favourable for the investors to gain high return and show
that company manages its resources and liabilities well in order to achieve
high returns. The market position of the Starbuck is most efficient and
Volkswagen is least efficient.