If you were the appropriate financial manager of any firm wh

If you were the appropriate financial manager of any firm what would be your observations and recommendations be? use any example for any firm

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Solution

The role of a Financial Manager is to monitor and control financial performance through analysis of financial statements and financial ratios.

Microsoft

Profit margin

Asset turnover

Equity multiplier

30/6/2017

Net income/Total sales

Total sales/Total assets

Total assets/Total equity

21204000/89950000

89950000/241086000

241086000/72394000

0.2357

0.3731

3.3302

ROE = 0.29

Apple

Profit margin

Asset turnover

Equity multiplier

30/9/2017

Net income/Total sales

Total sales/Total assets

Total assets/Total equity

48351000/229234000

229234000/375319000

375319000/134047000

0.2109

0.6108

2.7999

ROE = 0.36

Taking example of the above data

1.It can be observed that Microsoft profit margin is higher than Apple’s i.e. Microsoft is able earn more profit for every dollar in sales when compared to Apple Inc.

2.The asset turnover of apple is almost double that of Microsoft. i.e. Apple is able to earn more revenue from every 1$ in assets when compared to Microsoft.

3.The debt component is more in Microsoft when compared to Apple i.e. Microsoft is high levered.

4.The overall ROE is higher for Apple, which means it is generating better wealth for equity share holders.

Similarly various observations can be drawn based on the available information of an organization.