Analysis of Financial Statements Essay Example | Topics and Well Written Essays - 500 words

Analysis of Financial Statements - Essay Example The suite that I choose for the ratio analysis was the Wagner suite. The reason I choose this suite was based on the fact that the suite provides better balance in comparison with the StuarMason. The StuartMason ratio suite places too much importance on sales turnover. The greatest weight in the Wagner suite goes to sales growth which is a great indicator of the progress the company has made through the passage of time. As far as the ratio analysis the company that rated better overall was Lambda. The profitability, sales turnover, liquidity, and capital structure of Lambda are superior. One of the few metrics in which Coral received a better rating was sales growth. The second analysis that was performed to compare the two businesses been considered for a joint venture was an analysis of the notes to the financial statements. The accounting practices of Lambda are more aligned with the requirements of Panorama. As far as inventory Lambda utilizes First In First Out inventory system (FIFO). FIFO provides advantages such as providing a more accurate valuation of the total inventory. Coral has some pending lawsuits yet to be resolved that could inhibit the financial status of the company in the future. Both companies are weak as far as its stock option disclosures due to the fact that they do not mention the actual amounts of stock options outstanding. The third analytic tool utilized in the simulation was an evaluation of the non-financial information of the company. The non financial metrics of the pair of companies seem to indicate that Lambda is a superior choice. Lambda has a lower employee turnover ratio which is a positive sign. A low employee turnover ration represents money savings since it reduces initial training expenses and it allows for a company to create value in the form of human capital. Lambda has a better array of products and higher revenues from the introduction of new products. Lambda