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Inter-firm analysis Essay Example

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Inter-firm analysis

In addition, comparative financial graphs of the two firms have been depicted in the analysis below.On average of the five financial years that have been used in deriving the financial ratios above, Delta Apparel Company is more profitable compared to Abbeycrest Company. This has been depicted by the trend of the ROCE of the two firms over the five financial years. Delta Apparel has been able to maintain positive returns in the latest four of the five years while Abbeycrest has experienced negative ROCE in four years. In addition, the ROCE comparative graph depicts that the ROCE of Delta Apparel has been higher compared to that of Abbeycrest for much of the five financial years analyzed. Even though Abbeycrest was able to accumulate a higher ROCE to that of Delta Apparel Company in 2012, the firm experienced an abrupt negative decline in ROCE in 2013. This implies that common shareholders of Delta Apparel will earn more returns compared to shareholders of Abbeycrest Company. Consequently, the ability of the organization to generate returns to common shareholders is higher under Delta Apparel compared to Abbeycrest Company (Fridson & Alvarez, 2011).The high return to common shareholders for Delta Apparel Company compared to Abbeycrest Company has been contributed by RNOA, FLEV, SPREAD and NBC factors under the first stage ROCE decomposition. RNOA depicts how the two organizations utilize their net assets to generate income for the organization. Consequently, the organization with the best way of utilizing it asset resources will accumulate high returns for the common shareholders (Rajasekaran & Lalitha, 2011). This is because the firm will incur less asset expenses in generating the revenue that is essential in increasing the net income generated. The financial ratios for the two firms over the last five years depict that Delta Apparel has been more efficient in utilizing it assets optimally compared to Abbeycrest Company. Thus, Delta Apparel consumes fewer assets in generating revenue compared to Abbeycrest Company as reflected in the financial ratios over the last five financial years.This implies that the income that the organization generates from the sales revenue it accumulates during it operations will be high due to fewer financial value of assets utilized in generating the revenue (Wahlan, Baginski, & Bradshaw, 2010). Consequently, the ROCE of Delta Apparel will be considerably be high due to the higher income

Reference

Bagad, V. (2010). Managerial Economics And Financial Analysis. New York: Technical Publications.

Fridson, M. S., & Alvarez, F. (2011). Financial statement analysis: A practitioners guide. Hoboken, N.J: Wiley.

Gibson, C. H. (2012). Financial Reporting and Analysis. Boston: South-Western Pub.

Khan, M. Y., & Jain, P. K. (2010). Financial management. New Delhi: McGraw-Hill.

Moyer, R. C., & McGuigan, J. (2012). Contemporary Financial Management. Boston: Cengage.

Peterson, D. P., & Fabozzi, F. J. (2012). Analysis of financial statements. Hoboken, New Jersey: John Wiley & Sons.

Rajasekaran, V., & Lalitha, R. (2011). Financial accounting. New Delhi: Dorling Kindersley.

Sinha, G. (2009). Financial statement analysis. New Delhi: PHI Learning Pvt Ltd.

Wahlan, J., Baginski, S., & Bradshaw, M. (2010). Financial reporting, financial statement analysis and valuation: A strategic approach, Seventh-Edition. Boston, OH: South-Western.

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preview essay on Inter-firm analysis
  • Pages: 10 (2500 words)
  • Document Type: Essay
  • Subject: Marketing
  • Level: Undergraduate
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