Financial analysts ratio, investors, lenders, auditors, to help review and evaluate a company’s financial statements
Regarding to activity ratios, do the two companies efficiently leverage their resources to generate sales revenue and cash? How do the two companies utilize accounts receivable and inventory to generate sales?
C1. Read the notes to 10-K and figure out the revenue recognition policy for each company. Is the company aggressive in revenue recognition? What is the level of receivables compared to sales? Do the two companies offer customers with generous trade credits and collect cash from customers in time?
C2. Read their 10-Ks, what accounting method do the two companies use to value inventory? What’s the percentage of inventory compared assets for both companies ?
Do you think the two companies face obsolete inventory problem based on inventory turnover ratio? Read their 10-Ks, do the two companies write off any inventories based on the lower of cost or market accounting method? Read 10-Ks, how do the two companies determine the market value of inventories? Afterall, do you think the two companies’ products/services are popular or not?