Question

Research and find financial statements for two companies of your choosing. Drawing on information from therein, analyze the statements and write an essay summarizing which of the two is better investment. Include your reasons, using the course material evidence. Cite the financial statements.

Answer 1

	Analysis of Texas instruments:
1	Profitability of Texas instruments is its strength. It has got high Gross margin & decent net margin.
	The return earned on Assets is increasing, which shows that net profit as a percentage of its total assets
	is growing.
	Return on equity shows the return available to equity shareholders. It shows as increasing trend and an average of 30%
	return is quite high.
2	Cash flow growth is consistent
3	current ratio shows that its current assets are much greater than its current liabilities. Though it is good, it is better to further
	optimize and reduce the investment in working capital, for better return. It is recommended to have current ratio at 2.
	Debt equity ratio is less, which means lesser debt in its capital structure, which improves its long term solvency.
4	Assets turnove ratio shows how effectively the company uses its assets in generating the sales. A ratio of 0.8 is good.
	Overall, Texas instruments's financial strenth is commendable.
	Analysis of Western digital:
1	Though the gross margin ratio is 32%, the net margin is only 2%, which means that apart from cost of goods sold, the other
	operating expenses and admin & general expenses are high. This is its weakness.
	The lesser net return has affected the return on total assets as well as the return available to shareholders.
2	Though, cash flow growth appears good in the current year, it is due to the lower base effect of the previous year.
	Growth in cash flow is highly fluctuating, which is not an indicator of good financial performance.
3	current ratio shows that its current assets are greater than Currentt liabilities and it is optimum.
	Debt equity ratio is 1, which means that debt and equity are almost equal in capital structure. The recommended ratio is less than 1,
	and the company needs to reduce its debt.
4	Assets turnove ratio shows how effectively the company uses its assets in generating the sales. A ratio of 0.6 shows that
	it is not able to generate commensurate sales with respect to its assets.
	Financial performance of Texas instruments is good compared to Western digital
	Hence, based on the above analysis, it is advisable to invest in Texas instruments.