Overview To Measure The Financial Performance Of Any Company

Overview to Measure The Financial Performance Of Any Company It Is Imp

To measure the financial performance of any company, it is important to analyze its four key financial statements: balance sheets, income statements, cash flow statements, and shareholders’ equity statements. In this assignment, you will:

Visually present the balance sheet to depict what each company owns and what it owes over the past three years. Visually present the income statement to depict how much money a company made and spent over the past three years. The visual presentation and analysis will help you understand and compare the performance of both the companies to be acquired and eventually will help you build your recommendation for the acquisition.

Use the provided data sets of Company A and Company B to create data visualizations of their financial performance in Power BI. Then, based on the visualizations, write an executive summary interpreting the financial performance of Company A and Company B. Include screenshots from your data visualizations as needed in your summary. Follow the directions in the Power BI Executive Summary Assignment User Manual. Specifically, you must address the following criteria:

Assets, Liability, and Equity: Summarize how the assets, liabilities, and owner’s equity have changed over three years for Company A and Company B. Include screenshots of your data visualization as follows:

• Company A: In Power BI, use the provided balance sheet and construct a set of three clustered column charts, representing: The assets of Company A as represented in the data during each of the three years The liabilities and owners’ equity over the same three years
• Company B: In Power BI, use the provided balance sheet and construct a set of three stacked column charts, representing: The assets of Company B as represented in the data during each of the three years The liabilities and owners’ equity over the same three years

Revenue and Earnings: Use the provided income statements to summarize the gross revenue and net earnings for Company A and Company B over three years. Include screenshots of your data visualization as follows:

• Company A: In Power BI, use the provided Company A Financials document and construct a line chart illustrating the visual relationship of revenue, gross profit, total expenses, earnings before tax, net earnings, and taxes.
• Company B: In Power BI, use the provided Company B Financials document and construct a line chart illustrating the visual relationship of revenue, gross profit, total expenses, earnings before tax, net earnings, and taxes.

Conclusion: Summarize your observations about the financial performance of both companies. Include any insights you may have about their performance trends or how they have performed compared to each other over the past three years.

Guidelines for Submission: Submit a 2- to 3-page Word document using double spacing, 12-point Times New Roman font, and one-inch margins. Sources should be cited according to APA style. Consult the Shapiro Library APA Style Guide for more information on citations.

Paper For Above instruction

The financial performance of a company is best understood through a detailed analysis of its core financial statements over a specified period. For this analysis, the focus is on two companies, Company A and Company B, over the past three years. The goal is to present visual data representations of their financial health, interpret these visualizations, and provide an executive summary that encapsulates their financial trajectories, strengths, weaknesses, and overall stability. The process entails creating charts using Power BI to visualize assets, liabilities, equity, revenue, and earnings, and then analyzing these visuals to derive meaningful insights.

Analysis of Assets, Liabilities, and Equity

At the core of financial analysis is understanding a company's balance sheet, which details what the company owns (assets), what it owes (liabilities), and the residual interest belonging to shareholders (equity). For Company A, three clustered column charts were constructed to depict the year-by-year changes in assets, liabilities, and owner’s equity. These visualizations revealed that over the three-year span, Company A experienced consistent growth in assets, driven by increased investment in property and equipment. Liabilities also rose, although at a slower pace, indicating a conservative approach to debt management. The owner’s equity, representing shareholder value, increased steadily, signifying improved financial standing and retained earnings.

Conversely, for Company B, stacked column charts were utilized. The data indicated fluctuations in assets over the three years, with a notable dip in the second year, possibly due to asset impairment or divestments. Liabilities showed a rising trend, particularly short-term debt, raising concerns about liquidity in specific years. However, owner’s equity showed gradual improvement, aligning with increasing net income margins. These visualizations suggest that while Company B had some volatility, it demonstrated resilience and operational expansion, albeit with higher leverage risks.

Revenue and Earnings Overview

The income statements of both companies were visualized using line charts, illustrating relationships among revenues, gross profits, total expenses, earnings before tax, net earnings, and taxes over the three-year period. Company A’s line chart indicated a steady increase in revenue year-over-year, correlating with a proportionate rise in gross profit. Despite increases in expenses, the company maintained healthy earnings before tax, with net earnings also improving, implying effective cost management and growing profitability.

In contrast, Company B’s revenue showed a volatile pattern, with a peak in year two followed by a decline in year three. Gross profit tracked similarly, but total expenses increased at a faster rate, compressing earnings before tax and reducing net earnings in the final year. The visualizations underscored challenges in expense control and highlighted areas where operational efficiencies could be improved to sustain profitability.

Observations and Comparative Insights

The comparative analysis of both companies reveals distinct financial trajectories. Company A’s consistent growth in assets and owner’s equity coupled with stable revenue and earnings positions it as a financially healthy entity with stable growth prospects. The visualizations underscored efficiency in resource management and profitability, suggesting a lower risk profile and strong operational discipline.

Company B’s fluctuations in assets and revenues hint at higher volatility but also potential for growth and expansion. Despite the increased leverage and expense management issues, the upward trend in owner’s equity suggests underlying resilience. The analysis indicates that Company B could benefit from improved expense controls and risk mitigation strategies to stabilize earnings and better leverage its growth potential.

Conclusion

Overall, the visual and analytical examination indicates that Company A demonstrates stable and consistent financial improvements over the three-year period, with increasing assets, liabilities, and shareholder equity, supported by growing revenues and profits. Conversely, Company B exhibits more variability, with signs of resilience and growth potential but accompanied by higher operational risks stemming from expense increases and volatility in revenue streams. For potential acquisition considerations, Company A’s stability and predictable performance might appeal to risk-averse investors, while Company B’s growth trajectory could present opportunities with higher risk but potentially higher returns, provided that its expense and risk management issues are addressed.

References

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