白戸則道® 白戸則道®Instructions
The purpose of this assignment is to give you the opportunity to apply the concepts you have learned in this module and to discuss some of the key ideas of the module in your own words. Follow the instructions provided and respond to each question. This a required activity for this module.
Submit your answers to each of the questions based on the information provided below. Enter your answers directly in the spaces provided in the My submission tab. You may save a draft of your work as you go, and you can come back later to continue working on your draft. When you are finished working, click the Preview button, verify your identity, and then click Submit for Review to submit your assignment. Please answer each question fully and concisely.
The discussion of the assignment solution is provided in the Module 1 Assignment 2 Solution video. Do the assignment on your own first, before viewing the assignment discussion video!
Module 1 Assignment 2
Following are the relevant figures extracted from the balance sheet and income statement of two companies, a consumer electronics manufacturer and a large retailer.
| Category | Consumer.Electronics | Large.Retailer |
|---|---|---|
| Sales | $108,249 | $446,950 |
| Earnings | $ 25,922 | $ 15,699 |
| Assets | $116,371 | $193,406 |
| Equity | $ 76,615 | $ 75,761 |
Table 1.1 : Comparison of relevant information of balance sheet and income statement from two companies.
| Category | Consumer.Electronics | Large.Retailer |
|---|---|---|
| Sales | $108,249 | $446,950 |
| Assets | $116,371 | $193,406 |
| Asset Turnover | 93.02% | 231.09% |
Table 2.1 : Comparison of Asset-Turnover of two companies.
What is ‘Asset Turnover Ratio’?
Asset turnover ratio is the ratio of the value of a company’s sales or revenues generated relative to the value of its assets. The Asset Turnover ratio can often be used as an indicator of the efficiency with which a company is deploying its assets in generating revenue.
\(Asset Turnover = Sales or Revenues / Total Assets\)
Generally speaking, the higher the asset turnover ratio, the better the company is performing, since higher ratios imply that the company is generating more revenue per dollar of assets. Yet, this ratio can vary widely from one industry to the next. As such, considering the asset turnover ratios of an energy company and a telecommunications company will not make for an accurate comparison. Comparisons are only meaningful when they are made for different companies within the same sector.
Read more: Asset Turnover Definition | Investopedia
| Category | Consumer.Electronics | Large.Retailer |
|---|---|---|
| Earnings | $ 25,922 | $ 15,699 |
| Sales | $108,249 | $446,950 |
| Operating Margin | 23.95% | 3.51% |
Table 2.2 : Comparison of Operating-Margin of two companies.
What is an ‘Operating Margin’?
Operating margin is a margin ratio used to measure a company’s pricing strategy and operating efficiency.
Operating margin is a measurement of what proportion of a company’s revenue is left over after paying for variable costs of production such as wages, raw materials, etc. It can be calculated by dividing a company’s operating income (also known as operating profit) during a given period by its net sales during the same period. Operating income here refers to the profit that a company retains after removing operating expenses (such as cost of goods sold and wages) and depreciation. Net sales here refers to the total value of sales minus the value of returned goods, allowances for damaged and missing goods, and discount sales.
Operating margin is expressed as a percentage, and the formula for calculating operating margin can be represented in the following way:
\(Operating Margin = Operating Income / Net Sales\)
Operating margin is also often known as operating profit margin, operating income margin, return on sales or as net profit margin. However, net profit margin may be misleading in this case because it is more frequently used to refer to another ratio, net margin.
Read more: Operating Margin Definition | Investopedia
| Category | Consumer.Electronics | Large.Retailer |
|---|---|---|
| Earnings | $ 25,922 | $ 15,699 |
| Equity | $ 76,615 | $ 75,761 |
| Return of Equity | 33.83% | 20.72% |
Table 2.3 : Comparison of Return-On-Equity of two companies.
What is ‘Return On Equity - ROE’?
Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.
ROE is expressed as a percentage and calculated as:
\(Return on Equity = Net Income/Shareholder's Equity\)
Net income is for the full fiscal year (before dividends paid to common stock holders but after dividends to preferred stock.) Shareholder’s equity does not include preferred shares.
Also known as return on net worth (RONW).
| Category | Consumer.Electronics | Large.Retailer |
|---|---|---|
| Asset Turnover | 93.02% | 231.09% |
| Operating Margin | 23.95% | 3.51% |
| Return of Equity | 33.83% | 20.72% |
Table 2.4 : Comparison of Operations Performance of two companies.
We can compare the companies above to know that :-
Case Study :
I used to work as a customer service operator in Ladbrokes Far East Asian department (Scicom MSC Bhd) and now I’ve affiliate business partnership with Ladbrokes and some other companies. From my personal view, I try to separate the digital business and brick-and-mortar retailing outlet of Ladbokes as example. I assume that Consumer Electronic is digital business operates around the World while Large Retailer is the outlets which operates within Europe.
There has only few importance figures took into counting in this assignment. If both balance sheet and income statement of a company is not faud, the operational perforamce might reflect the healthiness of a company. We/Investors can easily know the potential of growth/profitable, if the company is overvalued or undervalued and if it is worth or valued to invest their fund.
There are a lot of figure that has not been states while it can be analysed and know the intrinsic value which is always quote and measure by Warren Buffet. - Warren Buffett: How He Does It? - Buffett’s Value Formula (?) - How does Warren Buffett value a business?
It’s useful to record some information about how your file was created.
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Same as pevious assignment — Operations Management : Module 1 Assignment 1, I do appreciate that University of Illinois at Urbana–Champaign provides the management course via Coursera. I like reading the legend of business tycoons (for example: Konosuke Matsushita, Peter Drucker, Bill Gates, Warrent Buffet, George Soros, Jim Rogers, Lee Kah Sheng, Henry Fok Ying Tung, Peter Lynch, Lim Goh Tong etc) to know how was their mindset and business strategy since I was a computer science student in Tunku Abdul Rahman College. I used to read the legend of Warren Buffet and then started my journey in financial market before join sportsbook industry.