91影视

Ratio analysis is a basic approach to assessing a company's health by examining the relationships between key financial indicators. According to many analysts, ratio analysis is the most important aspect of the analytical process.

Calculating return on asset for Liberty

$\begin{array}{c}\text{搁别迟耻谤苍鈥塷苍鈥塧蝉蝉别迟}=\frac{\text{狈别迟鈥塱苍肠辞尘别}}{\text{础惫别谤补驳别鈥塼辞迟补濒鈥塧蝉蝉别迟蝉}}\\ =\frac{拢125}{拢5,557}\\ =2.2\%\end{array}$

Calculating return on asset for Kimc$\begin{array}{c}\text{搁别迟耻谤苍鈥塷苍鈥塧蝉蝉别迟}=\frac{\text{狈别迟鈥塱苍肠辞尘别}}{\text{础惫别谤补驳别鈥塼辞迟补濒鈥塧蝉蝉别迟蝉}}\\ =\frac{\$297}{\$4,696}\\ =6.32\%\end{array}$

Calculating profit margin on sales for Liberty

$\begin{array}{c}\text{笔谤辞蹿颈迟鈥尘补谤驳颈苍鈥塷苍鈥塻补濒别蝉}=\frac{\text{狈别迟鈥塱苍肠辞尘别}}{\text{罢辞迟补濒鈥塺别惫别苍耻别蝉}}\\ =\frac{拢125}{拢741}\\ =16.9\%\end{array}$

Calculating profit margin on sales for Kimco

$\begin{array}{c}\text{笔谤辞蹿颈迟鈥尘补谤驳颈苍鈥塷苍鈥塻补濒别蝉}=\frac{\text{狈别迟鈥塱苍肠辞尘别}}{\text{罢辞迟补濒鈥塺别惫别苍耻别蝉}}\\ =\frac{\$297}{\$517}\\ =57.4\%\end{array}$

Calculating Asset turnover for Liberty

$\begin{array}{c}\text{础蝉蝉别迟鈥塼耻谤苍辞惫别谤}=\frac{\text{罢辞迟补濒鈥塺别惫别苍耻别蝉}}{\text{础惫别谤补驳别鈥塼辞迟补濒鈥塧蝉蝉别迟蝉}}\\ =\frac{拢741}{拢5,577}\\ =1.3\end{array}$

Calculating Asset turnover for Kimco

$\begin{array}{c}\text{础蝉蝉别迟鈥塼耻谤苍辞惫别谤}=\frac{\text{罢辞迟补濒鈥塺别惫别苍耻别蝉}}{\text{础惫别谤补驳别鈥塼辞迟补濒鈥塧蝉蝉别迟蝉}}\\ =\frac{\$517}{\$4,696}\\ =1.1\end{array}$

Kimco is outperforming Liberty in terms of return on assets (ROA). The fundamental reason for this disparity is a profit margin that is more than three times that of Liberty. While Liberty has a larger asset turnover (.13 vs.11), the smaller profit margin leads to only a 2.2 percent return on investment (ROI).

It is possible to argue that assets and equity are inflated in comparison to GAAP. The revaluation adjustment raises Liberty's asset values and equity in the item in (b) above. To make Liberty's reported figures comparable to those of a U.S. corporation like Kimco, you'd have to subtract the revaluation excess from Liberty's assets and equity.

For example, after adjusting Liberty鈥檚 assets downward by the amount of the revaluation reserve, Liberty鈥檚 ROA increases to:

$\begin{array}{rcl}ROA& =& \frac{NetIncome}{Averagetotalassets-RevaluationSurplus}\\ & =& \frac{125}{5,577-1,952}\\ & =& 3.45\%\end{array}$

This is still lower than Kimco鈥檚 ROA, but the gap is narrower after adjusting for differences in revaluation.

Note: Adjusting Kimco's assets to fair value is another technique to make Liberty and Kimco comparable. This method might be used to talk about the trade-off between relevance and accuracy in representation.