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Gabrielle DiSanto

ACT 264.01
Section II Financial Analysis
Due: 11/14/14
Calculations
1. Short-Term Liquidity:
Current Ratio = Current Assets / Current Liabilities
Year 2012 Current Ratio 5,562,713 / 1,290,232 = 4.38
Year 2013 Current Ratio 5,023,857 / 1,340,312 = 3.75
Quick Ratio = Quick Assets / Current Liabilities
Year 2012 Quick Ratio 2,667,778 + 1,516,175 + 1,008,448 / 1,290,232 = 4.02
Year 2013 Quick Ratio 2,077,590 + 1,330,304 + 979,559 / 1,340,312 = 2.28
2. Long-Term Credit Risk
Debt Ratio = Total Debt (Liabilities) / Total Assets
Year 2012 Debt Ratio 2,497,650 / 17,103,253 = 15%
Year 2013 Debt Ratio 3,674,362 / 16,804,959 = 22%
Interest Coverage Ratio = EBIT (Operating Income) / Interest Expense
Year 2012 Interest Coverage Ratio 566,368 / 45,403 = 12.47
Year 2013 Interest Coverage Ratio 589,926 / 55,688 = 10.59
3. Profitability Measures
ROA = Operating Income / Average Assets
Year 2012 ROA 566,368 / 17,103,253 = 3%
Year 2013 ROA 589,926 / 16,804,959 = 4%

ROE = Net Income / Average Stockholders Equity


Year 2012 ROE 3,950,602 / 14,605,603 = 27%
Year 2013 ROE 1,376,566 / 13,130,597 = 10%
4. Market Value Measures
Price-Earnings Ratio = Current Market Price of One Share / Earnings per Share
Year 2012 Price Earnings Ratio 3.31 / 3.88 = 85%
Year 2013 Price Earnings Ratio 1.30 / 1.35 = 96%
(Earnings per share = net income / Average shares of Capital Stock Outstanding)
Book Value per Share = Common Stockholders Equity / Shares of Common Stock Outstanding
Year 2012 14,605,603 / 1,014,338 = 14.40
Year 2013 13,130,597 / 1,014,338 = 12.94

Since its inauguration in 1994, Yahoo! has impacted the internet by the way of
connecting the things that matters most to its users while on the online. Over time Yahoo!s
financial statements has shown a declining trend. For Yahoo!s last two financial years, I made
my own financial analysis to determine what was going with their financial statements. The first
calculations I made was on Yahoo!s short-term liquidity: current ratio and quick ratio. In my
calculations for Yahoo!s current ratio, I found that there is a decreasing trend from 2012 to
2013, which puts Yahoo! into a weak position. A current ratio analysis means that for every
dollar of current liability Yahoo! has that falls due; $4.38 (2012) or $3.75 (2013) is available to
pay for its obligations. This could possibly be bad for the company because if the ratio lowers
every year the less likely Yahoo! will be able to pay in full for its obligations in the near future.
When calculating for Yahoo!s quick ratio, I found that the trend was more favorable and the
company was in a strong position. At the end of 2012 Yahoo!s quick ratio trend is considered
satisfactory by having a high ratio of 4.02. Although, in 2013 the ratio decreased to 2.28 but is
still considered satisfactory.
The next calculations I made were for long-term credit risks that included debt ratio and
interest coverage ratio. It is better for a company like Yahoo! to have a debt ratio that is lower
since it can mean that the margin of protection for their creditors will have against high
shrinkage of assets. For Yahoo! their debt ratio low, in 2012 it was 15% and 22% in 2013. These
percentages from 2012 to 2013 is considered for Yahoo!s long-term creditors as favorable. For
Yahoo! this will make their debt burden decrease because of their required interest payments also
decreasing too. For Yahoo!s interest coverage ratio, it is on the declining trend but still
favorable. In 2012 the interest coverage ratio was 12, which is considered strong because it has a
ratio higher than 2. In 2013 the ratio dropped down to 11, but still is considered strong. If

Yahoo!s interest coverage ratio continues to drop within the next couple of years, the company
may eventually not earn enough to cover its annual interest obligations.
For the following calculations I did profitability measures such as return on assets and
return of equity. It is very important for Yahoo! to earn a return on funds supplied from all of its
sources. From 2012 to 2013 Yahoo! had an increasing trend for their return of assets by 2012
earning 3% and 2013 earning 4%. This is very good for Yahoo! because it shows that they
earned more on funding, and have their resources under control. On Yahoo!s return to equity
their rate is also strong too with 2012 earning 27% and 10% in 2013. Through these earnings, it
shows that Yahoo! is financially strong. When the return of equity results in a percentage higher
than twelve that means there is a strong trend for the company, and every year when new
products come out it can bring more success to the company.
For my final calculations I did them on market value measures, which included price
earnings and book value per share. Through my calculations for price earnings ratio I had found
that there was an increasing trend. This is a favorable trend for Yahoo! because of the increase in
the market price of shares and earning of more money. By these earnings it reflects upon
Yahoo!s investors expectations, in hopes that it will increase in their future earnings. In the
calculations for the book value per share, Yahoo! had a decrease in trend, which is unfavorable
for this company. This means that Yahoo!s book value got less in value between 2012 and 2013,
and that they lost earnings. In the end for Yahoo!, their financial statements are doing well but
could be better. For being a financially strong company, Yahoo has expanded by bringing out
new products to help bring in revenue. With these expansions more investments are made to help
bring in more value to Yahoo! and still be one of the top search engines on the internet.