Chapter 4: Do financial statements help in Financial decisions and corporate valuation

Chapter 4

PRESENTATION, ANALYSIS AND

INTERPRETATION OF DATA

The chapter presents the analyses, and interpretation of the data collected from Compass Group PLC, Toronto Dominion Bank, Harris Corp, Morgan Stanley, and Boeing Co balance sheets, income statements, and Cash flows. The formulated questions identified in the problem were used as the bases for the presentation. The sequence of structure includes tables, analysis and interpretation of data of the current study.

Presentation, Data Analyses, and Interpretation

This section systematically presents the informational data from the balance sheets, income statements, and Cash flows data of Compass Group PLC, Toronto Dominion Bank, Harris Corp, Morgan Stanley, and Boeing Co companies. As well, the section brings to fore the systematic examination of the same data to reveal how financial statements help in Financial Decisions and Corporate Valuations. This gathered informational data were treated using Microsoft Excel program. On the other hand, the computations used statistical tools such as: current ratio, return on assets, return on equity, debt to total assets, firm value, and DuPond Framework.

Problem 1: What is the company profile of the selected banks of the United State of America in terms of: a) Net Income, b) Total Assets, c) Total equity, d) Total Debt, e) Total Liabilities, f) Total Revenue, g) Total Cost, h) Current assets, i) Current Liabilities, and j) Market Value?

To answer problem 1, the company profile of the selected banks of the United State of America were collected and presented in succeeding tables.

Table 1 presents the distribution of the company Net Income by period (In Millions of U.S. Dollars).

Table 1: Distribution of the company Net Income by

Period (In Millions of U.S. Dollars)

Bank	2004	2005	2006	2007	2008
1. Compass Group PLC	232	251	367	664	571
2. Toronto Dominion Bank	1513	1724	3714	3304	3154
3. Harris Corp	133	202	238	480	444
4. Morgan Stanley	4531	4939	7472	3209	1707
5. Boeing Co	1872	2572	2215	4074	2702

Table 1 presents the data on the net income of the selected company by period. It reveals that Compass Group PLC has an increasing net income from 2004 to 2007 and decreased in 2008 as evidenced by the values US$232, US$251, US$367, US$664, and US$571 respectively. This means that Compass Group PLC lost US$ 93 millions in 2008.

The net income of Toronto Dominion Bank were decreasing from 2006 to 2008 as evidenced by the values US$1513, US$1724, US$3714, US$3304, and US$3154 respectively. This means that Toronto Dominion Bank lost US$150 millions in 2008.

It also reveals that Harris Corp net income were increasing from 2004 to 2007 but decreased in 2008 as evidenced by the values US$133, US$202, US$238, US$480, and US$444 respectively. This means that Harris Corp lost US$36 millions in 2008.

The net income of Morgan Stanley increased from 2004 to 2006 but decreased in 2007 to 2008 as evidenced by the values US$4531, US$4939, US$7472, US$3209, and US$1707 respectively. This means that Morgan Stanley lost US$1502 millions in 2008.

Boeing Co can be seen to have high net income in 2007 and decreased dramatically in 2008 as evidenced by the values of US$1872, US$2572, US$2215, US$4074, and US$2702 respectively. This means that Boeing Co lost US$ 1372 millions in 2008.

Generally, all of the selected banks net income in 2008 dropped. This implies that it is not profitable to invest in these banking systems which are in the United State of America. Clearly, given this indicator, investors should not take any chances because they will just lose money in 2009.