Chapter 4-table 10: Do financial statements help in Financial decisions and corporate valuation

Table 10: Distribution of Return on Assets by period
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Bank--------------------------2004------2005------2006------2007------2008
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1. Compass Group PLC------0.021------0.023------0.039-----0.080-----0.064

2. Toronto Dominion Bank-0.006------0.006------0.012-----0.010------0.007

3. Harris Corp----------------0.060------0.082------0.076-----0.109------0.097

4. Morgan Stanley-----------0.006------0.005------0.007-----0.003------0.003

5. Boeing Co-----------------0.033------0.043------0.043------0.069------0.050
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Table 10 shows the distribution of Return on Assets by period. It reveals that only Harris Corp has the highest return on assets as evidenced by the values 0.060 or 6%, 0.082 or 8.2%, 0.076 or 7.6%, 0.109 or 10.9%, and 0.097 or 9.7% respectively. This means that the net income is increasing annually.

The Compass Group PLC has a return on assets of 0.021 or 2.1%, 0.023 or 2.3%, 0.039 or 3.9%, 0.080 or 8.0% and 0.064 or 6.4% respectively. It is notable that the Compass Group PLC returns on assets in 2008 decreased. This is because as the net income decreases and Total assets increase. The Compass Group PLC has very minimal returns on assets which mean that this company is not so attractive.

The Toronto Dominion Bank has return on assets of 0.006 or .6%, 0.006 or .6%, 0.012 or 1.2%, 0.010 or 1.0%, and 0.007 or 0.7% respectively. It is notable that the return on assets of the Toronto Dominion Bank is not consistently increasing nor decreasing. This means the net income is not stable and the total debts are inconsistent annually.

It is also notable that the Morgan Stanley has very low return on assets as evidenced by the values 0.006 or 0.6%, 0.005 or 0.5%, 0.007 or 0.7%, 0.003 or 0.3%, 0.003 or 0.3% respectively. This means that the company is not that attractive to invest and it also reveals that there is decreasing net income, total assets, and total liabilities from 2007 to 2008 which means that in case of investor interest, they must take the high risk.

Boeing Co had a decrease on return on assets from 2007 to 2008 with an increment of 1.9% (6.9%-5.0%), however, the return assets on 2008 was higher than 2004 with 3.3% only. This means that the company has improved but very minimal especially in terms of net income.