Chapter 4-table 9: Do financial statements help in Financial decisions and corporate valuation

Table 9: Distribution of the Profit margin by period

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----------Bank-----------------2004------2005-------2006------2007------- 2008
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1. Compass Group PLC------0.015------0.019------0.028-----0.050------0.039

2. Toronto Dominion Bank-0.117-------0.114-------0.206-----0.163------0.152

3. Harris Corp---------------0.053-------0.067------0.068-----0.113-------0.084

4. Morgan Stanley----------0.116--------0.106------0.089-----0.038------0.030

5. Boeing Co----------------0.036-------0.048------0.036----- 0.061------0.044


Table 9 shows the distribution of the Profit margin of the three selected banks by period. It reveals that Compass Group PLC have very low profit margin. In fact, it just ranges from 1% to 5% only as evidenced by the values 0.015 or 1.5%, 0.019 or 1.9%, 0.028 or 2.8%, 0.050 or 5.0%, and 0.039 or 3.9% respectively. This means that the company earned but little. This implies that the company needs to enhance earning strategy to uplift income.

Toronto Dominion Bank has the maximum profit margin in every succeeding period. This bank has a value of 0.117 or 11.7%, 0.114, 11.4%, 0.206, 20.6%, 0.163 or 16.3% and 0.152 or 15.2%. This means that the company earned a lot compared to the other four selected banks of the study. This implies that the strategy is consistent annually. However, there should be a space for improvement to maintain or increase profit margin.

The table also reveals that in 2004, Harris Corp profit margin has a value of 0.053 or 5.3% which increased in 2008 by 0.084 or 8.4%. This means that the company earned very minimal amount. This also means that financial management has to do improvisation. Otherwise, it must have a strategy for intensified earnings.

Morgan Stanley has decreasing profit margin annually as evidenced by the values 0.116 or 11.6%, 0.106 or 10.6%, 0.089 or 8.9%, 0.038 or 3.8% and 0.030 or 3.0% respectively. This means that the marketing strategy was failure. In case this will not be corrected, the company will experience a continuous dive.

Boeing Co has very minimal profit margin as compared to the other four selected banks in this study. In fact it has profit margin values of 0.036 or 3.6%, 0.048 or 4.8%, 0.036 or 3.6%, 0.061 or 6.1% and 0.044 or 4.4% respectively. This means that the company needs to improve earning abilities.

Toronto Dominion Bank has a good profit margin among the four companies. This apparently means the bank has been efficiently employing a successful strategy for earning.
However, overall, the earning strategies adopted by the banks under study are not apt for revenue generation.