Chapter 4-table 12: Do financial statements help in Financial decisions and corporate valuation

Table 12: Distribution of Debt to total assets by period
----------------------------------------------------------------------------------------------
Bank---------------------------2004-------2005-------2006-------2007-------2008
----------------------------------------------------------------------------------------------
1. Compass Group PLC----0.312------0.320-------0.271-------0.252-------0.232

2. Toronto Dominion Bank-0.167------0.142-------0.144-------0.158-------0.190

3. Harris Corp------------------0.185-----0.165-------0.223-------0.256-------0.186

4. Morgan Stanley--------------0.189----0.164--------0.176-------0.223-------0.278

5. Boeing Co--------------------0.217-----0.179--------0.184-------0.139-------0.140
----------------------------------------------------------------------------------------------

Table 12 shows the distribution of Debt to total assets of the selected banks of the United State of America by period. It reveals that Compass Group PLC has a decreased in solvency ratio as evidenced by 0.312 or 31.2%, 0.320 or 32.0%, 0.271 or 27.1%, 0.252 or 25.2% and 0.232 or 23.2% respectively. This is desirable because it has a very definite effect on the company’s ability to obtain additional financing.
It is also notable that the Boeing Co’s solvency ratio decreases from 0.217 or 21.7% to 0.140 or 14.0% in 2004 to 2008. This implies that the company uses significantly less debt.
The Toronto Dominion Bank solvency ratio has minimal increase from 2004 to 2008, approximately 0.167 or 16.7% to 0.190 or 19.0%. This means that the company uses minimal debt.
Harris Corp solvency ratio has very little increased from 2004 to 2008 as evidenced by the values 0.185 or 18.5%, 0.165 or 16.5%, 0.223 or 22.3%, 0.256 or 25.6% and 0.186 or 18.6% respectively. This means that the company increased their debt, but, very minimal.
Morgan Stanley has a continuously increasing solvency ratio with value 0.189 or 18.9%, 0.164 or 16.4%, 0.176 or 17.6%, 0.223 or 22.3%, and 0.278 or 27.8% respectively. However, this increase is not very high. This increase is just right for the market because of the very little financial risk.

Chapter 4-table 11: Do financial statements help in Financial decisions and corporate valuation

Table 11: Distribution of Return on Equity by period
--------------------------------------------------------------------------------------------
Bank------------------------2004-------2005------2006------2007------2008
--------------------------------------------------------------------------------------------
1. Compass Group PLC------0.073------0.087------0.124-------0.240-------0.203

2. Toronto Dominion Bank-0.148-------0.135------0.235-------0.192-------0.124

3. Harris Corp----------------0.104-------0.141------0.143-------0.252-------0.195

4. Morgan Stanley------------0.161-------0.169------0.239------0.103-------0.034

5. Boeing Co------------------0.166-------0.233-----0.467-------0.452--------2.138
--------------------------------------------------------------------------------------------

Table 11 shows the distribution of Return on Equity of the selected banks of the United State of America by period. It is notable that all of the banks have an increasing return on equity from 2004 to 2007 and decreased in 2008. It is also notable that the Return on equity is higher than the return on assets which means that the banks used their equity values for investment. This further implies that each bank added financial risk to itself, but, enhances residual earnings whenever the rate of return on assets exceeds the cost of debt.

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

Table 10: Distribution of Return on Assets by period
----------------------------------------------------------------------------------------
Bank--------------------------2004------2005------2006------2007------2008
----------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------

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.

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

Table 9: Distribution of the Profit margin by period

------------------------------------------------------------------------------------------
----------Bank-----------------2004------2005-------2006------2007------- 2008
------------------------------------------------------------------------------------------
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.

Chapter 4-table 8: Do financial statements help in Financial decisions and corporate valuation

Problem 2: Are the liquidity ratios, the profitability ratios, the solvency ratios used for wage negotiations, takeovers and mergers, and private share purchases?

To answer problem 2, the company liquidity ratio, profitability ratio and solvency ratio were computed and presented in succeeding tables.

Table 8: Distribution of current ratio of the selected banks
---------------------in United State of America
--------------------------------------------------------------------------------
Bank---------------- 2004-------2005-----2006----2007----2008
--------------------------------------------------------------------------------
1. Compass Group
-----------PLC --------0.836------0.718-----0.988-----1.059------0.805
2. Toronto
----Dominion Bank --1.888------1.208-----1.053-----1.133-------0.585
3. Harris Corp-------- 2.833------2.229-----2.004-----1.157-------2.057
4. Morgan Stanley ---1.048-------1.128-----0.862-----0.912------0.696
5. Boeing Co ----------0.752------0.779-----0.774-----0.865------0.840
--------------------------------------------------------------------------------
Table 8 shows the distribution of current ratio of the selected banks in United State of America. It reveals that Compass Group PLC had the ability to pay their balances on time except in 2005 as evidenced by the values 0.836, 0.718, 0.988, 1.059, and 0.805 respectively. This means that there is probability for the company to increase the wages of their employees. Otherwise, the company has the ability to take over another company with the same perspectives. This also means that private investors may purchase stocks of the company.
Toronto Dominion Bank current ratio decreased from 2004 to 2008 as evidenced by the values 1.888, 1.208, 1.053, 1.133, and 0.585. This means that Toronto Dominion Bank may have opted to cut jobs in 2008. This is because the company liabilities increased in 2008. In this case there will be no wage increases for the employees. This company may also opt for mergers to increase company credibility aside from increasing the total assets, total liabilities and common stock equity.
Harris Corp had a good current ratio as evidenced by the value of 2.833, 2.229, 2.004, 1.157, and 2.057 respectively. It is obvious that the value of the current ratio is more than one, meaning their current assets were very high in relation to the current liabilities. This means that the company can pay their bills on time or even before the due time. This also means that company can give wage increase for employees, and can afford to takeover another company.
Morgan Stanley current ratios are 1.048, 1.128, 0.862, 0.912, and 0.696 respectively. It reveals that Morgan Stanley has decreased current ratio in 2008. This means that the current liabilities were higher than the current assets in 2008. This also means that the company paid their debt in 2008. At this period the stocks were issued to settle the liabilities.
Boeing Co has a current ratio value of 0.752, 0.779, 0.774, 0.865, and 0.840 respectively. It is clearly seen in the table that the values in 2007 and 2008 were above 0.80 which means that the company has the ability to pay outstanding debt.

Chapter 4-table 7: Do financial statements help in Financial decisions and corporate valuation

Table 7: Distribution of the company Market Value by
---------------Period (In Millions of U.S. Dollars)
-----------------------------------------------------------------------------
-----Bank------------ 2004-----2005-----2006-----2007-----2008
-----------------------------------------------------------------------------
1. Compass
-----Group PLC-------6454-----6231--------5362 -----4661------4390
2. Toronto
--Dominion Bank----16785----18335-----22780-----25977-----36635
3. Harris Corp--------1680-----1841-------2362------2313-------3106
4. Morgan Stanley---123492---139647---180342----221893----214268
5. Boeing Co---------22165-----20597----12896-----16459------5688
-----------------------------------------------------------------------------
Table 7 shows the distribution of the companies Market Value by period (In Millions of U.S. Dollars). It reveals that the Compass Group PLC experienced decreased market value annually as evidenced by the values US$6454, US$6231, US$5362, US$4661, and US$4390 respectively. This means that the Compass Group PLC market power is getting weak annually.
The Toronto Dominion Bank made a dramatic change in the field of stock market because the company Market Value increased annually as evidenced by the values US$16785, US$18335, US$22780, US$25977, and US$36635 respectively. This means that Toronto Dominion Bank have established good concessions among other companies.
It is also remarkable that Harris Corp improved their market value in 2008 with US$3106. This value is very high in comparison to their 2004 level which was approximately US$1680 only. This means that the bank did plenty of upgrading within the short period.
Morgan Stanley has an increasing market value in 2004 to 2007 but decreased in 2008 as evidenced by the values US$123492, US$139647, US$180342, US$221893, and US$214268 respectively. This means that Morgan Stanley’s stockholders of equity are diminishing.
Boeing Co had a consistent decreasing market value from 2004 to 2006, but it increased from 2007 to 2008 as evidenced by the values US$22165, US$20597, US$12896, US$16459, and US$5688 respectively. This means that the number of shareholders of the bank is increasing.

Chapter 4-table 6: Do financial statements help in Financial decisions and corporate valuation

Table 6: Distribution of the company Total Revenue by
Period (In Millions of U.S. Dollars)
------------------------------------------------------------------------------
-------Bank---------2004----2005----2006----2007----2008
------------------------------------------------------------------------------
1. Compass
Group PLC----------15178----12987----13237----13239----14750
2. Toronto
Dominion Bank----12879----15060----18006----20273----20685
3. Harris Corp------2519-----3001------3475-----4243------5311
4. Morgan Stanley--39017---46581-----70151----84120----56200
5. Boeing Co--------51400---53621-----61530----66387----60925
------------------------------------------------------------------------------

Table 6 shows the distribution of the companies’ Total Revenue by period (In Millions of U.S. Dollars). The Compass Group PLC total revenues are US$15178, US$12987, US$13237, US$13239, and US$14750 respectively. It reveals that there was an increase in 2008 which means that the bank is starting to earn income.
The Toronto Dominion Bank and Harris Corp total revenues increased annually. Toronto Dominion Bank has the following values US$12879, US$15060, US$18006, US$20273, and US$20685. Harris Corp has the following values US$2519, US$3001, US$3475, US$4243, and US$5311 respectively. This means that the banks are maintaining the good image in the stock market.
On the other hand Morgan Stanley and Boeing Co had decreased total revenue in 2008 as evidenced Morgan Stanley has the following values US$39017, US$46581, US$70151, US$84120, and US$56200 while Boeing Co has the following values US$51400, US$53621, US$61530, US$66387, and US$60925 respectively. This means that these banks are losing credibility in the stock market.

Chapter 4-table 5: Do financial statements help in Financial decisions and corporate valuation

Table 5: Distribution of the company Total Liabilities by

Period (In Millions of U.S. Dollars)

Bank	2004	2005	2006	2007	2008
1. Compass Group PLC	7705	8182	6421	5523	6104
2. Toronto Dominion Bank	239940	280942	300193	322259	427464
3. Harris Corp	947	1018	1480	2502	2285
4. Morgan Stanley	719128	869341	1085828	1014140	607981
5. Boeing Co	44938	48937	47055	49982	55065

Table 5 shows the distribution of the company Total Liabilities by period (In Millions of U.S. Dollars). It reveals that the Compass Group PLC have a decrease in total liabilities in 2005 to 2007, but subsequently increased in 2008 as evidenced by the values US$7705, US$8182, US$6421, US$5523, and US$6104 respectively. This means that the reputation of the bank is still in good. However, company financial risk is intensifying because of the increasing liabilities.

It is notable that Toronto Dominion Bank has increasing total liabilities as evidenced by the values US$239940, US$280942, US$300193, US$322259, and US$427464 respectively. This implies that in case of fresh investments, capitalist should be ready to take the relatively high risk considering the very high liabilities.

The total liabilities of Harris Corp in 2004 to 2007 were increasing but decreased in 2008 as evidenced by the values US$947, US$1018, US$1480, US$2502, and US$2285 respectively. This implies that Harris Corp paid their obligations in 2008.

Morgan Stanley’s total liabilities increased from 2004 to 2006 and decreased from 2007 to 2008 as evidenced by the values US$719128, US$869341, US$1085828, US$1014140, and US$607981 respectively. This implies that Morgan Stanley started to pay their liabilities in 2007.

Boeing Co’s total liabilities increased except in 2005 as evidenced by the value of US$44938, US$48937, US$47055l, US$49982, and US$55065 respectively. This means that it will have a continuous increase in total liabilities in every succeeding period.

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

Table 4: Distribution of the company Total Debt by

Period (In Millions of U.S. Dollars)

Bank	2004	2005	2006	2007	2008
1. Compass Group PLC	3402	3548	2545	2086	2068
2. Toronto Dominion Bank	41756	41589	45587	53479	86055
3. Harris Corp	411	406	701	1129	846
4. Morgan Stanley	141230	147065	184406	232711	183281
5. Boeing Co	12200	10727	9538	8217	7512

Table 4 presents the data on the total debt of the selected companies by period. It reveals that Compass Group PLC total debt decreased as evidenced by the values US$3402, US$3548, US$2545, US$2086, and US$2068 respectively. This means that Compass Group PLC paid their debts annually.

The total debt of Toronto Dominion Bank was increasing from 2005 to 2008 as evidenced by the values US$41756, US$41589, US$45587, US$53479, and US$86055 respectively. This means that Toronto Dominion Bank incurred annual debt.

It is also notable that the total debt of Harris Corp was increasing from 2004 to 2007 and decreased in 2008 as evidenced by the values US$411, US$406, US$701, US$1129, and US$846 respectively. This means that Harris Corp paid their debt in 2008.

The total debt of Morgan Stanley was increasing from 2004 to 2007, but decreased in 2008, as evidenced by the values US$141230, US$147065, US$184406, US$232711, and US$183281 respectively. This means that Morgan Stanley paid their debt in 2008.

Boeing Co total debt decreased from 2004 to 2008 as evidenced by the values US$12200, US$10727, US$9538, US$8217, and US$7512 respectively. This means that Boeing Co pay debt annually.

Generally, only Toronto Dominion Bank had increased total debt. On the other hand Compass Group PLC and Boeing Co had decreased total debt. The Harris Corp and Morgan Stanley had decreased total debt in 2007 to 2008.

Chapter 4-table 3: Do financial statements help in Financial decisions and corporate valuation

Table 3: Distribution of the company Total equity by

Period (In Millions of U.S. Dollars)

Bank)	2004	2005	2006	2007	2008
1. Compass Group PLC	3200	2902	2973	2769	2820
2. Toronto Dominion Bank	10188	12759	15788	17213	25472
3. Harris Corp	1279	1439	1662	1904	2274
4. Morgan Stanley	28206	29182	35364	31269	50831
5. Boeing Co	11286	11059	4739	9004	-1264

Table 3 presents the data on the total equity of the selected companies by period. It reveals that in 2004 Compass Group PLC total equity was US$ 3200 Millions U.S. dollars. But, this dropped to US$2902 in the subsequent year. There was a minimal rebound in 2006 However, it again fell back to its lowest level in 2007 as evidenced by the values US$3200, US$2902, US$2973, US$2769, and US$2820 respectively. This means that Compass Group PLC earned US$ 51 millions in 2008.

The total equity of Toronto Dominion Bank was increasing from 2004 to 2008 as evidenced by the value of US$10188, US$12759, US$15788, US$17213, and US$25472 respectively. This means that Toronto Dominion Bank earned US$ 8259 millions in 2008.

It is also notable that the total equity of Harris Corp was increasing from 2004 to 2008 as evidenced by the values US$1279, US$1439, US$1662, US$1904, and US$2274 respectively. This means that Harris Corp earned US$ 370 millions in 2008.

The total equity of Morgan Stanley increased from 2004 to 2008, except for 2007, as evidenced by the values US$28206, US$29182, US$35364, US$31269, and US$50831 respectively. This means that Morgan Stanley earned US$ 19562 millions in 2008.

It also reveals that Boeing Co has high net income in 2007, but, decreased dramatically in 2008 as evidenced by the values US$11286, US$11059, US$4739, US$9004, and US$-1264 respectively. This means that Boeing Co lost US$ 10268 millions in 2008.

Generally it reveals that all of the selected banks have good equity distribution except for Boeing Co. The company therefore has very low total equity and highly deficient in 2008.