Return on asset gives an idea as to how efficiently company is to generate revenue by using assets. Comparing the ratios, it is obvious that return on asset declined over these years. In 2010, the ROA was 7.07% indicating that every dollar in asset generated about seven cents in profit, which is reletive high compared to that in 2013 where every dollar in asset gererated 0.75 cent. Return on equity generally measures that the amount of profit generate relevant with how much shareholders invest. Amazon had a lower ROE in year 2013 compared to year 2010, which illustrated that every dollar shareholders invested generated lower net income.
What at first seemed to be an economic slump turned into a brutal crisis, and all eyes looked to the Government and Federal Reserve to help the economy. With the large amount of debt the economy faced the Federal Reserve stepped in and bailed out the banks in an attempt to smooth over the financial struggles of the economy. The banks that survived took precautionary measures, making it difficult for businesses and consumers to borrow (Love, 2011). Thus leading to businesses failing and less jobs being created. The large amount of debt had also taken its toll on the job market.
It is hypothesized that the bank and other financial institutions are still struggling in the industry, due to several reasons. The research question in this paper is: What led to the mortgage down fall since the recent recession that occurred in 2008. In a research article by (Zhu, 2013), there are several causes of the sub-prime mortgage crisis. The author lists the following five contributing factors: The Federal Reserve abets the bubble, mortgage companies make loans perfunctorily, carefully packaged investment bank, hedge funds seeking income, Credit Company’s default assessment. It is hypothesized that because the Federal Reserve were afraid that the bursting of the internet bubble and other crisis events might lead the US economy into a prolonged recession, hence carried out a series of continued policies of interest rate cutting (Wolf and Ian, 2006).
The biggest decline was seen is accounts payable which decreased by $170,500 to $230,000, a decline of 42.6 %. Activity: The inventory turnover is almost half compared to the industry average, although it managed to increase by 0.3 compared to 2002. The company needs to maintain a constant cost of goods sold and at the same time manage inventory more efficiently to maintain market competitiveness. The average collection period also increased slightly to 58 days, three days increase compared to 2002. The company needs to negotiate or persuade on efficient payment methods to customers to decrease the collection period down to industry average.
According to the Commerce Department, the total value of goods and services slowed to 2.3% with a previous rate of 1.8% last year. The gradual decrease in growth indicates that the economy may be reducing to a more sustainable pace, and avoid another intererst rate increase from the Fed. The increase in employment costs may yet sway the Fed to to raise interest rates, but July will be decisive. Consumer consumption has fallen from 6% in increase in 1998 to 4% in 1999. The fall in consumer consumption has had its toll on the GDP as it too has slowed.
The vertical analysis of the balance sheet again highlights the increase in amount of stock held by the company at the end of 2008 and increase in current assets. Interpreting the Ratio Analysis By looking at the ROCE* ratio it is clear that the business has not generated any higher return in the period 2007-2008. Though there is a marginal decrease in the returns (0.14% from 0.16%), however when compared with returns of other competitors Tesco plc has performed much better. Drop in asset utilisation ratio in the year 2008 indicates that the company did not use its assets efficiently to generate sales. As a result profit margin dropped down to 5.91% in 2008 from 6.21% in the year 2007.
On the basis of Consumer Price Index: This has also shown a stark increase from 7.3% to 9% within a year. Money Supply Rate: The money supply rate has lowered to a value of 20.3% from 21.9% in the earlier year. Further moderation is expected to lower it to 17% according to the Annual Policy Statement of April, 2008. Foreign Exchange Reserves: The foreign exchange reserves was depleted by US$ 35.8 billion, and stood at US$ 273.9 billion. Foreign Exchange Rate: There was an 18.9% depreciation of rupee with respect to US Dollar, 0.4% depreciation with respect to Euro, 1.1% depreciation with respect to Pound Sterling and 19.1% depreciation with respect to Japanese Yen.
It has seen a slight decrease in structure of capital from 74.87% in 2014 to 72.72% in 2015, and long-term liability equal about almost triple of equity. Total liability make up about 83% of total asset and this percent exceeds the industry norm (60%). Furthermore, if the gearing ratio continues to increase means the risk of insolvency will be higher. Financial leverage ratio has dropped from 3.66:1 in 2014 to 3.98:1 in 2015, which leads to a lower inherent risk in a change in return on equity. While a lower financial leverage ratio reduces the return on equity.
Domestic wage rates during 1991-95 rose about 11%, on average or about 5% increase in real wages per year, cited as the key factor in the slowdown in growth of labor intensive exports. The real effective exchange rate of the baht is estimated to have appreciated by about 15% during 1995-97, primarily because of the linkage to the US$, which appreciated against the yen. While the above factors suggest that Thailand was losing its edge in low cost, labor intensive exports, these are at best partial explanations for the overall decline in export performance.
However, the company anticipate this trend to inverse over the coming year. Throughout the previous fiscal year, GM informed lower earnings of $2.35 versus $2.93 in the prior year. Matched to where it was a year ago, the stock is still up and by the stock's price rise over the last year has driven it to a level which is slightly costly compared to the rest of its industry.