One of the most effective ways to compare two businesses is to perform a ratio analysis on each company’s financial statements. A ratio analysis looks at various numbers in the financial statements such as net profit or total expenses to arrive at a relationship between each number. For the analysis to make sense, the comparison companies should come from the same industry.
This assignment asks you to compare and contrast the financial performance of Yahoo and Google. More specifically, please prepare a report including the following:
Part I. Prepare a table showing the following ratios for the 2 companies:
1. Profitability ratios
a. Gross margin
b. Operating margin
c. Net margin
d. Return on assets
e. Return on equity
2. Liquidity ratios
a. Current ratio
b. Quick ratio
3. Efficiency ratios
a. Inventory turnover ratio
4. Debt ratios
a. Debt ratio
b. Debt to equity ratio
5. Market ratios
a. Earnings per share
b. Price/earnings ratio
Part II. Briefly compare the two companies for each ratio. Overall, which company is doing better? Why?
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