Investing in products and services should produce returns so that stockholders, stakeholders, and others are interested in the organization.In this assignment, you will learn about a new product or se
FINANCIAL ANALYSIS 6
Financial Analysis
Rufus Williams
Argosy University
July 26, 2018
FINANCIAL ANALYSIS
The company Dow DuPont Company is one of the American company which formed merger of DuPont and the Dow Chemical August 31st, 2017. The company has become the global chemical firm about sales; the company even split into three publicly traded company which were so diverse, material science, agriculture, and special products. The division of agriculture is called the Corteva Agriscience, the division of material science is called Dow the DuPont is the specialty product. Below is the company income statements (Verdecchia et al., 2017).
| Dow DuPont Inc., Income Statement | ||||||
| Dec-17 | Dec-16 | Dec-15 | Dec-14 | Dec-13 | ||
| Net Sales | 63484 | 53458 | 53500 | 48778 | 58080 | |
| Costs of Sales | 50414 | 37500 | 37500 | 45685 | 47464 | |
| Gross Margin | 13070 | 15958 | 16000 | 3093 | 10616 | |
| R&D Expenditures | -2100 | -1208 | -1100 | -1178 | -1850 | |
| selling and general administrative | -4000 | -3300 | -3210 | -3546 | -2157 | |
| Amortization of intangibles | -1013 | -545 | -400 | -425 | -1685 | |
| Restructuring, Goodwill impairment and assets charges | -3280 | -500 | 525 | -578 | -458 | |
| Integration and separation costs | -1100 | -1103 | -975 | -845 | 1758 | |
| Asbestos-related charge | -524 | -548 | -689 | |||
| Total | -11493 | -7180 | -5708 | -7261 | -4392 | |
| Operating Income | 1577 | 8778 | 10292 | -4168 | 6224 | |
| Sundry Income, net | 756 | 258 | 1250 | 1571 | 1252 | |
| Interest expense and amortization of debt discount | 958 | 125 | 548 | 468 | 458 | |
| Income From Continuing operations before Income | 1714 | 383 | 1798 | 2039 | 1710 | |
| Loss from discount operations, net of tax | -77 | -85 | -64 | -784 | -84 | |
| Net Income | 1637 | 298 | 1734 | 1255 | 1626 | |
| Net Income to no controlling | -132 | -85 | -89 | -76 | -33 | |
| Net income attributable Dow DuPont Inc. | 1505 | 213 | 1645 | 1179 | 1593 | |
| Preferred Stock Divided | -345 | -345 | -345 | -345 | -345 | |
| Net Income | 1160 | -132 | 1300 | 834 | 1248 | |
the gross margin for the past five years indicates that the company has been performing very well since after all the expenses have been deducted 2017 had the net income of 1160 which was a significant improvement from 2016. 2015 was the year that the firm had a lot of expenses which made the company have a net loss of -132 (Verdecchia et al., 2017).
The following financial ratios are essential to illustrate the financial position of the company, starting with the higher the liquidity ratios indicate that the company liquid asset can cover the company’s liability, therefore, the higher the ratio of the company liquidity the better the firm can cover the liabilities. The table below illustrates the current ratio for the company for over five years; the liquidity ratio is above 1.9 to 2.8 which is very high for the company meaning that current assets can cover the liabilities. The quick ratios above indicate that the current company assets are measuring how the current assets are measuring the liabilities (Verdecchia et al., 2017).
| Dow DuPont Inc., liquidity ratios | |||||
| 31-Dec-17 | 31-Dec-16 | 31-Dec-15 | 31-Dec-14 | 31-Dec-13 | |
| Current ratio | 1.9 | 1.87 | 2.17 | 2.08 | 2.08 |
| Quick ratio | 1.3 | 1.23 | 1.45 | 1.2 | 1.2 |
| Cash ratio | 0.56 | 0.53 | 0.77 | 0.5 | 0.49 |
The table below shows how the current ratio of the company relates to that of the competitors in the company, from the current ratio analysis of competitors are; LyondellBasell Industries N.V has the highest, had the highest current ratios ranging from 2.13 to 2.56 which is the best level in the industry. While Praxair Inc. has the lowest level of quick ratio ranging from 0.96 to 1.16 while Dow DuPont has the average level (Verdecchia et al., 2017).
| Dow DuPont Inc., Current Ratio | |||||
| 31-Dec-17 | 31-Dec-16 | 31-Dec-15 | 31-Dec-14 | 31-Dec-13 | |
| Selected Financial Data (USD $ in millions) | |||||
| Current assets | 49,879 | 23,723 | 24,586 | 24,356 | 24,866 |
| Current liabilities | 26,229 | 12,635 | 11,225 | 11,692 | 11,987 |
| Ratio | |||||
| Current ratio | 1.99 | 1.87 | 2.09 | 2.07 | 2.07 |
| Benchmarks | |||||
| Current Ratio, Competitors | |||||
| LyondellBasell Industries N.V. | 2.44 | 2.13 | 2.25 | 2.17 | 2.56 |
| Praxair Inc. | 0.96 | 1.16 | 1.28 | 1.11 | 1.08 |
| Current Ratio, Sector | |||||
| Chemicals | 1.9 | 1.86 | 2.22 | 1.8 | 2.2 |
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The trend for the Dow DuPont company is illustrated in the table below, indicating the profitability, rate of tax, the asset turnover, Net Margin %, Return on Assets % ranging from 5.36, in 2016 to 10.76 in 2017. The financial leverage of 3.18 in 2017 to 1.92. ROE percent, with the ratio of 36.7 in 2015 to 2.29 (Epstein, 2018).
| Dow DuPont Inc. Trends in the financial ratios | ||||
| Profitability | 2015-12 | 2016-12 | 2017-12 | TTM |
| Tax Rate % | 21.56 | 0.2 |
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| Net Margin % | 14.85 | 8.22 | 2.43 | 2.43 |
| Asset Turnover (Average) | 0.72 | 0.64 | 0.45 | 0.45 |
| Return on Assets % | 10.76 | 5.36 | 1.08 | 1.08 |
| Financial Leverage (Average) | 3.18 | 3.17 | 1.92 | 1.92 |
| ROE % | 36.75 | 16.72 | 2.29 | 2.29 |
| ROI fund % | 20.77 | 11.95 | 2.22 | 2.22 |
| Coverage interest | 12.5 | 6.12 | 2.2 | 2.2 |
References
Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts. Routledge.
Verdecchia, A., Harrington, R. M., & Kirkpatrick, J. D. (2017, December). Source parameters of the 1999 Osa peninsula (Costa Rica) earthquake sequence from spectral ratios analysis. In AGU Fall Meeting Abstracts.
