QUIZ 6 – Financial Management

Analyze the data presented above and discuss which of the industry gives the best
result in your analysis. Consider each financial ratio in your analysis. 
Analysis
 In the account of Price to Earning (P/E), the industry that reached the highest ratio is the Airlines
which shows a percentage of 32.70%. This means the Airlines with high Price Earnings Ratio are
often considered to be growth stocks. This indicates a positive future performance, and
investors have higher expectations for future earnings growth and are willing to pay more for
them. The downside to this is that growth stocks are often higher in volatility, and this puts a lot
of pressure on companies to do more to justify their higher valuation. For this reason, investing
in growth stocks will more likely be seen as a risky investment. Stocks with high P/E ratios can
also be considered overvalued. This is followed by Computer Hardware with a percentage of
24.7% down to 24.0% gained by the Pharmaceuticals industry down to 22.7% in the area of
Retailers. This is followed by the Auto which commits 19.34%. The industry that has the lowest
quantity Price to earnings ratio is the Oil and Gas with a percentage of 12.1% which means that
this industry often considered to be value stocks. It means they are undervalued because their
stock price trade lower relative to its fundamentals. This mispricing will be a great bargain and
 will prompt investors to buy the stock before the market corrects it. And when it does, investors
make a profit as a result of a higher stock price.  
 In the account of Gross margin, the industry Pharmaceuticals was the highest ratio which is
68.2% means that the company will have more money to pay operating expenses like salaries,
utilities, and rent. Since this ratio measures the profits from selling inventory, it also measures
the percentage of sales that can be used to help fund other parts of the business. This is
followed by Computer Hardware which gained a percentage of 6.4% down to 47.5% by the
industry of Auto. Retail came up to 42.9% down to 28.0% by the industry of Airlines. The lowest
Gross margin ratio was be the Oil and Gas gained 17.1% indicates that ratio percentage is below
industry norms and potentially down from your company's prior periods. In essence, the
industry aren’t generating strong sales prices relative to your cost of goods sold, or COGS, which
are your costs to make or acquire products. This is a problem, since you need strong gross profit
to achieve operating and net profits.
 In the account of Profit margin, the industry Pharmaceuticals came up to the highest ratio for
about 22.5% indicating that an industry is successfully producing profit over and above its costs.
The net profit margin is the ratio of net profits to revenues for a company; it reflects how much
each dollar of revenue becomes profit. Each of the firm has more cash to pay for indirect and
other costs such as interest and one-time expenses. This makes it an important ratio for helping
business owners and financing professionals assess a company’s financial health. This is followed
by the Computer Hardware which gained the average ratio of 14.21% down to 14.9% by Auto
next is to Retail with a percentage of 8.4% down to Oil and Gas gained 7.28%. The lowest
average ratio got from an industry of Airlines in which it has only 5.2%. There is a big gap
compared to the other industries ranges from 5-15%. Each of the businesses came from the
industry of Airlines has a low profit margin this means that the selling price for a good or
services isn't much higher than its cost. If the firm has a low profit margin, this implies likely in a
very competitive industry, offering products that aren't highly unique.
 In current ratio, the highest average ratio was about 4.43% in the industry of Pharmaceuticals.
This indicates that each firms of this industry has enough cash. The higher the ratio is, the more
capable you are of paying off your debts and the more liquid the business is. It is more likely to
meet its liabilities. This is followed by the Computer Hardware for about 3.04% down to 2.86%
by the Auto and next is the Oil and Gas came up to 1.65% down to Retail which is about 1.42%.
The lowest average ratio in this account was got in the industry of Airlines with an average of
1.06%. It expresses that each of business firm found in this industry are struggling in terms of
paying short-term obligations since they haven’t enough on hand cash for different obligations
due to some negative factors. This indicates a higher distress or defaults. Therefore, each of the
firms who are struggling with this kind of problem may create some innovations and strategies
in order for them to overcome its losses.
 In the account of Debt to equity ratio, the oil and gas has reached the highest average ratio with
a percentage of 1.281%. This is considered as a higher risk to lenders and investors because it
suggests that the company is financing a significant amount of its potential growth through
borrowing. It is considered more risky to creditors and investors than companies with a lower
ratio. This is followed by an industry of Retail in which it has 1.099% average ratio down to
Airlines with a 0.484% of average. Next was the Pharmaceuticals with an average of 0.424%
down to 0.277% by Auto and lastly, the Computer Hardware was obtained the lowest average of
 Debt to equity ratio which acquires 0.149% implies different firms of the group of this industry
are financially stable businesses.
 In the account of Return on assets, The most gained average ratio was earned by an industry of
Computer Hardware which is about 14.24% indicates that each of its businesses is more
profitable and efficient as compared to the other industries. The higher the ROA number, the
better, because the company is earning more money on less investment. It only makes sense
that a higher ratio is more favorable to investors because it shows that the company is more
effectively managing its assets to produce greater amounts of net income. A positive ROA ratio
usually indicates an upward profit trend as well. This is followed by an industry of Oil and Gas
which gained 14.18% down to 4.01% by Auto to be followed descending to 3.84% obtained by
Airlines over Retail with a percentage of 3.59%. Lastly, the industry of Pharmaceuticals which
obtained 1.67% was acquire the most lowest average Return on assets ratio specifies that  the
company is not able to make maximum use of its assets for getting more profits. A falling ROA
indicates the company might have over-invested in assets that have failed to produce revenue
growth, a sign the company may be in some trouble. Having the lowest Return on assets ratio
may result to Low income of every businesses. A low percentage return on assets indicates that
the company is not making enough income from the use of its assets. In some cases, a low
percentage return may be acceptable. Next, the firm may experience Inefficiency since Low
percentage return on assets may indicate an inefficient use of company facilities, machinery or
fleet. This is especially true if the return on assets percentage is lower than the industry average.
Also firms encounter Poor Management because a company consistently produces a low return
on assets percentage, it may indicate a problem with its strategic management. The company
may be expanding too quickly. If it purchases too much land, buildings and equipment, its assets
and capital expenditures rapidly increase. This might backfire if actual sales and income do not
meet management's growth projections. Management may also use the company's assets
poorly if it inappropriately disperses its production facilities and responsibilities. Consolidation
or the integration of several functions, such as warehousing and order fulfillment, may be a
more efficient solution.
 In the account of Return on Equity, the Auto industry was obtained the highest average ratio
which indicates that it is more successful in generating profit internally. However, it doesn’t fully
show the risk associated with that return. A company may rely heavily on debt to generate a
higher net profit, thereby boosting the ROE higher. This is followed by an industry of Computer
Hardware with a percentage of 14.24% down to 11.42% by the Oil and Gas to be followed
descending to 11.01% by Airlines down to Retail which obtained 8.41%. Lastly, the industry of
Pharmaceuticals which obtained 7.51% which is the lowest average Return on Equity ratio
means that each of the business firms in this industry are becoming less efficient at creating
profits and increasing shareholder value. However, this also indicates that the company is
becoming less efficient at creating profits and increasing shareholder value.