FINANCIAL ANALYSIS

Financial Statement and Ethics

Financial Statement and Ethics

Introduction

The Food and Beverages Industry is growing at a rapid pace throughout the world. It no longer remains a household affair where a mom used to cook for her children and husband in whatever ways possible. The industry has grown manifolds and has become one of the chief industrial and business segments of the world. The industry of Food and Beverages earns annual revenues of more than a trillion dollars and has been the focus of economic activities throughout the globe. The food and beverage industry has been the mainstay in any country's economy. Whether it is the genetic and bio tech companies, chemical and pesticide firms, restaurants, hotels, inns, or even supermarkets like Kroger, Costco and Wal-Mart; each industry and business segment revolves around Food and Beverages (DePamphilis, 2009).

In the context of presenting a financial analysis of a public sector's food company in the United States, we are focusing on Kraft Foods. It is a public company in the food and beverage industry of the United States, which is listed on the New York Stock Exchange.

The Financial Case of Kraft Foods

Let's compare the proportions of 2008 and 2009 to determine the Kraft's financial health,

Total Revenue

37,843,000,000

EBITDA

8,872,000,000

Operating Income

7,404,000,000

Net Income

4,427,000,000

Total Assets

62,497,000,000

Current Assets

11,666,000,000

Total Liabilities

30,174,000,000

Current Liabilities

11,591,000,000

Long Term Debt

11,351,000,000

Stockholders' Equity

32,323,000,000

Profitability ratios are the projection of how successful the company is managing its assets and debts. In fact, profitability ratios measure the company's ability to generate income or the degree of success the company has generated revenue for a period of time (Graebner, Eisenhardt, 2004). Profitability ratios are indicators of success or failure of business activities.

ROA = Net Income + Interest Expenses/Total Assets

ROA 2009 = (4,397,648+22,969) / 11,817,756

= 37.4%

ROA 2008 = (1,667,985 + 71,943) / 6,592,536

= 26.4%

The return on assets shows that the effectiveness of the assets of the company are working to generate profits. According to the situation of the figures calculated above, we can say that the return on assets has increased (Wu, Zang, 2009). This is a positive sign for the company and its earnings grow in line with assets.

ROE = Net Income + Interest / Common Equity

ROE 2009 = (4,397,648+22,969) / 7,615,512

= 58%

ROE 2008 = (1,667,985 + 71,943) / 3,217,864

= 54%

Return on equity is a comparison of the amount of income and shareholders' equity. This ratio shows investors how much the company has earned in contrast to the amount of capital to shareholders. The evolution of the return on equity is positive. This means that revenues are increasing compared with equity shareholders (Allison, 1984).

Sales Margin = (Sales - Operating Expenses) / Sales

Sales Margin 2009 = (34,937,800 -9,293,962) / 34,937,800 = 73.4%

Sales Margin 2008 = (17,785,896 -5,162,044) / 17,785,896

= 70.9%

Liquidity Ratios

In this section, we focus on the current ratio, as this is the main determinant of corporate liquidity.

Current Ratio = current assets / current liabilities

CR 2009 = 10,883,862/4,151,203

= 2.62

CR 2008= 5,989,452/3,281,588

= 1.82

From the above figures, it is clear that the trend in the current ratio is increasing which means the company faces the ...