Managing Information (Compare the annual reports of two companies)

Managing Information (Compare the annual reports of two companies

2007

Introduction

According to the Enterprise Theory of Accounting , a company is considered as separate legal entity having the rights to make decisions independently despite the fact that company 's capitals might be rented ' from banks or stockholders . Regardless of being the true owners of company 's assets , stockholders cannot interfere with company 's operations without approvals of the executive leaders . Only in certain periodical meetings , the CEO will address stockholders , reporting management 's performance and performance results during the period

p This principle has logically created sound issue of agency , which constitutes the concerns of whether managers and directors using the powers invested in them in the light of stewardship or not . Methods are developed in to give owners of the company certain level of assurance regarding management 's performance

Financial Statements is the company 's way to communicate with the world It is their way to elaborate the company 's condition trough the financial period . Questions like , how is the company growing ? Is it using its resources wisely ? Is it safe to invest our money in it , will be answered by paying attention to the small numbers of financial statements diligently . Financial statements are like companies ' report cards after a year in the school (Schuller

The main parts of a financial statement (Balance Sheet , Income Statements , Cash flow and Retained Earnings Report ) are figures describing the company 's performance over the period . But how could we asses the company 's performance over numbers ? How could numbers form some explicit meaning causing it to describe the company 's overall condition ? The answer is financial ratios

Financial ratios are imperative analysis tool to define management performance and how best have the exploit available resources to maximize shareholders value . The ratios can be compared to similar industry or internal financial figures over a period of time (trend analysis . Beside its function as a tool of historical measurements , the ratios , to some extent , can be functioned as predictive tools also especially to make suggestion on investment opportunities and risks ( Analyzing

Concerning the examination of corporate ' financial statement , this will discuss three issue regarding financial statement of Ted Baker plc and its competitor , NEXT plc . The three issues are the comparison in the 2005 and 2006 results of the business of Ted Baker plc regarding their profitability , working capital position , liquidity the comparison with results of NEXT plc and a review of press articles that influence the achievement of corporate financial results of the two companies , respectively

Comparison of 2005 and 2006 Financial Results of Ted Banker plc

According to annual report of Ted Baker plc , we can assess the corporate ratios : profitability and liquidity ratio as following

Profitability Ratios

Return on Asset (ROA

This ratio shows the company 's ability to produce net income with the calculate the ROA by using following equation

Return on Assets (ROA (Net Income / Average Therefore , ROA for 2006 is

ROA (14 ,416 /73 ,613 ) in ? thousands...