The financial statements analysis helps to determine and examine the performance of an organization. Abcam is a branded organization which provides wide range of products which includes secondary and primary antibodies, proteins, biochemical, lysates, immunoassays, peptides and other kits. The number of employees of the company is more than 500. Novozymes manufactures wide of range of microorganisms and industrial enzymes (Appannaiah, Reddy and Putty, 2010) . The increase in population imposes significant impact on the natural resources and Novozymes helps address the challenges. The company has more than 6000 employees. Both the companies have built its reputation.
The financial analysis has been done of the companies Abcam and Novozymes to compare their financial strengths and weakness
Novozymes
The table in appendix shows that the sales revenue of Novozymes has increased from the year 2014 to 2016 which means the company is generating revenue with the help of efficient utilization of resources and business operations. The expenses on the research and development show slight differences from the year 2014 to 2016 (Britton and Waterston, 2013). The profits from operations have also been increased which means the operating expenses are less than the profit. The net profit margin has increased during the period which shows an increase in the profitability of the company. The cash flows from the operating activities has decreased which means the inflow of cash is less than the outflow of cash. The total asset value has decreased in the initial period, and again it has increased in the year 2016. The number employees in the organization show a slight difference (Besley, 2016)
Abcam
The table in appendix shows that the sales revenue of Abcam has been increased from the year 2014 to 2016, and it is much higher than the sales revenue of Novozymes. The research and development expense has also been increased which means the company is investing funds to increase its productivity. The operating profits have been increased, and it is higher than the operating profit of Novozymes. The company is generating profit from business operations, and the result shows high differences (Helbæk, Lindset and McLellan, 2010). The net profit margin of Abcam shows a decrease in the profits initially and again it has increased which shows a positive sign. The cash flow from operating activities has been increased which means inflow is more than the outflow of cash. The profits are much higher than Novozymes which shows efficient management of all the operations. The total assets of the company have increased, and it is much more than Novozymes, and the average number of employees are also high. The overall performance of Abcam is much better than the Novozymes.
Novozymes
The table in appendix shows that the gross profit margin of Novozymes has increased in the initial period, and again it has decreased in the year 2016. The performance of the company has slightly decreased over the period. The operating profit margin has increased from the year 2014 to 2016 which means the profits are generated from the business operations (Higgins, 2016). The net profit margin has been increased showing an increase in profits from operations. The company is generating profits over the period. The asset turnover has decreased slightly which shows the utilization of the assets. The return on capital employed has increased in the initial period, and again it has decreased slightly. The returns on the shareholder’s funds have decreased slightly. The profit per employee has been increased over the period which shows the efficient utilization of the employees.
Abcam
The table in appendix shows that the the gross profit margin of Abcam shows slight differences with a decrease in the values. The gross profit has decreased over the period but is higher than the Novozymes. The operating profit margin has been decreased over the period which shows a decrease in the operating profits of the company, and it is lower than the operating profit of Novozymes. The net profit margin has decreased over the period which shows a decrease in the profitability, and it is lower than the net profit margin of Novozymes (Palepu, Healy and Peek, 2016). The asset turnover ratio has also been decreased showing the inefficient utilization of the assets. The asset turnover ratio of Abcam is below the ratio of Novozymes. The return on capital employed has been decreased over the period, and it is lower than the value of Novozymes which shows that the company is generating less returns from the investment. The profit per employee has also been decreased, and it is less than Novozymes which shows the company is not efficient to utilize its employees. The results show that the Abcam is not performing well in comparison to Novozymes.
Novozymes
|
Working capital |
2016 |
% change |
2015 |
% change |
2014 |
||
|
For the year |
|||||||
|
Inventory days |
150.95 |
6.48% |
141.76 |
-5.57% |
150.12 |
6.48% |
-5.57% |
|
Debtor days should be 69,2 |
69.17 |
3.73% |
66.68 |
1.43% |
65.74 |
3.73% |
1.43% |
|
Trade Creditor days |
72.44 |
-1.97% |
73.89 |
-4.19% |
77.12 |
-1.97% |
-4.19% |
Table: Working capital
Analysis:
The inventory days has decreased initially and again it has increased in the year 2016. The debtor days has increased over the time which means the company is taking time collect its due amounts. The trade credit days has decreased over the period which means the company is taking less time to pay the due amounts (Parrino, 2015).
Abcam
|
Working capital |
2016 |
% change |
2015 |
% change |
2014 |
|
For the year |
|||||
|
Inventory days |
140.4 |
-17.41% |
170 |
18.61% |
143.33 |
|
Debtor days |
43.1 |
23.50% |
34.9 |
-31.43% |
50.90 |
|
Trade Creditor days |
30.3 |
-24.44% |
40.1 |
10.45% |
36.31 |
Table: Working capital
Analysis:
The inventory days has increased initial, and again it has decreased in the year 2016. The debtor days has decreased increased initially and again it has increased which shows that the company is taking the time to collect its due time. However, the company is collecting much faster than the Novozymes (Powers and Needles, 2012). The trade creditors days has been increased initially and again it has decreased which means the company is paying its creditors faster than the Novozymes.
Novozymes
|
Liquidity |
2016 |
% change |
2015 |
% change |
2014 |
|
For the year |
|||||
|
Current ratio |
1.79 |
-3.66% |
1.86 |
0.43% |
1.86 |
|
Acid test/ Quick ratio |
1.10 |
-6.45% |
1.17 |
-9.93% |
1.30 |
Table: Liquidity ratios
Analysis:
The current ratio and quick ratio shows the ability of the organization to pay the due amounts. The current ratio below one means that it would be difficult for the company to pay the due amounts. The current ratio of the company has decreased, but it is less than one which means the good financial health of the company (Spiceland, 2010). The quick ratio has decreased over the period.
Abcam
|
Liquidity |
2016 |
% change |
2015 |
% change |
2014 |
|
For the year |
|||||
|
Current ratio |
3.59 |
-24.74% |
4.77 |
-11.70% |
5.40 |
|
Acid test/ Quick ratio |
3.00 |
-21.67% |
3.83 |
-15.37% |
4.53 |
Table: Liquidity ratios
Analysis:
The current ratio of Abcam has been decreased over the period but it more than three. The current ratio value above three indicates that the company is not efficiently utilizing its assets. The quick ratio value is also high than the quick ratio of Novozymes (Stice and Stice, 2014). The liquidity ratios show that the performance of Abcam is not good in comparison to Novozymes.
Novozymes
|
Solvency |
2016 |
% change |
2015 |
% change |
2014 |
|
For the year |
|||||
|
Interest cover |
59.79 |
301.77% |
14.88 |
-47.67% |
28.44 |
|
Gearing (Total Debt/Shareholder’s Fund) |
0.16 |
45.45% |
0.11 |
-34.30% |
0.17 |
Table: Solvency ratios
Analysis:
The interest coverage ratio of Novozymes has been increased over the period which means the company is paying the interest expenses. The gearing ratio has decreased initially and again it has increased which means the debt level has increased in the year 2016 (Subramanyam, 2014).
Abcam
|
Solvency |
% change |
% change |
|||
|
For the year |
|||||
|
Interest cover |
The company has no/or very little gearing |
||||
|
Gearing (Total Debt/Shareholder’s Fund) |
Table: Solvency ratios
Analysis:
The solvency ratio shows that the company Abcam gas no or very little debts. Thus it is good that the company has no or little debt level.
Novozymes
|
Shareholder’s view |
2016 |
% change |
2015 |
% change |
2014 |
|
For the year |
|||||
|
Return on equity |
26.00% |
6.69% |
24.37% |
8.86% |
22.38% |
Table: Shareholder’s view
Analysis:
The return on equity of Novozymes has been increased from the year 2014 to 2016 which shows that the company is generating returns for the shareholders.
Abcam
|
Shareholder’s view |
2016 |
% change |
2015 |
% change |
2014 |
|
For the year |
|||||
|
Return on equity |
14.3% |
-18.29% |
17.5% |
-7.01% |
18.82% |
Table: Shareholder’s view
Analysis:
The return on equity of Abcam has decreased over the period which means the company’s ability to generate returns has decreased over the period. The return on equity of Abcam is less than the return on equity of Novozymes (Weil, 2017).
Porter’s five forces
The porter five forces help to determine and evaluate the competitive power of the company. The porter five forces of Adcam is as follows:
Conclusion
The financial ratios performance of both the companies. The profitability ratios show that the profit margin of Abcam is slightly higher than the Novozymes. The liquidity ratio shows that Abcam is not utilizing its resources appropriately in comparison to Novozymes. The solvency ratio shows that debt level of Abcam is lower than the Novozymes. The shareholder’s view depicts that the return on equity of Abcam is lower than Novozymes. Overall the performance of Abcam is not so good in comparison to Novozymes.
References
Appannaiah, H., Reddy, P. and Putty, R. (2010). Financial accounting. Mumbai [India]: Himalaya Pub. House.
Besley, S. (2016). Corporate finance. [Place of publication not identified]: Cengage Learning.
Britton, A. and Waterston, C. (2013). Financial accounting. Harlow: Financial Times Prentice Hall.
Helbæk, M., Lindset, S. and McLellan, B. (2010). Corporate finance. Maidenhead, Berkshire: Open University Press/McGraw-Hill Education.
Higgins, R. (2016). Analysis for financial management. London: McGraw-Hill Education – Europe.
Palepu, K., Healy, P. and Peek, E. (2016). Business analysis and valuation. Andover, Hampshire, United Kingdom: Cengage Learning EMEA.
Parrino, R. (2015). Corporate Finance. Singapore: John Wiley & Sons.
Powers, M. and Needles, B. (2012). Financial accounting. [Mason]: South-Western, Cengage Learning.
Spiceland, J. (2010). Intermediate accounting. Toronto, ON: McGraw-Hill Ryerson.
Stice, J. and Stice, E. (2014). Intermediate accounting. Mason: South-Western/Cengage Learning.
Subramanyam, K. (2014). Financial statement analysis. New York: McGraw-Hill Education.
Weil, R. (2017). Financial accounting. [Place of publication not identified]: Cengage Learning.
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