The Comprehensive Guide on How to Read a Financial Report: Wringing Vital Signs Out of the Numbers, + Website

CHAPTER 13

OUR CASE STUDY—COMPANY UPDATES AND ASSESSMENTS

The Big Picture—Comparing Both Companies

To start our comparison we should note that it might be helpful to fast forward to Chapter 22, which discusses key financial statement ratios and performance measurements. A number of the ratios and measurements covered in this chapter are used as a base reference point when comparing the operating results of HSI and TTI.

Exhibit 13.1 provides a macro-level comparison of our two case study companies’ operating results for the fiscal year ending 12/31/12. We’ve only summarized certain key operating results and trends for ease of presentation and to emphasize certain points. Please refer to Exhibits 13.2 to 13.3 later in this chapter for more detailed support on how the results in Exhibit 13.1 were calculated.

The long and short of our summary analysis appears to be straightforward. That is, with every measurement, HSI has outperformed TTI for the fiscal year ending 12/31/12 as noted below:

• Sales revenue for HSI of $38,281,000 compared to $31,977,000 for TTI (20 percent higher).
• Return on sales of 11.74 percent for HSI compared to 7.35 percent for TTI.
• Net income of $4,493,000 generating basic EPS of $6.42 for HSI compared to net income of $2,351,000 and basic EPS of $4.27 for TTI.
• HSI finished the year with a positive net working capital position of $7,646,000, a current ratio of 1.70, and a debt to equity ratio of 1.17. This compares to negative working capital of $2,779,000, a current ...