ratio analysis of yahoo

8/3/2019 Ratio Analysis of Yahoo

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ASSIGNMENT

OF

Financial statement

Analysis

Project name: RatioAnalysis of

Submitted by: Safeer Ahmad

Submitted to: sir Muhammad

yasir

UNIVERSITY OF WAH, WAH CANTT

Created by: SAFEER AHMAD

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The History of Yahoo! - How It All Started:

Yahoo! began as a student hobby and evolved into a global brand that has changed

the way people communicate with each other, find and access information and

purchase things. The two founders of Yahoo!, David Filo and Jerry Yang, Ph.D.

candidates in Electrical Engineering at Stanford University started their guide in a

campus trailer in February 1994 as a way to keep track of their personal interests on

the Internet. Before long they were spending more time on their home-brewed lists of

favorite links than on their doctoral dissertations. Eventually, Jerry and David's listsbecame too long and unwieldy, and they broke them out into categories. When the

categories became too full, they developed subcategories ... and the core concept

behind Yahoo! was born.

The Web site started out as "Jerry and David's Guide to the World Wide Web" but

eventually received a new moniker with the help of a dictionary. The name Yahoo! is

an acronym for "Yet AnotherHierarchical Officious Oracle," but Filo and Yang insist

they selected the name because they liked the general definition of a yahoo: "rude,

unsophisticated, uncouth." Yahoo! itself first resided on Yang's student workstation,

"Akebono," while the software was lodged on Filo's computer, "Konishiki" - both

named after legendary sumo wrestlers.

Jerry and David soon found they were not alone in wanting a single place to find useful

Web sites. Before long, hundreds of people were accessing their guide from well

beyond the Stanford trailer. Word spread from friends to what quickly became a

significant, loyal audience throughout the closely-knit Internet community. Yahoo!

celebrated its first million-hit day in the fall of 1994, translating to almost 100

thousand unique visitors.


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Due to the torrent of traffic and enthusiastic reception Yahoo! was receiving, the

founders knew they had a potential business on their hands. In March 1995, the pair

incorporated the business and met with dozens of Silicon Valley venture capitalists.

They eventually came across Sequoia Capital, the well-regarded firm whose most

successful investments included Apple Computer, Atari, Oracle and Cisco Systems.They agreed to fund Yahoo! in April 1995 with an initial investment of nearly $2

million.

Realizing their new company had the potential to grow quickly, Jerry and David began

to shop for a management team. They hired Tim Koogle, a veteran of Motorola and an

alumnus of the Stanford engineering department, as chief executive officer and Jeffrey

Mallett, founder of Novell's WordPerfect consumer division, as chief operating officer.

They secured a second round of funding in Fall1995 from investors Reuters Ltd. and

Softbank. Yahoo! launched a highly-successful IPO in April 1996 with a total of 49

employees.

Today, Yahoo! Inc. is a leading global Internet communications, commerce and media

company that offers a comprehensive branded network of services to more than 345

million individuals each month worldwide. As the first online navigational guide to the

Web, www.yahoo.com is the leading guide in terms of traffic, advertising, household

and business user reach. Yahoo! is the No. 1 Internet brand globally and reaches the

largest audience worldwide. The company also provides online business and

enterprise services designed to enhance the productivity and Web presence of

Yahoo!'s clients. These services include Corporate Yahoo!, a popular customized

enterprise portal solution; audio and video streaming; store hosting and management;and Web site tools and services. The company's global Web network includes 25 World

properties. Headquartered in Sunnyvale, Calif., Yahoo! has offices in Europe, Asia,

Latin America, Australia, Canada and the United States.


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Assets in Millions of Dollars

YEARS 10-Dec 9-Dec 8-Dec 7-Dec 6-Dec

Cash and Equivalents 1,526 1,275 2,292 1,514 1,570

Restrictable Cash - - - - -

Marketable Securities 1,358 2,016 1,160 488 1,032

Receivables 1,029 1,003 1,060 1,056 931

Inventories - - - - -

Prepaid Expenses 433 300 233 67 218Current Deferred Income Taxes - - - 84 -

Other Current Assets - - - 30 -

Total Current Assets 4,346 4,595 4,745 3,238 3,750

Gross Fixed Assets 2,551 2,782 2,305 2,408 1,955

Accumulated Depreciation -898 -1,355 -769 -1,077 -853

Net Fixed Assets 1,653 1,427 1,536 1,332 1,101

Intangibles 256 356 486 611 406

Cost in Excess 3,682 3,640 3,441 4,002 2,969

Deferred Income Taxes - - - 300 -

Other Non-Current Assets 4,992 4,918 3,481 2,747 3,288

Total Non-Current Assets 10,583 10,341 8,944 8,992 7,763

Total Assets 14,928 14,936 13,690 12,230 11,514


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Liabilities in Millions of Dollars

YEARS 10-Dec 9-Dec 8-Dec 7-Dec 6-DecAccounts Payable 162 137 152 176 109

Short Term Debt - - - 750 -

Notes Payable - - - - -

Accrued Expenses - - - 853 1,047

Accrued Liabilities 1,209 1,170 1,140 - -

Deferred Revenues - - - 368 318

Current Deferred Income Taxes 255 411 413 13 -

Other Current Liabilities - - - 140 -

Total Current Liabilities 1,626 1,718 1,705 2,300 1,474

Long Term Debt - - - - 750

Deferred Income Tax 507 494 420 261 19

Other Non-Current Liabilities 56 123 218 123 102

Minority Interest 38 25 18 12 8

Capital Lease Obligations 143 83 77 - -

Preferred Securities of SubsidiaryTrust - - - - -

Preferred Equity OutsideShareholders' Equity - - - - -

Total Non-Current Liabilities 744 725 734 396 879

Total Liabilities 2,370 2,443 2,439 2,697 2,353

Preferred Shareholder's Equity - - - - -

Common Shareholder's Equity 12,558 12,493 11,251 9,533 9,161

Total Equity 12,558 12,493 11,251 9,533 9,161

Total Liabilities & Shareholder's

Equity 14,928 14,936 13,690 12,230 11,514

INCOME STATEMENTS in Millions of Dollars Dec-10 Dec-09 Dec-08 Dec-07 Dec-06


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Operating Revenue 6,325 6,460 7,209 6,969 6,426

Adjustments to Revenue - - - - -

Cost of Revenue -1,977 -2,172 -2,321 -2,287 -2,260

Gross Operating Profit 4,348 4,288 4,888 4,683 4,165

Selling/General/Admin Expense -1,753 -1,826 -2,268 -2,244 -1,851

Research & Development -1,082 -1,210 -1,222 -1,084 -833

EBITDA (Operating Income BeforeDepreciation) 1,513 1,252 1,397 1,355 1,481

Depreciation & Amortization -683 -739 -790 -659 -540

Operating Income 830 514 607 695 941

Interest Income 23 22 86 130 143

Other Income, Net 671 416 594 8 -1

Total Income Before Interest Expense (EBIT) 1,466 825 693 1,000 1,210

Interest Expense - - -9 - -

Income Before Tax 1,466 825 684 1,000 1,210

Income Taxes -222 -219 -259 -337 -458

Minority Interest -13 -7 -6 -3 -1

Net Income from Continuing Operations 1,232 598 419 660 751

Net Income from Discontinued Operations - - - - -

Net Income from Total Operations 1,232 598 419 660 751

Normalized Income 1,290 725 1,013 658

Extraordinary Income/Loss - - - - -

Special Income/Charges -58 -127 -594 2 15

Income from Cum. Effect of Acct Change - - - - -

Total Net Income 1,232 598 419 660 751

RATIO ANALYSIS

WORKING CAPITAL


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Interpretation:

Working capital ratio indicates that how much capital a company has for its daily operation.It is best that ratio should be positive. By calculating the working capital ratio we found that in2006 working g ratio of yahoo is $2276.In 2007 working capital ratio is $938, in 2008 workingcapital ratio is $3,040, in 2009 working capital ratio is $2,877 and in 2010 is $2,720. In first two yearratio is negative which shows that companys current liabilities are greater than its current assets.This means in first two years company short term financial position is not good.

CURRENT RATIO


YEAR WORKING CAPITAL=(C.A - C.L) (in Millions of Dollars)

2006 2276

2007 938

2008 3,040

2009 2,8772010 2,720

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Interpration:


CURRENT RATIO = CURRENT ASSET / CURRENT LIABILITESYEAR CURRENT RATIO

2006 2.544

2007 1.4078

2008 2.7829

2009 2.6746

2010 2.6728

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Current ratio indicates that how much current assets we have to pay liability. This ratiodetermines the short term liquidity position of company. By comparing the results of analysis yearsit is known that for pay $1 of current liability the company have $2.544 rupees of current asset in2006, $1.4078 in 2007, $2.7829 in 2008, $2.6746 in 2009 and $2.6728 in 2010. According to standardcompany financial position is good, but in 2007 not good.

Liquid Ratio


LIQUID RATIO = CURRENT ASSET - INVENTORY PREPAID EXPENSECurrent liabilities

YEAR LIQUID RATIO

2006 2.39

2007 1.37

2008 2.64

2009 2.5

2010 2.40

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Interpretation:Quick ratio indicates that how much quick assets we have to pay current liability. By

comparing the results of analysis years it is known that the quick ratio is $2.39 in 2006, $1.37 in2007, $2.64 in 2008, $2.5 in 2009 and $2.40 in 2010 to pay a current liability of $1. According tostandard company financial position is good, but not in 2007. And in 2008 there is an increase butafter 2008 there is decreasing trend.

ABSOLUTE LIQUID RATIO


ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSET / CURRENTLIABILITES

YEAR ABSOLUTE LIQUID RATIO

2006 1.7652

2007 0.8704

2008 2.02462009 1.9155

2010 1.7736

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Interpretation:Absolute ratio indicates that how much absolute assets we have to meet current obligation. By

comparing the results of analysis years it is known that absolute ratio of yahoo in 2006 is $ 1.7652

to pay a current liability of $1. And $0.8704, $2.0246, $1.7736, $1.9155in 2007, 2008, 2009, and

2010 respectively.

SALES TO WORKING CAPITAL

SALES TO WORKING CAPITAL = NET SALES/AVG. WC

YEAR SALES TO WC RATIO

2006 2.8233

2007 7.4296

2008 6.8009

2009 2.2453

2010 2.3253


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Interpretation:Sales to W.C of yahoo are $2.8233, $7.4296, $6.8009, $2.2453, $2.3253 in 2006,

2007,2008,2009,2010 respectively. Which show that in 2006 company is not performing well but in2007 sales to W.C is $7.4296 which shows Than2006 Company performs well. In 2008 sale to W.Cis $6.8009 which is good but not better than 2007 and in 2008 and 2009 company not performingwell.

A/C REC. T/O RATIO


A/C REC. T/O RATIO=NET.CR SALE/AVG GROSS REC.

YEAR A/S REC. T/O RATO(TIMES)

2006 6.9022

2007 6.5594

2008 6.8009

2009 6.4406

2010 6.1467

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Interpretation:A/R turnover ratio indicates that how many times company makes credit sales during the

period. By calculating the A/R turnover ratio we found that in 2006 we makes 6.9022 times creditsales in 2007 makes 6.5594 times credit sales and 6.8009 times in 2008, 6.4406 times in 2009 and6.1467 times in 2010.

A/C REC. T/O IN DAYS


A/C REC. T/O IN DAYS=NO. OF WORKING DAYS IN YEAR/ACC.RECT/O

YEAR A/C REC T/O IN DAYS2006 53

2007 55

2008 54

2009 57

2010 59

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Interpretation:Collection period determines that how many days we spent to makes one time credit sales.

By comparing the results of analysis years it is known that in 2006 company spend 53days to make1 time credit sales. And also spend 55 days in 2007, 54 days in 2008, 57 days in 2009 and 59 days in2010.

OPERATING CYCLE


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Interpretation:Operating cycle indicates that how many days involve to converting the raw material in to

cash. After analysis we come to know that in 2006 53 days involve to convert the raw material intocash. 55 days in 2007, 54 days in 2008, 57 days in 2009 and 59 days in 2010.

DEBT RATIO


OPERATING CYCLE=INVENTORY T/O IN DAYS+ACC REC T/O

IN DAYS

YEAR OPERATING CYCLE

2006 53

2007 55

2008 54

2009 57

2010 59

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DEBT RATIO= T.LIABITILIES / T.ASSESTS

YEAR DEBT RATIO

2006 0.2043

2007 0.2205

2008 0.1781

2009 0.1635

2010 0.1587

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Interpretation:Debt ratio indicates the firm long term debt paying ability. Debt ratio indicates the total

liability of a firm. By calculating the debt ratio of yahoo we found that in 2006 company have $1total assets to pay $0.2043 total liability and have$ 1 total assets to pay total liability of $0.2205,$0.1781

,$0.1635

,$0.1587

in 2007,2008,2009,2010 respectively. There is an increasing trend from2006 to 2007 of total liabilities then it decreasing in 2008, 2009, and 2010.

Debt to Equity Ratio

Debt to Equity Ratio=Long Term Debt/Shareholder Equity

YEAR Debt to Equity Ratio

2006 0.081

2007 0

2008 0

2009 0

2010 0

Only in 2006 long term debt is given.

Interpretation:This ratio also indicates the long term debt paying ability of company. It also

determines how well creditors are protected in case of in insolvency. This trend indicates


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that we have $ 1 shareholder equity to pay $0.0777 long term debt in 2006.and no long term

debts are taken for further years.

FIXED ASSESTS TO EQUITY

Interpretation:


FIXED ASSESTS TO EQUITY= FIXED ASSEST / S.H EQUITY

YEAR FIXED ASSEST TO EQUITY

2006 0.1201

2007 0.1397

2008 0.1365

2009 0.1142

2010 0.1677

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This ratio determines that how much amount of shareholder equity spends on fixed assets.In 2006 $0.1201 used to buy fixed assets. $0.1397 in 2007,$ 0.1365 in 2008, $0.1142 in 2009, $0.1677in 2010.


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GROSS PROFIT MARGIN

Interpretation:This ratio determines the margin of gross profit in net sales. In 2006 the margin of G.P in

net sales is 64.8148%.margin of G.P in sales in 2007 is 67.1975%.and 67.8041% in 2008, 66.3777%in 2009, and 68.743% in 2010.

NET PROFIT MARGIN


GROSS PROFIT MARGIN=G.P / N.SALES * 100

YEAR GROSS PROFIT MARGIN

2006 64.8148

2007 67.1975

2008 67.8041

2009 66.3777

2010 68.743

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Interpretation:This ratio determines the margin of net profit in net sales. In 2006 the margin of net profit in

net sales is 11.68%.margin of net profit in sales in 2007 is 9.47%.and 5.81% in 2008, 9.25% in 2009,and 19.47% in 2010.

OPERATING PROFIT MARGIN


NET PROFIT MARGIN=NPAIT / N.SALES * 100

YEAR NET PROFIT MARGIN

2006 11.68

2007 9.47

2008 5.81

2009 9.25

2010 19.47

OPERATING PROFIT MARGIN=O.P / N.SALES * 100

YEAR OPERATING PROFIT MARGIN

2006 14.64

2007 9.97

2008 8.42

2009 7.95

2010 13.12

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Interpretation:This ratio determines the margin of operating profit in net sales. In 2006 the margin of

operating profit in net sales is 14.64%.margin of operating profit in sales in 2007 is 9.97%.and8.42% in 2008, 7.95% in 2009, and 13.12% in 2010.

TOTAL ASSETS TURNOVER


TOTAL ASSETS TURNOVER=NET SALES/ AVG.TOTALASSETS * 100

YEAR TOTAL ASSETS TURNOVER

2006 0.55

2007 0.58

2008 0.55

2009 0.45

2010 0.42

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s

Interpretation:This ratio determines the activity of the assets and the ability of the firm to generate sales by

using the total assets. By analyzing the five year data we found that in 2006 by using total assets wemake sales of $0.55. In 2007 generate the sales of $0.58. Generate the sales of $0.55, $0.45, $ 0.42 in2008, 2009, and 2010 respectively.

DUPONT ROA

DUPONT ROA = NET PROFIT / T. ASSEST

YEAR DUPONT ROA

2006 0.0652

2007 0.054

2008 0.0306

2009 0.04


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2010 0.0825

Interpretation:This ratio determines the activity of the assets and the ability of the firm to generate profit

by using the total assets. By analyzing the five year data we found that in 2006 by using total assetswe generate profit of $0.0652. In 2007 generate the profit of $0.054. Generate the profit of $0.0306,$0.04, $ 0.0825 in 2008, 2009, and 2010 respectively.

OPERATING ASSESTS T/O


OPERATING ASSESTS T/O = NET SALES/AVG OPASSESTS

YEAR OPERATING ASSESTS T/O

2006 0.82

2007 0.83

2008 0.8

2009 0.67

2010 0.6

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Interpretation:This ratio determines the activity of the assets and the ability of the firm to generate sales by

using the operating assets. By analyzing the five year data we found that in 2006 by using operatingassets we make sales of $0.82. In 2007 generate the sales of $0.83. Generate the sales of $0.8, $0.67,$ 0.6 in 2008, 2009, and 2010 respectively.

RETURN ON T.EQUITY


RETURN ON T.EQUITY = NPAIT / AVG. TEQUITY

YEAR RETURN ON T.EQUITY

2006 0.082

20070.07

20080.04

20090.05

20100.098

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Interpretation:Return on total equity measures the return on both common and preferred stockholders. In

2006 return on total equity is $0.082.return on total equity $0.07 in 2007, $0.04 in 2008, $0.05 in2009, $0.098 in 2010.

RETURN ON INVESTMENT

LONG TERM FUNDS = LONG TERM DEBTS+LONG TERM SHARE HOLDERS


RETURN ON INVESTMENT = NPBIT/LONGTERM FUNDS

YEAR RETURN ON INVESTMENT

2006 1.6133

2007 _

2008 _

2009 _ 2010 _

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ONLY IN 2006 LONG TERM DEBT ARE AVAILABLE THERE IS NO DATA AVAILABLE OF

LONG TERM DEBTS AND LONG TERM SHARE HOLDERS FOR OTHER YEARS SO NO

CALCULATIONS WILL BE PERFORMED.

Interpretation:Return on investment ratio is used to measure the operating income earned on the invested capital.

In 2006 we earned the operating income of $1.6133 on invested capital.

DUPONT RETURN ON OP ASSEST


DUPONT RETURN ON OP ASSEST=OPPROFIT/AVG OP ASSEST

YEAR DUPONT RETURN ON OP ASSEST2006 0.121

2007 0.083

2008 0.067

2009 0.053

2010 0.079

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Interpretation:This ratio determines the activity of the assets and the ability of the firm to generate profit

by using the operating assets. By analyzing the five year data we found that in 2006 by usingoperating assets we generate profit of $0.121. In 2007 generate the profit of $0.083. Generate theprofit of $0.067, $0.053, $ 0.079 in 2008, 2009, and 2010 respectively.

RETURN ON COMMON EQUITY

PREFFERED DIVIDEND NOT AVAILABLE IN DATA.


RETURN ON COMMON EQUITY=NPAIT-PREFFERD DIVDEND/AVG COMMON

STOCK

YEAR RETURN ON COMMON EQUITY

2006 0.082

2007 0.07

2008 0.04

2009 0.05

2010 0.098

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Interpretation:

This ratio measures the return to the common stockholder, the residual owner. In 2006return on common equity is $0.082. $0.07 return on common equity in 2007.$ 0.04, $0.05, $0.098return on common equity in 2008, 2009, and in 2010 respectively.

TIMES INTEREST EARNED

TIMES INTEREST EARNED = NPAIT /INTEREST

YEAR TIMES INTEREST EARNED

2006 -

2007 -

2008 46.55

2009 -2010 -


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SALES TO FIXED ASSETS

Sales To Fixed Assets=Net Sales/Avg NetFixed Assets

YEAR Sales To Fixed Asset

2006 5.83

2007 5.72

2008 5.02

2009 4.36

2010 4.1


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Interpretation:This ratio indicates that how much sales we make by using fixed assets. In 2006 we make the sales

of $ 5.83. And make the sales of $5.72, $5.02, $4.36 and $4.1 in 2007, 2008, 2009, and 2010

respectively.

DEGREE OF FINANCIAL LEVERAGE

Degree of Financial Leverage=EBIT/EBT

YEAR Degree of Financial Leverage

2006 1

2007 1

2008 1.01

2009 1

2010 1


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Interpretation:This ratio tells us 1% change in EBIT brings how much change in EBT. In 2006 1% change

in EBIT bring 1 change in EBT.1 in 2007, 1.01 in 2008, 1 in 2009, and 1 in 2010.after analysis wefound 2008 year is best.

DILUTED EARNINGS PER COMMON SHARE

Diluted Earnings per Common Share= N.I -Preferred Dividend/AvgS Common Share

Outstanding

YEAR Diluted Earnings per Common Share

2006 0.52

2007 0.47

2008 0.29

2009 0.42

2010 0.9


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No data for calculation is given but Diluted EPS from Total Operations is given in company data

Interpretation:This ratio determines the amount of income earned on a share of common stock during the

accounting period. In 2006 $0.52 income earned on a share of common stock.$0.47 in 2007, $0.29in 2008, $0.42 in 2009, and $0.90 in 2010.

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ratio analysis of yahoo

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