Financial Analysis Statement

This document provides a financial analysis statement of Carnival Corporation, including profitability, efficiency, liquidity, and solvency ratios. The analysis reveals that the profitability position of the company is weaker compared to the industry, while the efficiency position is stronger. However, the liquidity and solvency positions of the company are weak. The document also includes a DuPont analysis of the company's return on equity and provides investment decision recommendations.

Running head: REPORT 0
FINANCIAL ANALYSIS STATEMENT
APRIL 22, 2019
STUDENT DETAILS:

REPORT 1
Contents
Ratio Analysis............................................................................................................................2
Research Summary.....................................................................................................................3
1. Financial analysis of company........................................................................................3
2. DuoPont Analysis of ROE..............................................................................................3
3. Significant current investments and other information of importance............................3
4. Investment Decision........................................................................................................4
References..................................................................................................................................5

REPORT 2
Ratio Analysis
company name: Carnival Corporation
industry name: https://www.investing.com/equities/carnival-corporation-ratios
Company ratio
Title of ratio
Industrial Ratios
average change
current
year
prior
year
Financial year 2018 2017
Profitability Ratios
Return on sales 17.07% Weaker 17% 15%
Return on assets 3.78% Weaker 2% 2%
gross profit margin 48.74% Weaker 41% 40%
Return on equity 7.14% Weaker 13% 11%
Efficiency ratios
Account receivable
turnover 112.43 Quicker 14.09 14.35
inventory turnover 35.89 Quicker 6.59 7.41
asset turnover 0.53 Quicker 0.23 0.11
Liquidity ratios
current ratio 0.41
less
liquid 0.24 0.18
Solvency ratios
Debt Ratio 60.67%
More
risk 73% 68%
Financial leverage N/A N/A 1.73 1.68
times interest earned N/A N/A 16.53 13.46
free cash flow ($ in
millions) N/A N/A 2329 $ 2516 $
Additional data needed for ratio computations:
($ in Million) year 2018 2017 2016
Account receivable 358 312 298
inventory 450 387 322
interest expense 54 60 233
capital expenditures 3360 2944 3036
dividends paid 1355 1087 977
Research Summary

REPORT 3
Company name: Carnival Corporation
Industry name: https://www.investing.com/equities/carnival-corporation-ratios
1. Financial analysis of company
Profitability (Weak)
Explanation: The profitability position of company can be majorly evaluated by various
main ratios like return on sales, return on equity, gross profit margin and return on asset.
Profitability ratios are selected to evaluate capacity of corporation to generate incomes
rather than expenditures and other costs at particular period. In 2017 ROS of company was
15% but it increased to 17% in 2018. On the other hand, industrial average ratio was
17.07%. In year 2017 and 2018, ROA of company was 2%. The industrial average ratio
was 3.78%. As per ratio analysis, the profitability position of entity is not good in
comparison of industry. Further, gross profit margin of company was 40% in 2017 and
41% in 2018. The gross profit margin of industry was 48.74%. Furthermore, ROE of
company was 11% in 2017 and 13% in 2018. The ROE of industry was 7.14%. In this way,
profitability of company was not good in comparison of industry.
Efficiency (strong)
Explanation: The efficiency ratios are chosen for evaluating. This ratio evaluates ability of
corporation to utilise asset. The efficiency ratios include inventory turnover, asset turnover
and account receivable turnover (Miller, 2018). In 2017, Account turnover ratio of
company was 14.35 in 2017 and 14.09 in 2018. This ratio of industry was 112.43. In 2017,
inventory turnover ratio of company was 7.41 and 6.59 in 2018. This ratio of industry was
35.89. In 2017, asset turnover ratio was 0.11 and 0.23 in 2018. This ratio of industry was
0.53. From ratio analysis, it can be said that the efficiency position of company is stronger
than industry.
Liquidity (weak)
Explanation: Corporation’s Liquidity position provides insight of business’s ability to pay
off short term debt. The current ratios are major ratios to evaluate the liquidity position of
corporation. In 2017, current ratio was 0.18 and in 2018, it was 0.24. On the other hand,
current ratio was 0.41. Therefore, it is clear that company is not in good liquidity position.
Solvency (weak)
Explanation: Solvency position evaluates ability of corporation to avoid pressures related
to short period financial condition. The solvency of company can be calculated by
calculating debt ratio, financial leverage, time interest earned and free cash flow (Zinyama,
Nhema, 2016). In 2017, debt ratio was 68% and 73% in 2018. This ratio of industry was
60.67%. In comparison of industry, the solvency position of company is not good.
2. DuoPont Analysis of ROE
Ratio ROS
*Asset
turnover ROA
*Financial
leverage ROE
Type profitability efficiency solvency
Formula NI/Revenue REV/Asset NI/ Asset/SE NI/

REPORT 4
asset SE
company 17% 0.23 0.04 1.73 0.07
Industry 17.07% 0.53 0.09 0 0
3. Significant current investments and other information of importance
For improving profitability of company, the macro-economic factors such as asset and
liability must be taken into consideration. The corporation must sell-off the non-paying and
avoidable asset. It is required by a company t decrease the liabilities.The company should
reduce the operating expenses like research and development expenses, sales and
administrative expenses to enhance company’s profitability. The company must recreate the
portfolio and establish the new R&D strategies. The company should control the overhead
expenses to improve liquidity position. It should avoid new debts for improving solvency
position (Williams and Dobelman, 2017).
4. Investment Decision
Carnival Corporation: (Invest/not invest)
Why?
1- Through above calculations, it is not suggested to invest in Carnival Corporation is
not earning sufficient profits.
2- Investment should not be made in Carnival Corporation because of poor liquidity
position of company.
3- The solvency ratio of company is also not good to make investment in it.
4- Further, an only good point is that the company uses asset and liability in proper
way. The efficiency position is good. Only this point to be considered to make
investment (Robinson, et. al, 2015).

REPORT 5
References
Miller, G. (2018) Performance on the base of financial statements. New York: Routledge.
Robinson, T.R., Henry, E., Pirie, W.L. & Broihahn, M.A. (2015) International financial
statement analysis. New Jersey: John Wiley & Sons.
Williams, E.E. & Dobelman, J.A. (2017) Financial statement analysis. World Scientific Book
Chapters, pp.109-169.
Zinyama, T. & Nhema, A.G. (2016) DuoPont analysis. Oxford: Oxford University Press