BMGT1101: Financial Analysis Report: Investment Decision Making

This report presents a comprehensive financial analysis of three companies: Yum Brands, Ruth Hospitality, and Dominos, based on the provided financial data. The analysis includes the calculation and interpretation of key financial ratios such as Return on Sales, Current Ratio, Return on Equity, and Debt to Equity Ratio. The report highlights the financial strengths and weaknesses of each company, focusing on aspects like liquidity, profitability, and solvency. It further incorporates additional information relevant to investment decisions, such as customer satisfaction and market image. The report concludes with a recommendation on which company presents a better investment opportunity, considering both financial ratios and external factors. References from academic journals are also included to support the analysis.

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Bgmt 1101

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Table of Contents
Ratio analysis.............................................................................................................................3
Additional information to make investment decision................................................................4
Recommendation........................................................................................................................4
References..................................................................................................................................6
Appendix....................................................................................................................................7

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Ratio analysis
The calculation for the ratios shall be performed so that the required results can be obtained
and there will be a proper evaluation which will be made. The information from the accounts
of the company is taken into use for the same.
Particulars Formula Yum
Brands
Ruth
Hospitality
Dominos
Net income Total Revenue - Total Expenses 17630000
00
51659000 57168900
0
% Return on
Sales
Net Income/Total Revenue 31.00% 11.42% 16.65%
Current Ratio Current Assets/Current
Liabilities
0.93 0.38 1.49
$ Stockholder
Equity
Total Assets-Total Liabilities -
79260000
00
90132000 -
30399210
00
% Return on
Equity
Net Income/Stockholder Equity -22.24% 57.31% -18.81%
% Debt to Equity
Ratio
Total Liabilities/Stockholder
Equity
-152.11% 182.49% -129.85%
Earnings per
Share
Net Income/the Number of
Shares of Stock
5.83 1.80 13.98
The ratio calculation is made and in the case of Yum brands, it can be noted that the amount
of equity that has been identified is a negative amount. This shows the excess of debts for the
company which is not good in the long run and with the negative amount, there is no equity
that is involved (Delen et al., 2013). The net income which is made comprises 31% of the
sales which is made. The current ratio is at 0.93 which is very low and due to these issues
will be faced with meeting all the obligations which will be arising. The total amount of
liabilities is far higher than the equity and due to that, the debt to equity ratio is 152.11%. The
earning which is made by the company on each share is identified at 5.83 which shows its
good earnings and will help it in meeting the further requirements and paying the dividend to
the shareholders.
For Ruth hospitality, the net income has been ascertained at $51659000 which is forming the
11.42% of the total revenues which are made. The liquidity of the company is not maintained
adequately and that is at the point of 0.38. The standard for the current ratio is set at 2 but the
same is not fulfilled and the ratio is below it to a great level. The return which is provided on

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the equity is 57.31% which is a very good rate and investors will be satisfied with the same.
The debt of the business is more than equity and constitutes 182.49% which is very high.
This shows the higher debt funding which is not positive and will increase the obligations and
expenses for the business.
The net income is also calculated for Dominos and that has arrived at $571689000 and it is
16.65% of the total sales. The current ratio is managed at 1.49 which is beneficial for the
company. With this liquidity position, the company will not face any of the issues in paying
the costs and liabilities. The equity for the company is negative and that represents higher
liabilities that are involved in comparison to the assets (Bannigidadmath & Narayan, 2016).
The debt position of the company is also very high and the company is having overdue
balances which are an adverse aspect of it. The earning per share is good at 13.98 but it is not
used to meet the liabilities.
Additional information to make an investment decision
In the making of investment decisions there are various aspects that are required to be
considered and in that financial as well as non-financial elements are taken into account. The
return which is involved and identified is important but with that, the risk associated shall
also be considered. Customer satisfaction and image in the market shall be evaluated to
ascertain the position of the business in the market (Kauffman et al., 2015). The information
from security analysts shall also be gathered which will help in taking the best decisions and
with that standards and policies of the business shall be considered which will help in gaining
the complete understanding.
The government intervention and its policies which will be applicable shall be determined
and the impact of that will also be considered for the company. The reliability of the
information which is available for the company will be ensured and then only the decision to
make the investment will be undertaken.
Recommendation
As an investor, the making of choice is very difficult and there are various aspects that are
involved. The ratios have been calculated for all the three companies and in that various areas
have been involved. It can be noted Ruth hospitality is the only company with positive equity
and others are having the negative balances which show the excess of liabilities over assets.

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The liquidity position is not strong but then also there are less overdue and the company will
meet its obligations in the coming period in an effective manner. They all will be considered
with the return on equity which is positive and due to that the investment is recommended in
the same.

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References
Bannigidadmath, D., & Narayan, P. K. (2016). Stock return predictability and determinants
of predictability and profits. Emerging Markets Review, 26, 153-173.
Delen, D., Kuzey, C., & Uyar, A. (2013). Measuring firm performance using financial ratios:
A decision tree approach. Expert Systems with Applications, 40(10), 3970-3983.
Kauffman, R. J., Liu, J., & Ma, D. (2015). Technology investment decision-making under
uncertainty. Information Technology and Management, 16(2), 153-172.

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Appendix