Investment Strategy: Financial Ratio Analysis and Investment Decisions

This report analyzes investment strategies by examining financial ratios of various companies. The financial statements of Monsanto and Toshiba were evaluated, and the impact of financial ratios such as profit margin, current ratio, and total assets turnover on their credit ratings was discussed. The report also considers the impact of a growing economic environment on these ratios. Furthermore, it proposes an investment strategy for a CFO with $150,000, focusing on Amazon.com and Google Inc. The report highlights the importance of current ratios and gross margins in making investment decisions, analyzes the financial performance of the selected companies, and discusses the potential for future growth based on strategic plans. The analysis provides insights into how financial ratios can inform investment choices.

Running Head: investment strategy 1
Investment Strategy
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Investment strategy
INVESTMENT STRATEGY
The financial statements of the two companies with a negative rating include Monsanto and
Toshiba. Moody’s changed the credit rating of Monsanto from neutral to negative due to its
inability to develop strong financial systems to repay loans and value its biotechnology
appropriately. In 2015, Toshiba was placed into credit watch and was given a negative credit
rating due to the inability to grow profits and issues related to management and governance at
the company (DHU & HBP, 2019). The financial ratios, which are likely to impact on the
rating decisions includes the profit margin, current ratio and total assets turnover.
The two financial ratios supporting the rating agency’s claims include current ratio and profit
margin. Both ratios help in determining whether the companies can gain additional earnings
and cash. The profit margin examines the ability of the organization to make profits, while, the
current ratio measures the ability of the company to repay its debts. A growth in the economic
environment such as growing disposable income would improve the profit margins as well as
the current ratios of the company.
As a chief financial officer with $150,000 of ideal cash, I would consider investing the money
to two companies including Amazon.com and Google Inc. The financial ratios, which be
reliable and useful in determining my investment strategy in the companies includes the current
ratio and gross margin. Amazon.com has a current ratio of 108 % and a gross margin of 33%.
In terms of Google Inc, the gross margin level is 60.2% and the current ratio is 467%. Both
financial ratios imply that the company is able to pay for its debts and still earn strong margins.
The gross margin and the current ratio of the companies are likely to improve due to the
projections of good performance in the strategic plans of the company over the next five years
(Hilkevics & Semakina, 2019).

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Investment strategy
REFERENCES
DHU, H & HBP, C. (2019). Corporate Governance and Earnings Management: A.
Hilkevics, S., & Semakina, V. (2019). The classification and comparison of business ratios
analysis methods.