Analysis of Financial Performance: Visa Inc. vs. Mastercard Comparison

This report provides a comprehensive analysis of the financial performance of Visa Inc., focusing on key financial ratios to assess its profitability, liquidity, efficiency, and solvency. The report also includes a comparative analysis with its major competitor, Mastercard, using the same financial metrics. The analysis covers key ratios such as net profit margin, return on assets, return on equity, current ratio, quick ratio, debtor turnover period, and solvency ratios. Furthermore, the report examines the market valuation of both companies, including earnings per share and price-earning ratios. Additionally, the report discusses Visa Inc.'s sustainability practices and its commitment to innovation and cybersecurity. The conclusion highlights Visa Inc.'s superior performance compared to Mastercard, while also pointing out areas for potential improvement, particularly in efficiency and liquidity. This report is a valuable resource for understanding the financial health and strategic positioning of Visa Inc. in the financial services industry.

Running head: ACCOUNTING AND FINANCIAL MANAGEMENT
Accounting and Financial Management
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Introduction...............................................................................................................................2
Discussion..................................................................................................................................2
Review of the Financial Performance of Visa and Mastercard.............................................3
Comparison with Competitors...............................................................................................4
Sustainability Reporting........................................................................................................5
Conclusion.................................................................................................................................6
Reference...................................................................................................................................7

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Introduction
The main purpose of the assessment is to analyze the financial performance of Visa Inc
which is engaged in providing financial services to the clients. The company offers credit card
and debt card services to the clients and facilitates efficient cashless payment facilities. The
assessment would be identifying the financial performance of the business on the basis of key
financial ratios which will be computed. The ratios which are considered is related to one or
more area of performance for the business (Visa Inc. - Annual Report & Meeting .2019). In
addition to this, the assessment would also be comparing the performance of Visa Inc with one
of its major rivals which is Mastercard. In addition to this, the assessment would also be
discussing the sustainability practices which is followed by the management of Visa Inc for
fulfilling its commitment towards the society.
Discussion
The analysis of the ratios of the business provides an insight on the working of the
business and also provides information as to what is the target o the management of the
company. The analysis would be based on the financial data which is available from the annual
reports of the business (Robinson et al., 2015). Visa Inc is regarded as one of the most popular
companies in providing credit and debit card services to customers. The management of the
company generates maximum revenue from its investments and loans activates and the business
model of the company aims to expand the operations of the business globally.
Review of the Financial Performance of Visa and Mastercard
In order to review the financial performance of Visa and its close competitor Mastercard,
ratio analysis as a tool is considered which would be computing key financial ratios which in
turn would reveal the financial performance of the business (Delen, Kuzey & Uyar, 2013). The
key ratios which are computed for Visa Inc are effectively shown below in details:

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Figure 1: Key Financial Ratios of Visa Inc
Source: (Created by Author)
The above figure effectively shows the key financial ratios which are computed for the
business of Visa Inc. The profitability ratios of the business consist of return on assets, return on
equity, net profit margin. The net profit margin of the business is shown to be have increased
significantly in comparison to previous year estimates. This shows that the management of the
company has focused more on profitability of the business which has resulted an immense
growth in profitability of the business. The return on assets and return on equity estimates for the
business is also shown to have increased which signifies that the management of the company is
doing well in terms of profitability of the business. The liquidity ratios consist of current ratio
and quick ratio which shows a major decrease in the estimate from previous year. In fact, the
decrease is shown to be the first major fall in a 5 years period which may due to more
investments or loans which is undertaken by the business. The fall in current and quick ratio is a
sign that the liquidity position of the business has slightly declined. In terms of efficiency ratios
of the business, the debtor turnover period is shown to be appropriate and this shows that the
management of the company is running the operations efficiently (Ongore & Kusa, 2013). The
debtor’s turnover policies of the business is shown to be appropriate. The solvency ratio of the

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business shows significant increase in debt capital which shows that the business is trying to
maintain its liquidity by taking additional capital from other sources. In terms of market
valuation, the earning per shares and price earning ratio is shown to favorable which suggest that
the business has proper valuation and reputation in the market.
Comparison with Competitors
Figure 1: Key Financial Ratios of Mastercard
Source: (Created by Author)
The ratios of Mastercard are also computed with an objective of assessing the financial
performance Mastercard and making comparisons to performance of the Visa Inc. The net profit
margin for Mastercard is shown to be 39.2% in 2018 while the same is shown to be 50% in 2018
for Visa Inc. In addition to this, Mastercard shows slow growth rate considering the trend while
that of Visa is tremendous (Carraher & Van Auken, 2013). This makes it clear that the
management of Visa is focusing more on profitability and achieving the same as well. In terms
of liquidity aspect as well the business of Mastercard shows a lower estimate of current and
quick ratios in comparisons of that of Visa. This shows that Visa has more liquid funds available
to it in comparison to that of Mastercard. This is a positive sign for the business of Visa. The
efficiency ratio of both the companies shows that Visa is more efficient as the debtor turnover
days is lower of Visa which shows that Visa has a sounder debtor management policy. This can

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be attributed as the main reason for generation off such revenue and profits for the company. In
terms of market valuation, Visa is shown to have a superior market value in comparison to
Mastercard which is another positive sign for the business. In other words, it can be said that the
performance of Visa is more appropriate than Mastercard but there are still areas where the
management of Visa can work to improve performance.
Sustainability Reporting
The management of Visa Inc are dedicated to maintain a sustainable approach in the
business and has the aim of connecting the global environment with secure, innovative and fast
payment process (Junior, Best & Cotter, 2014). The management of the company aims to make
lifestyle of the people digital so that efficiency and security can be maintained in payment
system around the world. The management of the company has taken initiatives to expand the
payment system by introducing mobile payment apps for supporting sustainable payment process
(Ioannou & Serafeim, 2017). In addition to this, the management of the company follows gender
equality policy in conducting business opportunities and therefore there is no discrimination of
any kind in the operations of the business.
The company follows an innovative approach and takes all possible steps for making the
payment process more efficient. The company was in 2017 recognized as one of the top 10
innovative companies in the field of finance. Another aspect which the management of the
company is trying to develop more is the cybersecurity of the payment system so that security
can be provide to its customers (Hahn & Kühnen, 2013). The business of Visa is known for
investing time and resources in the employees of the business and significantly contributes to the
total employment in the global environment. These factors make the business as sustainable one
with more emphasis on expanding accesses than profitability.
Conclusion
The above discussion effective shows that the performance of Visa Inc is better than
Mastercard which makes the company superior. However, the management of the company still
needs to improve the efficiency and liquidity aspect of the business. The analysis of the ratio also
shows a positive performance results for the business of Visa Inc. In addition to this, the

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company is also a sustainable one following appropriate policies for maintaining sustainability
principles in the business.

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Reference
Carraher, S., & Van Auken, H. (2013). The use of financial statements for decision making by
small firms. Journal of Small Business & Entrepreneurship, 26(3), 323-336.
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.
Hahn, R., & Kühnen, M. (2013). Determinants of sustainability reporting: a review of results,
trends, theory, and opportunities in an expanding field of research. Journal of cleaner
production, 59, 5-21.
Ioannou, I., & Serafeim, G. (2017). The consequences of mandatory corporate sustainability
reporting. Harvard Business School research working paper, (11-100).
Junior, R. M., Best, P. J., & Cotter, J. (2014). Sustainability reporting and assurance: a historical
analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1), 1-11.
Ongore, V. O., & Kusa, G. B. (2013). Determinants of financial performance of commercial
banks in Kenya. International journal of economics and financial issues, 3(1), 237-252.
Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial
statement analysis. John Wiley & Sons.
Visa Inc. - Annual Report & Meeting . (2019). Investor.visa.com. Retrieved 9 May 2019, from
https://investor.visa.com/annual-report-meeting/