Discussion Unit 1 Managerial Accounting

Ratios

Western Digital

Seagate

Comparison

Profit margin ratios

Net profit margin

= Net profit/Sales

Net profit margin in 2016:

242,000,000/12,994,000,000=1.86%%

Net profit margin in 2017: 397,000,000/19,093,000,000=2%

We can see that the net profit margin increase from 2016 to 2017. That is a good sign of financial performance of the Western Digital. The company  have earned more profit from 2016 to 2017.

Net profit margin in 2016:

248,000,000/11,160,000,000=2.22%%

Net profit margin in 2017: 772,000,000/10,771,000,000=7.16%

The net profit margin increase from 2016 to 2017 significantly.  At the same time the revenue decrease. That is a good financial performance.  One of the possible reason of this performance is the improvement of operation activities. However, Seagate should pay attention to its sale operations, because the revenue decrease.

Seagate has move from 2.22% to 7.16% as net profit margin where Western Digital move from 1.86% to 2%.

Seagate have achieved more profit than Western Digital even Western Digital have achieved more performance in sale operations.

Management efficiency ratios

Inventory turnover

=Sales/Inventory

Inventory turnover 2016

= 12,994,000,000/2,129,000,000=6.1 times

Inventory turnover 2017

= 19,093,000,000/ 2,341,000,000=8.15 times

Western Digital has sold

and replaced 6.1 times in 2016 against 8.15 in 2017. That is a better performance of turnover in 2017. This performance can be linked to performance achieved in the sale operations in 2017

Inventory turnover 2016

= 11,160,000,000/868,000,000=12.85 times

Inventory turnover 2017

= 10,771,000,000/ 982,000,000=10.97 times

Seagate has sold

and replaced 12.85 times in 2016 against 10.97 in 2017. That confirm the decline in performance about sale operation in 2017. Perhaps Seagate has introduced news changes in sale operations. The changes are effective in terms of operations process but have impact negatively the sales operations.

Two mains aspects, a company need to consider for maximizing its net profit: reduce operation cost as low possible and increase sale as high possible. Western Digital is doing better on sale aspect where Seagate is doing better on operation efficiency aspect but has failed with sale operations

Management effectiveness ratios

Return on assets= Net profit/ Total assets

Return on assets 2016

= 242,000,000/32,862,000,000=0.7%

Return on assets 2017

= 397,000,000/ 29,860,000,000=1.33%

Western Digital has done better in 2017 but the progression is not significant

Return on assets 2016

= 248,000,000/ 8,213,000,000=3.01%

Return on assets 2017

= 772,000,000/ 9,268,000,000=8.33%

Seagate has achieved a great performance in 2017 compared to 2016. This is one of the main ratios that investors look at. The result achieved from 2016 to 2017 shows the great performance of Seagate in 2017 even their sale decrease.

Western Digital has a good position on the market but this has not a significant impact on its profit where Seagate has  a high impact on its profit with less revenue($10,771 millions) in 2017 and even compared to Western Digital revenue ( $19,093 millions)