RUNNING HEADING: Financial Statements 1
Financial Statement 6
Financial statements are a vital component of organization business. They can assist with determining a business’ profitability, future earning potential, the probability of failure and overall success. The company that will be discussed will be Jones Lang LaSalle (JLL). This company is a property management and real estate firm that is publicly traded and a Fortune 500 organization. During this countries existence, there have been upswings in the real estate industry which this business has profited very well. The most recent income statement, balance sheet, and shareholder’s equity, and statement of cash flow from 2015 through 2017 for this analysis.
At the end of 2017, JLL net income was $254,100,000. The net profit was down $64,000,000 from the net figures at the end of 2016. Even though the numbers have lowered it still give investors a gaze to predict the future net income, it’s also an indicator of how the company will perform. When there the net income increases it shows the investor that there could be great success in this business and stock could possibly be profitable. However, if there is a decrease which has been displayed at JLL, it could also show success because the industry can sustain the company even though there was a decrease. The statement provided also shows the numbers from 2015, and the past two years, the net income has been significantly lower (JLL Income Statement, 2018).
Shareholders’ equity is the owners’ claim to assets (Kieso, Weygandt, & Kimmel, 2017). According to JLL’s current balance sheet, the ending balance for shareholders’ equity in 2017 was $3,243,200,000 (JLL Balance Sheet, 2018). Stockholders’ equity is important to labor unions; it helps to determine if a union can put ‘the ask’ in for higher wages and better benefits for its employees. JLL does not have a union if by chance there was wages and benefits would be very competitive because of the money the business makes.
Total Value of Assets
The total value of the Assets for JLL for 2017 was $8,014,500,000 (JLL Balance Sheet, 2018). “In general, assets provide you a means to keep up with debt in times of uncertain or volatile business profit” (Kokemuller, 2018). When a business has a strong balance sheet, it allows investors to have an insight into the business assets, and it also displays the potential of sustainability through rough times.
Return on Assets
It is imperative to evaluate the return on assets by employing the equation appropriately: Return on assets = net income/average total assets (Kieso, Weygandt, & Kimmel, 2017). Based on JLL’s income statement and balance sheet its return on assets would be net income divided by the average of total assets ($254,200,000/ ($8,014,500,000 + $7,629,400,000)/2) equals 0.81% (JLL, 2018). The return on assets indicates the amount of net income generated by each dollar of assets (Kieso, Weygandt, & Kimmel, 2017,). The ROA explains the earning generated from the assets. ROA varies from company to company, and the industry of which a company is it is vital to whether the company will be successful.
Working Capital and Current Ratio
Working capital is calculated by subtracting current assets by current liabilities (($268,000,000 – $3,210,000,000) which equals (-$2,942,000,000). The current ratio is current assets divided by current liabilities which equals 8.35% based on JLL’s balance sheet information (JLL Balance Sheet, 2018). The current ratio is current assets divided by current liabilities which equals 8.35% based on JLL’s balance sheet information (JLL Balance Sheet, 2018). When a company’s current liabilities exceed their current assets that causes a negative working capital results and can indicate that the company might not be able to pay short-term creditors (Kieso, Weygandt, & Kimmel, 2017).
|Total Current Assets||$268,000,000||$258,500,000|
|Total Current Liabilities||$3,210,000,000||$2,966,300,000|
Debt to Assets Ratio and Free Cash Flow
Free cash flow describes the net cash provided by operating activities after adjusting for capital expenditures and dividends paid (Kieso, Weygandt, & Kimmel, 2017). Debt to asset ratio dividing the total liabilities by total asset. When reviewing JLL’s balance sheet the debt to assets ratio was at 59%. This is a measure of the company’s solvency which is its ability to pay interest as it comes due to repay the balance of debt due at its maturity (Kieso, Weygandt, & Kimmel, 2017,). Solvency ratios measure the ability of the company to survive over a long period (Kieso, Weygandt, & Kimmel, 2017,). Solvency ratios measure the strength of the company to survive over a long period (Kieso, Weygandt, & Kimmel, 2017,).
In conclusion, having a clear understanding of a company’s yearly financial statement can assist leadership to cut operating expenses, or invest. It also is a tool that can be used to give an employee the vision of the future of the company. Companies like JLL should have been forthcoming with their employee, investors and possible new investors to show how strong a company it is.
Jones Jang LaSalle (2018). Balance Sheet. Retrieved from: https://finance.yahoo.com/quote/JLL/balance-sheet?p=JLL
Jones Jang LaSalle (2018). Cash Flow. Retrieved from: https://finance.yahoo.com/quote/JLL/cash-flow?p=JLL
Jones Jang LaSalle (2018). Income Statement. Retrieved from: https://finance.yahoo.com/quote/JLL/financials?p=JLL
Kieso, D., Weygandt, J., & Kimmel, P. (2017). Accounting: Tools for Business Decision Making (6th ed.).
Kokemuller, N. (2018). Why Creditors Are Interested in the Total Assets of a Company. Retrieved from: http://smallbusiness.chron.com/creditors-interested-total-assets-company-78242.html
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