Eastman Kodak Financial Analysis Essay
Open the financial statement analysis template that you saved from the Chapter 1 Eastman Kodak problem and input the data from the Eastman Kodak balance sheet. Eastman Kodak has combined many of its asset and liability accounts into one comprehensive account on the balance sheet. Be sure to read the notes to determine the correct numbers to input in the template. For example, the company has combined many items in the account “Other long-term assets” that should be separated into appropriate accounts. When you have finished inputting the data, review the balance sheet to make sure there are no red blocks indicating that your numbers do not match the cover sheet information you input from the Chapter 1 problem. Make any necessary corrections before saving your input and the common-size balance sheet that the template automatically creates for you, you will be submitting this saved “print-out” to your instructor.
Analyze the balance sheet. Write a summary that includes important points that an analyst would use in assessing the financial condition of Eastman Kodak.
The Balance Sheet of the company shows that the current ratio of Kodak has increased from 1.22 to 1.36 which means that the company’s ability to pay off its current liabilities has increased and the company is not facing any liquidity issues. The Quick ratio has also increased from 0.82 to 1.15 which also shows the expected positive cash-flows to the company in the future (Helfert, 2001).
The total assets have been decreased by around 4.62% which is mainly due to the sale of assets under discontinued operations and reduction in fixed assets of 1,157 which might be due to the depreciation expense over the year.
The major changes in the assets are in the cash and cash equivalent which has increased by around 100% since previous year and also the long term investment which has increased by 17.93%. All other assets increased or decreased minutely. The increase in long term investments is of 629 million which shows that the company is trying to invest in interest based securities for fixed cash flows in the future.
The changes in current liability is mainly in the areas of reduction in long term debt and a very high increase in short term debt which amounts to 244 million. The change is around 381% since previous year. All the long term liabilities have decreased which means that the company should be expecting a very high cash outflow in the upcoming year (Helfert, 2001).
The debt to equity ratio has been decreased from 0.76 to 0.47 which means that Kodak was previously a very highly geared company but now the gearing has been lower which means that higher amount of profits shall be available to the shareholders of the company. This will increase the dividend payout ratio also and also the dividend yield of the company.
Although higher taxes would be payable as dividend is not tax deductible but the interest would have been tax deductible and therefore the net effect might be lesser Earnings per Share to the company. The retained earnings of the company shows an increase of 507 million which shows that the company has gained a profit in the year being considered.
Helfert, E. A. (2001). Financial analysis tools and techniques : a guide for managers. New York: McGraw-Hill.