Financial analysis Assignment Example | Topics and Well Written Essays - 500 words

Financial analysis - Assignment ExampleThe steel company will have the lowest because steel production is very summation intensive, meaning the company will have to invest billions in equipment, plants, and property required for steel manufacturing. Additionally, equipment used will have a dogged lifetime. As a result of this last investment and its long lifetime, the sales for a steel company will be relatively low, leading to low asset turnover (Rodgers 23).While supermarkets have low sales margins, pharmaceutical companies, jewelry retailers, and software companies have gamey sales margins. Supermarkets have low sales margins because of the high intensity of competition in the sector. In addition, there is minimal product differentiation because they mainly carry similar brands. Consumers also have a high sensitivity to price changes and switch costs tend to be low. As a result, competition in the sector is mainly based on pricing, which results in extremely low margins (Rod gers 48). On the other hand, software companies have the highest sales margins because consumer-switching costs are high, while production costs tend to be relatively low. Finally, most costs for initial development of software are previously expensed. Thus, the sales margins are higher than for the rest.I disagree with James Brokers assessment. While earning numbers and operating cash flow are essential in the evaluation of a companys prospects, they will differ because of long and short-term accruals. Some flow accruals like credit sales lead to higher earnings than operating cash flows. On the other hand, other current accruals like unpaid expenses result in lower earnings than operating cash-flows. Non-current accruals like deferred taxes and depreciation also result in differences between operating cash-flows and earnings. appreciation the difference between earnings and operating cash-flows, in this case, is more important than the fact that earnings are higher than