Financial Statement Analysis Essay Example | Topics and Well Written Essays - 1500 words

Financial Statement Analysis - Essay Example Please see Appendix A. The same behaviour may be observed in terms of operating margin and gross margins for the same years respectively. These are all relevant evidence of poor performance for the poor performance of Vodafone. It was only for the years 2004 and 2003 that the company had positive gross margin. In other words, the company has in fact been losing money for the years 2003 through 2006. For purposes of comparing the company’s operating margin of the two companies against the industry average, Vodafone is performing poorly compared France Telecom where average for operating margin 17% as taken from MSN (2008) under the telecommunication services. France Telecom had actually the same 17% average for the last four years while Vodafone’s average for the same period, was -29%. Please see Appendix A. Even in terms of Return of Assets (ROA, Vodafone had -8%, -7%, -7%, and -7% for the years 2006, 2005, 2004 and 2003 respectively which faired poorly again compared with France Telecom’ s 6%, 23%, 19% and 32% for the same years respectively. The results of these ratios further confirmed earlier observation in negative net profit margin for Vodafone. The same less desirable or profitability is further observed in terms of Return of Equity where Vodafone showed -6%, -5%, -6%, -6% for the years 2006, 2005, 2004 and 2003 respectively which are definitely lower than that of France Telecom which showed -6%, 2%, 5%, 3% and 4% for the same years respectively. Please see Appendix A. Although France Telecom also reflected negative ROE for 2006, it may be pointed out that years before the company were indeed clearly more profitable. It may be asserted that two ratios have different purposes. ROA measures how efficient management of company was in terms of assets employed in business while ROE measures how