Financial Analysis of Scholastic and Daktronics Essay -- Financial Ana

Evaluating a company’s financial condition can be done by looking at its profitability or its ability to satisfy long-term commitments. These measures can be viewed through an analysis of a company’s financial statements, including the balance sheet and income statement. This paper will look at the status of Scholastic Company’s (Scholastic) ability to satisfy its long-term commitments and at the profitability of Daktronics, Inc. (Daktronics). This paper will include various financial ratio calculations and an analysis of the notable trends. It will also discuss the profitability and long-term borrowing positions of the firms discussed. Scholastic Company is a multibillion dollar children’s book publisher and distributor with more than 9,000 worldwide employees (Scholastic Inc., n.d.). Scholastic leases some of its physical office and storage locations and equipment (as cited in Gibson, 2011). Cornaggia, Franzen, and Simin (2013) noted the reasons firms lease may be the result of a company’s financial distress which prevents sufficient capital being raised to purchase instead of leasing. They also suggested if profitability of the firm is not at issue, leasing can be used to reduce taxes thus reducing borrowing costs. Though the reason for maintaining material lease obligations is not disclosed in its financial statements (as cited in Gibson, 2011), Scholastic’s ability to satisfy its long-term commitments is important for investors, creditors, and management. The long-term borrowing capacity of Scholastic can be determined through an analysis of its times interest earned, fixed charge cove rage, and debt ratios. The times interest earned ratio uses a company’s income statement to assess its ability to meet long-... ... Cited Cornaggia, K. J., Franzen, L. A., & Simin, T. T. (2013). Bringing leased assets onto the balance sheet. Journal of Corporate Finance, 22345-360. http://dx.doi.org/10.1016 /j.jcorpfin.2013.06.007 Damodaran, A. (n.d.). Operating versus capital leases. Retrieved from http://pages.stern.nyu.edu /~adamodar/New_Home_Page/AccPrimer/lease.htm Daktronics, Inc. (n.d.). Our company. Retrieved from http://www.daktronics.com/en-us/about-us Gibson, C. H. (2011). Financial reporting & analysis: Using financial accounting information. (12th ed.). Mason, OH: South-Western Cengage Learning. Monea, M. (2009). Financial ratios – Reveal how a business is doing? Annals of the University Of Petrosani Economics, 9(2), 137-144. Retrieved from http://www.upet.ro/eng Scholastic Inc. (n.d.). About Scholastic. Retrieved from http://www.scholastic.com /aboutscholastic/index.htm