BUS FPX 4060 Assessment 1 Transaction Analysis and Financial Statements

BUS FPX 4060 Assessment 1 Transaction Analysis and Financial Statements

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Capella University

BUS-FPX4060 Financial Accounting Principles

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Date

Comprehensive Analysis of Transaction and Financial Statements for Alltech vs. SynergyXT

In the world of corporate finance, understanding financial statements is crucial for evaluating the health and performance of a business. In this detailed analysis, we will compare the financial metrics of two companies, Alltech and SynergyXT, based on their respective transaction analysis and key financial statements. By examining the core financial figures—liabilities, equity, income, sales, and expenses—this comparison will provide valuable insights into each company’s financial standing. Let’s dive into the data and understand the key takeaways.

Financial Overview: A Comparative Snapshot

Alltech vs. SynergyXT: Key Metrics

When analyzing the financial health of both Alltech and SynergyXT, several important metrics stand out.

• Alltech:
  • Total Liability & Owner’s Equity: $11,502 million
  • Net Income: $3,127 million
  • Sales Revenue: $15,453 million
• SynergyXT:
  • Total Liability & Owner’s Equity: $48,823 million
  • Net Income: $9,276 million
  • Sales Revenue: $44,612 million

At first glance, SynergyXT appears significantly larger than Alltech in terms of both liabilities and equity. However, Alltech shows impressive net income and a competitive sales figure relative to its smaller size.

Total Assets and Their Significance

Total assets represent the full value of a company’s owned resources, including both current and fixed assets. The total assets invested are crucial indicators of a company’s ability to generate returns on its investments.

• Alltech: Total Assets = $11,502 million
• SynergyXT: Total Assets = $48,823 million

Clearly, SynergyXT has a substantial advantage in total assets, which reflects its larger scale of operations compared to Alltech.

Return on Assets (ROA): A Performance Indicator

One of the most critical financial metrics to assess a company’s efficiency is the Return on Assets (ROA), which measures how effectively a company uses its assets to generate profit. Let’s look at the ROA for both companies:

• Alltech:
  ROA = Net Income / Average Total Assets
  ROA = $3,127 million / (($8,101 million + $11,502 million) / 2) = 31.90%

• SynergyXT:
  ROA = Net Income / Average Total Assets
  ROA = $9,276 million / (($36,171 million + $48,823 million) / 2) = 21.83%

Alltech’s higher ROA suggests that it is more efficient at using its assets to generate profit compared to SynergyXT, despite SynergyXT’s larger asset base.

Expense Analysis: The Cost of Operations

An essential part of any transaction analysis involves understanding the expenses a company incurs in generating its revenue. These figures help in assessing profitability and operational efficiency.

• Alltech:
  Expenses = Sales Revenue – Net Income
  Expenses = $15,453 million – $3,127 million = $12,326 million

• SynergyXT:
  Expenses = Sales Revenue – Net Income
  Expenses = $44,612 million – $9,276 million = $35,336 million

While SynergyXT spends more on operations, both companies demonstrate effective management in controlling their costs relative to their revenues.

Balance Sheets: Comparing Financial Health Over Time

Let’s now compare the balance sheets for two years, which offer a clear snapshot of the companies’ assets, liabilities, and equity over time.

BUS FPX 4060 Assessment 1 Transaction Analysis and Financial Statements

Alltech’s Balance Sheet (2011 vs. 2012)

• 2011 Assets:
  Current Assets = $80,990 million
  Fixed Assets = $175,000 million
  Total Assets = $255,990 million

• 2012 Assets:
  Current Assets = $51,680 million
  Fixed Assets = $427,800 million
  Total Assets = $479,480 million

• 2011 Liabilities & Equity:
  Current Liabilities = $6,950 million
  Equity = $249,000 million

• 2012 Liabilities & Equity:
  Current Liabilities = $37,500 million
  Long-Term Liabilities = $105,000 million
  Equity = $336,980 million

The increase in total assets and equity from 2011 to 2012 reflects significant growth in Alltech’s business, with a notable increase in fixed assets.

SynergyXT’s Balance Sheet Analysis (2011 vs. 2012)

SynergyXT also experienced growth, but its balance sheet is considerably more complex due to larger liabilities and assets. Key figures are as follows:

• 2012 Assets:
  Current Assets = $46,400 million
  Fixed Assets = $53,750 million
  Total Assets = $100,150 million

• Liabilities & Equity:
  Current Liabilities = $42,750 million
  Equity = $57,400 million

These numbers show that SynergyXT’s assets and liabilities were heavily skewed toward current liabilities, indicating a short-term focus in financing.

Debt Ratio and Financial Leverage

The debt ratio is a critical financial metric that shows the proportion of a company’s assets that are financed by debt. Let’s calculate the debt ratio for Alltech and SynergyXT for 2012.

• SynergyXT’s Debt Ratio:
  Debt Ratio = Total Liabilities / Total Assets
  Debt Ratio = $142,500 million / $479,480 million = 29.72%

A debt ratio of 29.72% indicates that SynergyXT relies on a moderate amount of debt financing, which is typical for companies of its size and industry.

Adjusting Entries and Their Impact on Financial Statements

Adjusting entries ensure that financial statements reflect the true financial condition of a company. Below are some adjustments made to Alltech and SynergyXT’s books in 2012:

• Insurance Expense Adjustment: $2,800
• Teaching Supplies Adjustment: $5,500
• Depreciation Adjustments: $11,000 (equipment) and $6,250 (library)
• Unearned Training Fee Adjustment: $3,600
• Salaries Payable Adjustment: $750
• Prepaid Rent Adjustment: $2,200

These adjustments were necessary to ensure accurate financial reporting and are a key part of the year-end closing process.

Income Statement and Retained Earnings for 2012

The Income Statement provides a summary of a company’s revenues, expenses, and net income over a specific period. For Alltech and SynergyXT, the figures for 2012 are as follows:

• SynergyXT 2012 Income Statement:
  Revenues = $152,250 million
  Expenses = $116,750 million
  Net Income = $35,500 million

• Retained Earnings:
  Beginning Retained Earnings = $52,900 million
  Add: Net Income = $35,500 million
  Less: Dividends = $42,000 million
  Ending Retained Earnings = $46,400 million

This shows that despite higher expenses, SynergyXT maintained solid retained earnings, indicating its ability to reinvest profits back into the business.

Conclusion:

In conclusion, both Alltech and SynergyXT exhibit strengths in different areas of their financial statements. Alltech outperforms SynergyXT in terms of Return on Assets (ROA), demonstrating higher efficiency. However, SynergyXT’s larger asset base and higher overall sales revenue show its scale and market presence. Both companies have shown solid growth from 2011 to 2012, with significant improvements in equity and asset values.

Understanding these financial metrics and how they relate to a company’s performance can provide valuable insights for investors, stakeholders, and managers alike.

BUS FPX 4060 Assessment 1 Transaction Analysis and Financial Statements

References

Wild, John J. and Shaw, Ken W (2022) Financial and Managerial Accounting (9th ed). 3 Adjusting accounts for financial statements. P.58-63. Retrieved from https://capella.vitalsource.com/reader/books/9781264098583/epubcfi/6/2[%3Bvnd.vst.idref%3Dco ver]!/4/2/2%4054:98