Liquidity
The current and quick ratio are used to determine a company’s ability to meet its short-term obligations. Though it is not surprising that the current ratio is generally higher due to the inclusion of inventory in the calculation, the bulk of Nintendo’s current assets are in the form of cash and cash equivalents, indicating that it is highly liquid. Nintendo uses little debt leverage and accrues minimal liabilities, which explains why their current/quick assets cause the current and quick ratios to be greater than 1 and why these ratios have steadily increased over the past 3 years.
Asset Management
Nintendo’s inventory turnover has increased over the past three years due to promoting digital software downloads (thus decreasing …show more content…
Nintendo has a relatively small amount of fixed assets, giving light to the outcome of its fixed assets turnover decline over the years. Total assets have increased relative to sales, however, explaining the slight decline in total assets turnover during this period.
Debt Management
Nintendo uses relatively little debt leveraging to finance its operations. For this reason, the debt ratio indicates that Nintendo’s capital primarily consists of equity, and equity is increasing. Although debt financing may be preferable to companies in the U.S., as the tax structure encourages it, Japanese companies tend to be more risk averse and prefer equity financing to protect investors. Nintendo is a relatively mature firm as well, so it is unsurprising that equity constitutes the majority of capital and that its use has increased over the past three years.
Also note that Nintendo has very few interest charges. The only interest charges reported were for retirement pension plans and lease obligations, amounting to roughly $10 million each year. Hence interest charges were earned many times over. …show more content…
This is likely due to highly anticipated upcoming projects, which include Nintendo’s move into the mobile application market, an retro console with built-in games known as the NES Classic Edition, and the release of the Nintendo NX in March 2017.
Cash Flows
Nintendo has a 3-year price/cash flow average of 49.7, compared to the industry average of 21.3. This entails that Nintendo is more highly valued by the market than average, as it has high market capital compared to its operating cash flows. (MORNINGSTAR) In comparison to net income, free cash flow has varied over time, increasing in recent years from 1.84 in 2014 to 3.06 in 2013. This indicates that Nintendo has potential for growth, as it can reinvest these cash flows for shareholder benefit.
Growth Patterns
On a year to year basis, Nintendo’s operating income has increased. As an example, operating income from 2015 to 2016 increased by 32.75%. Revenues, net income, and earnings per share have decreased on a year to year basis
The current and quick ratio are used to determine a company’s ability to meet its short-term obligations. Though it is not surprising that the current ratio is generally higher due to the inclusion of inventory in the calculation, the bulk of Nintendo’s current assets are in the form of cash and cash equivalents, indicating that it is highly liquid. Nintendo uses little debt leverage and accrues minimal liabilities, which explains why their current/quick assets cause the current and quick ratios to be greater than 1 and why these ratios have steadily increased over the past 3 years.
Asset Management
Nintendo’s inventory turnover has increased over the past three years due to promoting digital software downloads (thus decreasing …show more content…
Nintendo has a relatively small amount of fixed assets, giving light to the outcome of its fixed assets turnover decline over the years. Total assets have increased relative to sales, however, explaining the slight decline in total assets turnover during this period.
Debt Management
Nintendo uses relatively little debt leveraging to finance its operations. For this reason, the debt ratio indicates that Nintendo’s capital primarily consists of equity, and equity is increasing. Although debt financing may be preferable to companies in the U.S., as the tax structure encourages it, Japanese companies tend to be more risk averse and prefer equity financing to protect investors. Nintendo is a relatively mature firm as well, so it is unsurprising that equity constitutes the majority of capital and that its use has increased over the past three years.
Also note that Nintendo has very few interest charges. The only interest charges reported were for retirement pension plans and lease obligations, amounting to roughly $10 million each year. Hence interest charges were earned many times over. …show more content…
This is likely due to highly anticipated upcoming projects, which include Nintendo’s move into the mobile application market, an retro console with built-in games known as the NES Classic Edition, and the release of the Nintendo NX in March 2017.
Cash Flows
Nintendo has a 3-year price/cash flow average of 49.7, compared to the industry average of 21.3. This entails that Nintendo is more highly valued by the market than average, as it has high market capital compared to its operating cash flows. (MORNINGSTAR) In comparison to net income, free cash flow has varied over time, increasing in recent years from 1.84 in 2014 to 3.06 in 2013. This indicates that Nintendo has potential for growth, as it can reinvest these cash flows for shareholder benefit.
Growth Patterns
On a year to year basis, Nintendo’s operating income has increased. As an example, operating income from 2015 to 2016 increased by 32.75%. Revenues, net income, and earnings per share have decreased on a year to year basis