When deciding to invest in a company it is important to look at multiple aspects of the company. Just because the company’s net sales increase does not mean the company is in a better financial position. It is also important to compare the focus company to another company in the same industry. Yes, the focus company may look like it is growing, but is it growing as fast as the rest of the companies in the industry? When looking at investing one should take a look at profitability, solvency, and liquidity.
Profitability is the degree to which a business yields profit or financial gain. When comparing the net profit margins of Staples and Office Depot, Staples has a higher percent of net income to total revenue for the year of 2015. However, the difference is only about 1.7 percent. When looking back over two years, we see that Office Depot has improved net income by almost 1800 percent from 2014 to 2015. On the other …show more content…
When looking at Staples and Office Depot’s debt to asset ratios, Staple’s debt to assets was 0.47:1 and Office depot was 0.75:1. This Staple is in a less risky position when it comes to debt, however, both companies are less than 1:1 which is a good thing.
Liquidity is a measure of the ability to pay debts. Staples (1.57:1) has a higher current ratio than Office Depot (1.48:1). Both companies nevertheless have a ratio that is low. This means that both companies have a reduced ability to pay their debts on time.
Based on my calculations of Staples and the comparison of another company in the same industry, Staples looks to be a decent company to invest in. It is growing and improving, but not as drastically as other companies in the industry. In researching staples a little more I discovered that Staples stock price took a nose dive about six months ago and recovered, but the stock price is slowly declining overall (Stock Information). Therefore, I would not invest in
Profitability is the degree to which a business yields profit or financial gain. When comparing the net profit margins of Staples and Office Depot, Staples has a higher percent of net income to total revenue for the year of 2015. However, the difference is only about 1.7 percent. When looking back over two years, we see that Office Depot has improved net income by almost 1800 percent from 2014 to 2015. On the other …show more content…
When looking at Staples and Office Depot’s debt to asset ratios, Staple’s debt to assets was 0.47:1 and Office depot was 0.75:1. This Staple is in a less risky position when it comes to debt, however, both companies are less than 1:1 which is a good thing.
Liquidity is a measure of the ability to pay debts. Staples (1.57:1) has a higher current ratio than Office Depot (1.48:1). Both companies nevertheless have a ratio that is low. This means that both companies have a reduced ability to pay their debts on time.
Based on my calculations of Staples and the comparison of another company in the same industry, Staples looks to be a decent company to invest in. It is growing and improving, but not as drastically as other companies in the industry. In researching staples a little more I discovered that Staples stock price took a nose dive about six months ago and recovered, but the stock price is slowly declining overall (Stock Information). Therefore, I would not invest in