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Cisco Systems Inc. Company Ratio Analysis
Cisco Systems, Inc. is an American company that specializes in the production and design of various consumer technologies. With the head quarters in San Jose California, the company is well known is well known for its networking and communication technologies, and is one of the leading electronic company in the state at present (Cisco: The Network 1). Being a multinational company, Cisco Systems Inc serves the international market, as it manages production and the delivery of its company services in more than one country. The company’s operation activities take place in the competitive computer networking industry, and for that reason, the company has a variety of competitors both from within the company’s headquarter locations and outside. The key competitors of Cisco Systems Inc. include Alcatel-Lucent (ALU), Hewlett Packard Company (HPQ), Jupiter Networks Inc. (JNPR), ARRIS Group Inc., and the Aruba Networks Inc. among others (Yahoo Finance 1).
A closer examination of the company’s annual report reveals that the company’s business strategy revolves around market expansion and product value. As a company, Cisco Systems Inc. has managed to expand its market share over a short period of time and this has been through their innovative products and services. The company has managed to utilize al its resources in a way that ensures the company is up to date with the changing trends in the industry, hence providing their customers with what they need. Price Water House Coopers LLP has been charged with the duty of auditing Cisco Systems Inc., and their opinion regarding Cisco’s financial statement and internal control is substantial (Cisco: The Network 1). According to the most recent auditor’s report, the company’s financial statement and internal control illustrate that the company is well positioned financially and there are prospects for future growth. The company’s management report also supports the auditor’s report in that it records the possibility of future growth owing to Cisco’s ability to manage and control its finances accordingly. In addition to this, the managers’ report suggests that Cisco Systems Inc. has discovered a number of investment opportunities, which it has taken advantage of for profitability.
Activity Ratio Analysis
Based on the financial statements presented over the last three years, it is evident that as a company that seeks market expansion, growth and profitability, Cisco Systems Inc. is likely to achieve its financial goals and objectives. The operating efficiency of Cisco Systems Inc. in the last three years illustrates the company’s ability to generate sales and control operations costs (Cisco: The Network 1). Evidently, the company’s team of managers has developed appropriate business and operations strategies to assure the company of a proper operating efficiency. Seeing as Alcatel-Lucent is the company’s closest competitor, a comparison of Cisco’s operating efficiency and that of ALU reveals a large difference of the two companies (Yahoo Finance 1). At the outset, ALU’s financial records for the last three years illustrate a bit of inconsistency in the management of company sales against operations costs. Though the most current financial reports record more sales than the actual operations costs, the preceding two years illustrate a big difference in the two, hence a poor operations efficiency in the company. Accordingly, ALU is experiencing growth in its operations efficiency meaning that the managers have taken up strategies that favor the control of company sales and operations costs in each financial year.
Based on ALU’s financial records, it is safe to assume that the company is yet to reach to Cisco’s level in relation to operations efficiency. However, because the company has shown to have the ability to improve and increase its operations efficiency, then there exists a possibility of ALU and Cisco Systems Inc. being on the same level at one point. Some of the factors that distinguish Cisco’s operating performance and ALU’s operating performance include company employees, access to raw materials, and the company’s marketing strategies and efforts (Alcatel-Lucent 1). At the outset, a comparison of the two organizations reveals a difference in the number of employees, which is considered a key factor in determining a company’s operations efficiency. Having more employees, as in the case of ALU increases the company’s operation costs and because the sales are not high enough to compensate for the costs, the company experiences low operations efficiency. Secondly, access to raw materials for the production of goods also distinguishes the two companies’ operations efficiency. Whereas Cisco Systems Inc. has access to plenty of raw materials for their production activities, ALU relies on secondary sources thus increasing their operations costs (Alcatel-Lucent 1). An increase in the operations costs presents a variance in the operations efficiency as the sales do not match the company’s operations costs. Lastly, the companies’ marketing strategies also distinguish the operations efficiencies of the two companies. Cisco Systems Inc. has employed a proper marketing strategy that has allowed the company to make more sales for their products and services (Cisco: The Network 1). ALU’s marketing strategy, on the other hand, has failed to generate the company as many sales as Cisco’s thus lowering its operations efficiency. Cisco’s business environment and business strategy affects the activity ratios in that it determines the amount of money the company makes as income.
Profitability Ratio Analysis
A closer examination of Cisco’s profitability indicates that the company’s profitability has been on an upward spiral for the last three years. The company’s profitability can be estimated through an assessment of the current after-tax run-rate gross income (Cisco: The Network 1). This assessment is carried out both with the consideration of cash and non-cash financial .............
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