Analysis

The analysis would be conducted on Nomura whether to understand that the newly Lehman brother Acquisition would have a positive impact on the business. The tools for conducting the analysis would be through analyzing the financial statements, using the PEST tool for further analyzing the political, economic, social and technological impact, ratio analysis consisting of the key ratios that would help in deciding the company’s financial position and the ethical consideration of Lehman brother since the company had been using unethical approaches for gaining advantage among other banks.

Analysis of Financial Performance

Common size analysis of Income Statement:

From the analysis of income statement, we can conclude that company is performing very well as compared to the past years. In 2006, thecompany has the net income of 4 billion dollars and in the fiscal year 2007, it has increased to 4.19 billion dollars. We have done trend analysis to analyze the income statement. Trend analysis shows that company’s total revenues have increased by 26.32% and with this increment, its interest expense has also increased by 36.46% and ultimately its net revenue has increased by 9.52%. Trend analysis also shows that company’s net income has increased by 4.62% that shows that company has performed bit well as compare to the fiscal year of 2006.

Common size analysis of Balance Sheet:

In the common size analysis of balance sheet, we examine the trend analysis of the balance sheet, trend analysis means we look at the percentage change in the balance sheet accounts such as at what percentage the lon0term assets of Lehman brothers have increased.

The trend analysis shows that company’s cash and cash equivalents have decreased by 17.83%, moreover company’s total assets have decreased by 27.13%, it shows that company has used its assets to pay off some of its liabilities as trend analysis shows that total liabilities have decreased by 27.55%, so we can conclude that company has used its assets to pay off some of its liabilities.

Ratio analysis also shows that company’s debt to assets ratio has decreased from 97% to 96%, so thecompany has used its assets to pay off its debt.

Moreover, trend analysis shows that company has not issued any further equity and this is whythere is no impact on the common stock..

Ratio Analysis:

Profitability Ratios:

Profitability ratios determine the capability of the company to generate earnings with the comparison of its expenses. We can analyze the profitability position of the company by calculating operating profit and a net profit ratio of the company.  The reported operating profit margin and net profit margin of Lehman Brothers were 31.23% and 33.58% respectively in 2006 while in 2007 they become 21.77% and 22.79% respectively. The profitability performance of the company reveals that the company effectively controls its expenses thus, this improves the overall earning position of the company.

Liquidity Ratios:

Liquidity ratios determine the ability of the company to pay out its obligation. We can analyze the liquidity position of the company by calculating current ratio, quick ratio and interest coverage ratio of the company. The current ratio, quick ratio, and interest coverage ratio of the company were 1.24, 1.24 and 0.15 respectively in 2006 while in 2007 they become 1.22, 1.22 and 0.20 respectively. Thecompany does not have any inventory and this is why its current and quick ratio is same. You can see below table……………..

This is just a sample practical work. Please place the order on the website to get your own originally done case solution.