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Vanguard Group Financial Analysis Paper

860 Words4 Pages

Financial analysis has used to determine Vanguard group financial condition and performance whereby, the items in the balance sheet are compared with those items in the statement of financial performance. This is done because items in the statement of financial position have an impact on those in the statement of financial performance. The assets in the balance sheet have an influence on the items in the income statement such as the revenues and expenses. The financial condition of Vanguard Group is determined by establishing the liquidity position and the financial risk of the company. The liquidity risk is determined using the current ratio and the quick ratio. The current ratio and the quick ratio are fairly constant over the three years showing stability in the liquidity position of the company. In comparison to the industrial averages, both ratios are higher. The current ratio for 2007 is 1.67 in comparison to the industrial average of 1.6 while the quick ratio is 0.96 compared to the industrial average of 0.9. This is an indication …show more content…

Over the years, there has been an increasing trend in this ratio and this shows that the company ability to meet the interest expense on the debts is increasing. The ratio is 5.53 times for the company while the industrial average ratio is 4 times. The company will not have difficulties in paying interest expenses. In comparison to the industrial averages, the company boasts of having a high ratio and this is a good indicator. Financial institutions will be willing to lend to this company as the probability of losing their money is low. However, the company’s dependability on debt capital in financing majority of assets is high and this can be evidenced by the gearing ratio which is more than one. This shows reliance on more debt capital than equity by the firm. This could be as a result of the ability by the company to assess more debt

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