Organizational commitments and application of financial statement analysis techniques to CNN

Published: 2019-11-18 09:00:00
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Organizational commitment refers to the psychology of an individual attached to the organization. Organizational commitment do predicts work variables such as job performance, turnover and the organizational behavior of citizenship. Factors such as empowerment, employability, role stress, job performance and job security have been shown to have a connection with the workers sense of the organizational commitment. This paper discusses the three types of commitment and the application of ratios in the financial statements and reports of a company.

Affective commitment is characterized as the worker's sure enthusiastic connection to the association. A worker who is unequivocally dedicated relates to the association's objectives and yearnings to be a piece of it .This commitment can be influenced by many characteristics which demographic such as age, education and tenure but these characteristics cannot be defined.

Continuance commitment refers to the need component or the losses verses gains of working in the organization. A person may commit to the organization since he or she perceives a high cost of losing membership of an organization. Things like social costs and the economic costs are costs which results due to losing organizational membership.

Normative commitment alludes to where an individual focuses on and stays with the association in view of the sentiments of the commitments, the last component of the hierarchical responsibility. These sentiments can be gotten from a strain on a man before and even subsequent to joining an association. This type of commitment is higher where the organization values loyalty and systematic communication of facts to the employees with rewards, incentives and other strategies.

2. The application of financial statement techniques to CNN Company from the year 2014 to 2016.

Liquidity ratios

Current = current assets /current liabilities

Year 2014

11.9B/8.2B = 1.451

Year 2015

11.6B/8.5B = 1.365

Year 2016

11.9B/8.9B = 1.3371

Since the company in the three financial years has more current assets compared to the current liabilities implies that the company can survive in the near future since it can sell its present resources in order to pay the present liabilities confronting the organization.

Quick = current assets / inventories

Year 2014

11.9B/0 = 0

Year 2015

11.6B/0 = 0

Year 2016

11.9B/0 = 0

This company has no inventories at the end of each the year for the three consecutive years. But in actual sense receivables are always more liquid compared to the inventories since the receivables directly converts to cash after the credit period, inventories in the other hand are converted first to receivables which then take time to be converted to cash.

Asset management

Inventory turnover = sales/ inventories

Year 2014

31.9B/0 =0

Year 2015

32.9B/0 =0

Year 2016

34.8B/0 =0

The company had no inventory for the three year. But inventory turnover shows the number of times the inventories are restored a specified year.

Days sales outstanding = receivables / (annual sales/365)

Year 2014

5.7B/ (31.9B/365) = 65.22

Year 2015

5.7B/ (32.9B/365) = 63.24

Year 2016

6.2B/ (34.8B/365) = 65.029

Days sales outstanding refer to the measures of the receivables collection days. 65, 63 and 65 are for the three years consecutively, which shows the days the company takes to convert receivables into cash.

Fixed assets turnover = sales/ net fixed assets

Year 2014

31.9B/3.1B = 10.29

Year 2015

32.9B/4.3B = 7.65

Year 2016

34.8B/3.6B = 9.67

The fixed assets turnover refers to the comparison of sales to fixed assets. It shows how the fixed assets can be utilized efficiently so as to generate sales. The fixed asset turnover in the company decreases in the year 2015 and it goes up in the year 2016 to 9.67 times.

Total assets turnover = sales/ total assets

Year 2014

31.9B/17.9B =1.78

Year 2015

32.9B/18.3B = 1.798

Year 2016

34.8B/20.6B = 1.689

This refers to the comparison between the sales and the total assets. This proportion demonstrates how effectively the benefits are used in order to create deals. Asset turnover in this company show a declining trend in the year 2014 it was 1.78times, 2015 it was 1.79 times and the year 2016 it is showing asset turnover of 1.689 times.

Profitability

Operating margin = operating income/sales

Year 2014

4.4 B/31.9B = 0.13793 *100 = 13.79%

Year 2015

4.4B/32.9B = 0.13374*100 =13.37%

Year 2016

4.8B/34.8B = 0.13793*100 = 13.79%

The operating margin measures the rate of benefit on the deals made after the working costs. The operating profit margin for this company has decreased in the year 2014 to 13% in 2015 and n 2016 it increased to 13.79% hence this shows a positive trend of the company in the industry.

Profit margin = net incomes/sales

Year 2014

2.9B/31.9B = 0.091

Year 2015

3.1B/32.9B = 0.0942

Year 2016

4.1B/34.8B =0.1178

Return on total assets = net income/total assets

Year 2014

2.9B/17.9B = 0.162*100 =16.2%

Year 2015

3.1B/18.3B = 0.1694*100=16.94%

Year 2016

4.1B/20.6B = 0.199*100 =19.9%

This return on total assets do identifies with the association's income to all the capital put resources into the business. The return on total assets for the company has increased from 16.2% in 2014 to 19.9% in 2016. This therefore shows a positive trend of the company. This shows that in 2016 the company is generating a return of 25% on the total assets.

Return on common equity= net income/common equity

Year 2014

2.9B/5.7B = 0.50877*100 = 50.87%

Year 2015

3.1B/6.1B = 0.5082*100= 50.82%

Year 2016

4.1B/7.6B = 0.5395*100= 53.95%

Return on common equity is based on the shareholders common equity. The return on common equity for this company increased from 50.87% in 2014 to 53.95% in 2016. This shows a positive work done by the company.

Return on invested capital = EBIT (1-T)/total invested capital

Year 2014

4.3B/5.7B =0.754*100 =75.4%

Year 2015

4.4B/6.1B = 0.72*100 = 72.00%

Year 2016

5.6B/7.6B =0.73*100 = 73%

Return on the capital invested is based on the amount of capital that was employed. According to the company the rate reduced in 2015 to 72% and increased in 2016 to 73%. This shows that the company has been able to make a lot of return from the capital that was employed in the companys operations.

In short, the company is doing fairly well and making good use of the resources employed as it is shown by the application of ratios in their income statement and the balance sheet reports. The company should improve on the level of inventories it have in the store.

sheldon

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