Asian Research Consortium

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1 Asian Research Consortium Asian Journal of Research in Banking and Finance Vol. 7, No. 11, November 2017, pp Asian Journal of Research in Banking and Finance ISSN A Journal Indexed in Indian Citation Index DOI NUMBER: / UGC APPROVED JOURNAL Financial Analysis JP Morgan Chase & Co. Chihiro Iizawa MBA International University of Health and Welfare Graduate School c_1016@yahoo.co.jp Abstract The research was analyzed based on the financial statement. JPM Chase & Co. was purchased Morgan Stanley in The research showed the analysis of monetary management s differentiation before they purchased the financial institution and after. The research method was analysis of each items of accounting in financial statement fiscal year 2007 and As a result of the research disclosed the outstanding financial management after they purchased the Morgan Stanley. Keywords: JP Morgan Chase & Co., Morgan Stanley, Financial statement analysis, Asset mgmt, Debt mgmt. Introduction Liquidity 1. Current Ratio The JPM Chase & Co. current ratio of 2007 was 0.42%, Currents assets of 2007 were $534,963,000,000. Current liabilities of 2007 were $1,239,916,000,000. Whereas, current assets of 2008 were $782,721,000,000, current liabilities were $1,737,488,000,000, and current ratio was0.45. Current ratio was slightly moving well in 2008 ( JP Morgan Chase & Co. Annual report and proxy ). As moving opposite direction, this designated poor evaluation. 44

2 2. Quick Ratio JP Morgan Chase & Co. is same operation as banks, which means without of inventories. The numbers of quick ratios are nearly identically with current ratio. They used almost same base such as denominator is current liabilities subtracted inventories, and numerator is almost same as well. Table 1 Liquidity Current ratio Current assets/current liabilities (721,734,000,000+60,9 87,000,000)/2,008,168, 000, ,094,000,000-18,586,000,000= % 42% 2.Quick Ratio (Current assets- Inventories)/Current liabilities (721,734,000,000+60,9 87,000,000)- 0/2,008,168,000, ,094,000,000-18,586,000,000= % 42% Asset Management 3. Inventory Turnover Unfortunately, JP Morgan Chase & Co. don t have inventory because it s a stock company, thus it is an impossible to analyze them. 4. Days Sales Outstanding The days sales outstanding were of 2007 are 127 days, 2008 is 331 days. Account receivables of 2007 were $24,823,000,000, 2008 were $60,987,000,000. Again, 2007 annual sales were $44,966,000,000, 2008 were $67,252,000,000. Precisely, the days sales outstanding were 204 days improving(jp Morgan Chase & Co. Annual report and proxy ). The firm also needs to gain more the receiving dates for animating for their business in the future. 45

3 5. Fixed Assets Turnover Financial company s fixed asset turnover does not make sense rather than the company, which produces tangible products. 6. Total Assets Turnover The sales of 2007 were $28,473,000,000, total assets were $2,175,052,000,000, and total assets turnover were On the other hands, the sales of 2008 were $28,473,000,000, total assets were $2,175,052,000,000, and total assets turnover were (JP Morgan Chase & Co. Annual report and proxy ). The different of total assets turnover were %, which are anticipating that firm are requiring getting profit margin to achieve return on investment. Asset Management 4.Days sales outstanding Receivables/(Annual sales/365)=331 Table ,987,000,000/(67,252,000,000 /365)= days 127days 6.T otal asset turnover Sales/T otal assets 28,473,000,000/2,175,052,000,0 00= % 2.87% Debt Management 7. Total Debt to Total Assets Debit equity ratio is established by the balance that the way to manage certain firm has struck between these forces of risk against the costs. Total debts to total asset s amount of 2007 were 92.11%, 2008 were 92.00%. In this case, 2008 had better number than 2007 (JP Morgan Chase & Co. Annual report and proxy ). Total debt to total assets also showed unique number, which seemed like high amount of total debt to total assets, however the financial firms usually hit high percentages of them. 8. Times Interest-earned 2007 s earnings before interest and taxes were $22,805,000,000, and 2008 s were $2,773,000,000. Interest charge is same as interest expense, 2007 s interest expense were $44,966,000,000, 2008 s were $34,239,000,000. Times interest earning of 2007 were , 2008 were (JP Morgan Chase & Co. Annual report and proxy ) s managements were better than 2008 s one. 46

4 9. EBITDA Coverage EBITDA coverage does not make sense rather than the firms, which are producing intangible products. Table 3 Debt Management T otal debt tototal assets Total liabilities/t otal assets 8.Times interest-earning 2,008,168,000,000/ 2,175,052,000,000= 0.92 Earning before interest and taxes/interest charges sales-non interest expense+interest expense 2,773,000,000/34,2 39,000,000= % 92.11% 8.09% 50.70% Profitability 10. Profit Margin on Sales The price of profit margin of JPM in 2007 is 34 %, 2008 is 17 %. This is a negative sign for JPM because the number is decreasing. The profit margin of JPM is moving negatively such as decreasing 17 %. The negative results were also Net Sales $28,473,000,000 in 2008 related. (JP Morgan Chase & Co. Annual report and proxy ). 11. Basic Earned Power Earnings before interest and taxes 2007 were $44,966,000,000, and 2008 were $28,473,000,000. Total assets of 2007 were $1,562,147,000,000, and 2008 were $2,175,052,000,000. Basic earning power of 2007 were 2.87%, 2008 were 1.30 %, which illustrated poor management in 2008 (JP Morgan Chase & Co. Annual report and proxy ). 12. Return on Total Assets Net income available to common stockholders of 2007 were $15,365,000,000, and 2008 were $4,932,000,000. Total assets of 2007 were $1,562,147,000,000, 2008 were $2,175,052,000,000. Return to total assets of 2007 were 0.97%, 2008 were 0.22%, which designated financial operation of 2007 were better than 2008 (JP Morgan Chase & Co. Annual report and proxy ). The firm would improve their net income available to common stock holders and total assets amounts for

5 13. Return on Common Equity Iizawa (2017). Asian Journal of Research in Banking and Finance, Unfortunately, 2007 s preferred stock price was not given. However, industry averages of return on common equity were 15%, 2008 s returns on common equity were 5.8%, which were poor operations (JP Morgan Chase & Co. Annual report and proxy ). JP Morgan Chase Co. s negative movement was rapidly. Table 4 Probability Profit margin in sales Net income available to common stockholders/sales 4,932,000,000/28,473,000,000= % 34% 11.Basic earning power Earning before interest and taxes/total assets 28,473,000,000/2,175,052,000,000= % 28.7% 12.Return to total assets Net income available to common stockholders/total assets 4,932,000,000/2,175,052,000,000= % 0.97% 13.Return on common equity Net incomeavailable to common stockholders/common equity (Shareholders' equity-preferred stock) 4,931,000,000/116,884,000,000-31,939,000,000= % Preferred stock price is not given in Market Value 14. Price/Earning Price/earnings ratios of 2007 were 11%, 2008 were 45% (JP Morgan Chase & Co. Annual report and proxy ). In this case, 2008 is better than 2007 because bringing benefits for shareholders. 48

6 15. Price/Cash Flow This ratio doesn t make sense in banking systems. 16. Market/Book Market/book amount of 2007 were 6.5%, 2008 were 6.1%. Market prices of 2008 were Book value per share of 2007 were ($3,658,000,000+$78,597,000,000+$54,715,000,000)/ $9,000,000,000=15.210, 2008 were ($3,942,000,000+$92,143,000,000+$54,013,000,000)/ $9,000,000,000= (JP Morgan Chase & Co. Annual report and proxy ) had more beneficial finance operation than year of Table 5 Market Value Price/earning Price per share/earning per share 1.290/2.270= % 11% 16.Market/book Market price per share/book value per share Market price=1.410/1.370=1.030 Book value=3,942,000,000+92,143,000,000+54,013,000,000= 150,098,000,000/9,000,000,000= /16.67= % 6.5% In conclusion, over all JP Morgan Chase Co. is producing effective financial operation because year 2008 s over all financial activities were better than year of Ultimately, the financial benefits, which they earned in past years, they could buy the Morgan Stanley. It was implied that returns on total assets definitely requiring to improving for next year because the gaining total assets are seriously significant components for banking industries. Reference JP Morgan Chase & Co. Annual report and proxy proxy.htm 49