ACCT 203DL Cisco Systems, Inc. – Case 3 Ratio Analysis
Cisco Systems, Inc. vs. Juniper Networks, Inc.
For our final case, we’re going to use ratio analysis to compare Cisco Systems, Inc’s financial performance and financial health to that of Juniper Networks, Inc., one of its competitors.
On the next two pages, I have attached the key financial ratios analyses for each company – Cisco Systems and Juniper Networks. The ratios are listed in the 4 major categories – Profitability, Liquidity, Debt Management, and Asset Management.
In our course, we the Debt Management ratios are called Solvency ratios and the Asset Management ratios are called either Efficiency ratios or Turnover ratios.
The schedules also have some per share ratios.
Using the relevant ratios from the attached schedules, please answer the following questions. In answering each question, please explain your reasoning using the relevant ratio(s) from the attached.
1. Over the 5-year period presented, which company was most efficient as generating revenue from its investment in total assets?
2. Over the 5-year period presented, which company was best able to meet their periodic interest payments related to debt obligations?
3. Based on the 5-year performance, which company generated the highest return on its total financing, i.e. debt and equity?
4. Based on the 5-year performance, which company is in the best position to meet its long-term debt obligations and stay in business?
5. If you were a bank lending officer and each of these companies applied for a $500 million short-term borrowing (i.e. to be repaid in a less than a year), which company would you be more likely to lend to and why? Would your decision and analysis differ if the company was required to repay the borrowing in 5-years rather than less than a year? Please explain your answer.
6. Based solely on the attached ratios, which company’s common stock would you most likely invest in? Please explain your answer.
Note: Assume that the market price per share of the companies’ common stock are:
a. Cisco Systems, Inc. – $30.98
b. Juniper Networks. Inc. – $29.20