ACCOUNTING FOR MANAGERIAL

DECISIONS

HARSH PATEL
A141
INTRODUCTION

ASUS is a Taiwan-based, multinational computer hardware and consumer

electronics company that was established in 1989. Dedicated to creating
products for today’s and tomorrow’s smart life, ASUS is the world’s No. 1
motherboard and gaming brand as well as a top-three consumer notebook
vendor.In 2015 and 2016, Fortune magazine recognized ASUS as one of the
World’s Most Admired Companies, and for the past four years Interbrand has
ranked ASUS Taiwan’s most valuable international brand. The company has
more than 17,000 employees, including a world-class R&D team. 
Acer Incorporated is a Taiwan-based multinational electronics manufacturer. Its
product includes laptops, desktops as well as servers and storage, personal
digital assistance (PDA), peripherals, peripherals and e-business services for
government, business, education, and home users. Acer is the third largest
computer manufacturer in the world behind HP and Dell. The company also
owns the largest franchised computer retail chain in Taipei, Taiwan. Acer was
founded by Stan Shih, his wife Carolyn Yeh, and a group of five others as
Multitech in 1976. The company was renamed Acer in 1987. It began with eleven
employees and US$25,000 in capital.  
 LIQUIDITY RATIO

QUICK RATIO 0.77 0.83

CURRENT RATIO 1.38 1.32

INVENTORY TURNOVER RATIO 3.51 5.89

ASSET RATIO 1.19 1.76

The higher the liquidity rate of a company the higher is the safety margin that the business
possesses to meet its current liabilities therefore Acer is less likely to face problems in time of
hardships as compared to Asus as they have a higher liquidity rate.
 SOLVENCY RATIO
RATIOS
DEBT TO ASSETS 0.02 0.04

DEBT TO EQUITY 0.04 0.14

LONG TERM DEBT TO TOTAL ASSETS 0.00 0.03

The higher the solvency ratio, the better. Both the companies above have poor
solvency ratios. But Acer will have comparatively less difficulty to pay of
interests on debts as compared to Asus. 
 PROFITABILITY RATIO

RETURN ON ASSESTS 5.56 9.53

RETURN ON EQUITY 17.16 21.02
RETURN ON INVESTED CAPITAL 15.62 20.92
GROSS MARGIN 11.73 21.32
OPERATING MARGIN 4.95 10.5
EBITDA MARGIN 5.37 11.28
NET MARGIN 3.63 8.88
• Profitability ratios assess a company's ability to earn profits from
its sales or operations, balance sheet assets, or shareholders'
equity. Profitability ratios indicate how efficiently a company
generates profit and value for shareholders. Higher ratio results
are often more favorable, but these ratios provide much more
information when compared to results of similar companies, the
company's own historical performance, or the industry average.
Here we can see that Acer has a better ratio than Asus therefore
comparatively Acer is more profitable.
 ACTIVITY RATIO

RECEIVABLES TURNOVER 5.58 5.16

TOTAL ASSET TURNOVER 1.1 1.63

An activity ratio is a type of financial metric that indicates how efficiently a

company is leveraging the assets on its balance sheet, to generate revenues and
cash. Commonly referred to as efficiency ratios, activity ratios help analysts
gauge how a company handles inventory management, which is key to its
operational fluidity and overall fiscal health. Both companies have similar
ratios.
 COVERAGE RATIO
149.97

56.16

The ratio is calculated by dividing EBIT by the company's interest expense—

the higher the ratio, the more poised it is to pay its debts. Creditors can use the
ratio to decide whether they will lend to the company. A lower ratio may be
unattractive to investors because it may mean the company is not poised for
growth. Therefore Asus has a better ratio.