Comparing and contrasting the financial performance and current financial status of Cambridge and Suxxex universities.

 
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Introduction
The financial performance of any institution is effectively determined by the use of financial ratios that are categorized into profitability, efficiency and investment. According to Hinton and David(2005) financial ratios are one of the most appropriate means of evaluating the firm’s financial performance as they reveal the true picture about how healthy a firm is regarding revenue, stock, and the profitability. Ratios can also be easily be compared with those of the industry or even those of competitors. Financial ratios are also critical in evaluating various unhealthy characteristics of an organization like liquidity which signifies financial weakness.
Financial ratios
Profitability is the firm ability to generate more earnings as compared to its costs or expenses. Profitability ratio also shows a company’s ability and the level of returns to investors and other stakeholders who have financial interest to the company. Examples of Profitability ratios include gross profit margin and the net profit margin. The net profit margin is equal to net profit / Revenue. Comparing Cambridge and Sussex universities for the year 2012, 2013 and 2014, the scenario will be as follows
Year 2012, Cambridge University net profit margin = 99/1499= 0.07 for year 2013 the net profit margin is 74/1570 =0.05.The net profit margin for year 2014 is 44/1504= 0.03.When the figure is compared with that of Sussex University
For 2012= 13749/48794=0.3.For 2013=14735/41923=0.4,while for 2014= 922/11059=0.08.When compared Suxxex university has a higher net profit margin as compared to Cambridge University in all the three years , therefore, being better financially from a profitability aspect. When the analysis is conducted vertically, Cambridge University maintained a downward trend while Suxxex University had an upward trend.

Organizations efficiency is measured how well an organization makes use of its assets as well as liabilities internally. An example of efficiency ratios includes the working capital that is equal to current assets less current liabilities. The asset turnover ratio which measures the ability of a company to generate income from the available assets. Asset turnover ratio is therefore equal to net sales /average total assets.
Working capital ratio
Year 2012 2013 2014
Cambridge 1201-1041=160 1260-1002=258 813-631=182
Suxxex 29118-44464=(15346) 67,376-41494=25882 9312-2679=6633
Asset turnover ratio
Year 2012 2013 2014
Cambridge 1322/ 2641= 0.5 1438/3074 =0.5 1504/ 3177= 0.5
Suxxex 172510/ 94873 = 1.8 191092/ 145424=1.3 207610/152642=1.4
The ratios show that in the two years Suxxex University had a higher efficiency than Cambridge. On a vertical analysis basis both Suxxex and Cambridge University maintained an upward trend. Vertically, the Suxxex asset turnover ratio took a downward trend while that of Cambridge was constant at 0.5.The asset turnover ratio shows that Suxxex are better at utilizing the available resources to increase their income as compared to Cambridge.
A firm’s liquidity shows the ability of the firm to meet cash obligations in the short term. Comparing Cambridge and Sussex regarding liquidity that is revealed by current assets divided by current liabilities as shown in the results below.
Quick ratio
Year 2012 2013 2014
Cambridge 1201/1041 =1.2 1260/1002 =1.3 813/631=1.3
Suxxex 29,118/44,464=0.7 67376/41,494= 1.6 9312/2679=3.5
The two universities seem to have maintained a healthy liquidity ratio although Suxxex University had a better liquidity ratio. Vertically both universities maintained and upward trend especially in the 2013 to 2014 years. On the other hand, comparing the two universities regarding solvency that is the ability of any organization to meet its long-term financial obligation (Zietlow & Seidner, 2007). The ratio will be calculated by dividing the operating income with interest.
Solvency ratio
Year 2012 2013 2014
Cambridge 1322/11=120.2 1438/19=75.7 1504/16=94
Suxxex 48,784/4,949= 9.9 41,923/5985=7.0 6766/5241=1.3
In terms of solvency Cambridge did better than Suxxex as they had a higher solvency ratio as compared to Cambridge. The ratio shows that Cambridge has a better ability to meet its long term financial obligations. Vertical analysis had an upward trend for Cambridge in the period 2013-2014 while Suxxex had a downward trend in 2013- 2014 years. The solvency ratio also reveals the organizations financial health and as such indicates whether the university owns more than it owes the stakeholders.
The various elements of the financial statements in the two universities include the various financial statements used like the balance sheet and the income and expenditure statement. The income of the two organizations varies considerably with Cambridge having an income of $38157 while Suxxex had $41,923 in the same period.
Table 1:summary of the ratios(Cambridge )

Ratio Formula 2012 2013 2014
Net profit margin Net profit/revenue 99/1499=0.07 74/1570 =0.05 44/1504= 0.03
working capital ratio current assets-current liabilities 1201-1041=160 1260-1002=258 813-631=182
Asset turnover ratio Net sales /average total assets. 1322/ 2641= 0.5 1438/3074 =0.5 1504/ 3177= 0.5
Quick ratio current assets/current liabilities 1201/1041 =1.2 1260/1002 =1.3 813/631=1.3
Solvency ratio operating income/interest 1322/11=120.2 1438/19=75.7 1504/16=94

Table 2:summary of the ratios(Suxxex)
Ratio Formula 2012 2013 2014
Net profit margin Net profit/revenue 13749/48794=0.3 14735/41923=0.4 922/11059=0.08
working capital ratio current assets-current liabilities 29118-44464=(15346) 67,376-41494=25882 9312-2679=6633
Asset turnover ratio Net sales /average total assets. 172510/ 94873 = 1.8 191092/ 145424=1.3 207610/152642=1.4
Quick ratio current assets/current liabilities 29,118/44,464=0.7 67376/41,494= 1.6 9312/2679=3.5
Solvency ratio operating income/interest 48,784/4,949= 9.9 41,923/5985=7.0 6766/5241=1.3

The various changes in business risks range from lowering of research funds and the type of investments undertaken by the university management. In Suxxex they are faced with liquidity risks and low efficiency. In the course of the analysis the various limitations caused by the use of financial ratios included the ratios being too general and therefore making their reliability questionable. The limitations came into play due to the fact that the two universities are in the academic sector which requires precision.
In both financial statements the director statements have emphasized the gains made and those to be made in the near time. The two statements strike a lot of similarity .However looking at the auditors reports both have no anomalies thereby proving the reports reliability.
Corporate social responsibility includes an organization initiative in giving back to the community around so as to foster good relationship. The two universities have both been involved in corporate social responsibility as per the audited financial statements, first the University of Cambridge is a exempt charity which is guided by the charity regulations. The university has also been involved in the establishment of Gatsby charitable foundation which is an organization dealing with research for community programs. The university has also been highly involved in Kidney research in the UK as a way of giving back to the community. University of Suxxex on the other hand carry out it’s cooperate social responsibility programs through the health safety and environmental committee that ensures that the university does not engage in activities that can harm the environment and helping the community around in conserving the environment. The similarity between the two universities in their CSR programs is that both have initiatives that have a direct impact to the society.
Conclusion
The two universities have been making progress financially with little notable financial anomalies. When the two financial reports are analyzed from various angles like profitability, solvency, efficiency and liquidity a trend similarity can be seen. The two organizations are therefore striving to excel financially.
References
Hinton. M and David, B.(2005). Towards a Framework for Evaluating the Business Process Performance of E-Business Investments. International Journal of Business Performance Management .Vol87 (1).
Zietlow T. & Seidner, G (2007). Cash & investment management for nonprofit organizations. John Wiley and Sons.
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