Oracle Case Analysis
Autor: Sara17 • April 27, 2018 • 717 Words (3 Pages) • 529 Views
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Liquidity ratios of Oracle measured are Current Ratio and Quick Ratio. Using time series analysis, it was obvios that both ratio are volatile and plunged down in 1990. Comparing to its industry average, Oracle still performed under its peers. The big gap between current ratio and quick ratio showed that Oracle has much inventory.
To know the leverage ratio, Times Interest Earned and Debt/Equity were employed. It was evident that the ability to meet the interest obligation of Oracle was good based on time series analysis or cross section with industri ratio. Nevertheless, the ratio went down by 76 % in 1990. Along with the phenomena, the total liability of the corporate increased rapidly from 1988.
- Conclusion
So, did the share price drops related to past financial performance?
Yes. Based on Profitability Ratio we can see that Oracle is below the industry standard. Even though the net income rise, if we breakdown and see the ratios we acknowledge that the rise in net income does not mean rise on the company profit.
Was the company healthy?
No. Because the sales the company received majority comes from Receivable (in 1990, the receivables is 59.95%) and the Doubtful Account Receivables increase each year therefore become bad debt and fail to be recognized as Revenue.
What had been changed in the company that led to drops in share price?
The company had trouble with inventory turnover, the trend is negative and it’s lower than the industry average. The inventory turnover indicates that the products the company sold is fall and the products in the inventory is pile up. It shows the decline of product quality. Other than that, the high target the company set lead to many sales representatives leaving the company. Which mean the company can’t retain their employees. Because of that, Oracle is now shifting its strategy to emphasize profitability and product quality instead of market share and sales growth, to meet demands in the maturing market for database applications.
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