For the purpose of this project, Activision Blizzard Inc.
has been chosen, which is a video game publisher headquartered in the United
States of America since 2008. It develops video games franchises under five
different operating units and has nearly 500 million active users globally.
The reason of selecting it as a company for analysis is
because it is America’s leading entertainment interactive company which is
publicly traded and is the largest video game company in Europe and the U.S. in
terms of market capitalisation and revenue, as of September 2017 (Activisionblizzard,
Activisionblizzard.com. (2017). Our Company
Current Ratio = = = 1.81
Current Ratio measure’s a company’s
ability to pay off its short-term obligations. Since, the current ratio of
Activision Inc. is greater than 1, it signifies that the company has sufficient
assets to meet its short-term obligations.
Liquidity Ratio = = = = 1.8
Liquidity Ratio measure’s a company’s
ability to pay off its short-term obligations by only considering the most
liquid asset of a company. A liquidity ratio of 1.8 is considered sufficient
for Activision to meet its short-term obligations.
Total Debt to Assets = = = 0.47
Total Debt to asset ratio indicates how
much debt is funded by assets of a company. Since the ratio is 0.47 in the case
of Activision, which is lower than 1, it is safe to interpret that its assets
are funded by equity. Therefore, the investors would find it safe to invest in
Time Interest Earned = = = 5.16
Time interest earned is yet another
measure to analyse a company’s debt coverage ability. 0.19 means that the
Coverage Ratio = = = = 9
Net profit Margin = = = 0.14
Return on Asset = = = 0.05
Return on Asset ratio reflects the
efficiency of a company in generating earnings from its assets. A ratio of 0.05
signifies that Act ivision Inc. is inefficient in generating income from its
invested assets. In other words, the company is earning $0.05 for every $1 of
investment in assets.
Return on Equity = = = 0.11
Return on Equity signifies the amount of
profits generated by a company from the money invested by the shareholders.
Activision Inc. has a very low return on equity which means the company is
inefficient in generating profit from the investments of its shareholders.
Inventories turnover = = = 74.66
Inventories turnover ratio estimates how
quickly the firm is selling its goods and services in a specific period of
time. A ratio of 74.66 is very high which signifies that Activision Blizzard
Inc. has very strong sales.
Average collection period of the company
can be found out by:
= = 38.97
It measures how long does a debtor take
to pay for the outstanding money. The company takes 39 days to collect its
Fixed Asset Turnover Ratio = = = 29.5
Fixed asset turnover ratio indicates how
well does a company is using its fixed assets to produce sales.
Avg. Fixed Assets (US$ million)
Sales (US$ million)
Fixed Asset Turnover Ratio
Compared to the competitors, Activision
Blizzard’s fixed asset turnover ratio is the highest (29.5) which means the company
has very efficient in generating sales from its plant, property and equipment.
Electronic Arts’ low ratio indicates that the company is unable to generate
revenues efficiently from its investments in fixed assets.
Total Asset Turnover Ratio = = = 0.4
Avg. Total Assets (US$ million)
Sales (US$ million)
Total Asset Turnover Ratio
While Activision Blizzard had a high
fixed asset turnover ratio, its total asset turnover ratio is lower than the
competitors. It signifies that it is has invested heavily in other intangible
and current assets which have not generated revenue as efficiently as that of
Price to Earning Ratio = = = 48.46
Price to Earning ratio indicates the amount
that needs to be invested in a company to earn an amount of $1. In other words,
it expresses the willingness of an investor to invest in a company to earn 1$
of its earnings. Since, Activision Blizzard Inc. has a high price to earning
ratio, it signifies that investors expect higher growth rate in the future.
Price (US$ million)
Earnings Per Share (US$ million)
Price to Earnings Ratio
As per the above table, the price to
earnings ratio of Activision Blizzard Inc. is less than Take-Two Interactive’s
ratio. This means that its stock price closed lower than the stock price of
Take – Two Interactive. It can be profitable for certain investors as they may
buy it before it is corrected by the market, once it rises, investors can make
higher profit due to higher stock price.