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The company analysis sections contains information about the
strength, weaknesses, opportunities and threats of the duke energy company
Strengths: Company is building long-term relations with the reliable
suppliers, entering in new markets and geographical segments, and introducing
new products/services that are supporting new revenue streams for the company
and playing role as strength factors. Management of the company and employees
are highly skilled and trained that benefit the company in improving efficiency
in the operations of the company that are the main strengths of the company.
Weaknesses: However there are some weaknesses also as
profitability ratio is low as compared to average profitability of the industry.
Duke energy is also not using modern approaches for product demand forecasting
that results in higher inventory keeping in channels
Opportunity: government green drive, and new environmental
policies are opportunity for the company to lead the market as current
operations of the Duke energy is according to the environmental policies set by
government. While competitors will face issues in running business.
Threats: new competitors are entering in the market that are
sharing market and causing to increase competition therefore company need to
work on improvement continuously.
Financial Ratio Analysis of Duke Energy Company
Liquidity Ratio of
Duke Energy Company
Current Ratio
Current ratio presents that how efficiently a company can pay back its current liabilities that are due in one year through utilizing the current assets as cash, inventory and receivables. In accordance to the analysis current ratio of the duke energy is stronger as compared to American electric power in 2016, and 2017 however overall ratio is not really good as ratios are less than 1.
Quick Ratio
According to quick ratio Duke Energy company is not enough capable to pay back its current liabilities through using current assets excluding inventory. While condition of competitor company was better in the 2015. However, in 2016, and 2017 Duke was doing well.
|
|
Duke
Energy |
American
Electric Power |
|
2017 |
0.41 |
0.398 |
|
2016 |
0.39 |
0.32 |
|
2015 |
0.40 |
5.5 |
Solvency Ratio of Duke Energy Company
Total Debt to Equity Ratio
Ratios of Duke and competitor company presents that Duke is
financial performance is better than competitors financial position as ratios
of competitors are greater than the duke ratios. Analysis presents that company
is able to produce enough cash that was required to satisfy its debt
obligations
|
|
Duke
Energy |
American
Electric Power |
|
2017 |
2.30 |
2.53 |
|
2016 |
2.23 |
2.64 |
|
2015 |
2.04 |
2.44 |
Times Interest Earned Ratio
In
accordance to mentioned below table, American Electric power is managing its
debt better than the Duke energy as lower and negative values of times interest
earned ratio of Duke indicate that company is not producing enough earning that
can meet its interest payment.
|
|
Duke
Energy |
American
Electric Power |
|
2017 |
-3.07 |
3.14 |
|
2016 |
-2.93 |
-0.54 |
|
2015 |
-3.37 |
3.00 |
1. Asset Management Ratios
Total Asset Turnover Ratio
Analysis of both companies are mentioned
below according to which American power is more efficient to generate sales
through the use of assets as compared to Duke as ratios of Competitor Company
is greater than Duke
|
|
Duke
Energy |
American
Electric Power |
|
2017 |
0.168 |
0.23 |
|
2016 |
0.16 |
0.25 |
|
2015 |
0.18 |
0.26 |
Day’s sales in receivable Ratio
Ratio
of Day’s sales receivables presents that in how many days company covers its
receivables through sales. In 2015, Duke Ratio was 37.7 that was seems better
than 2017, and 2016 ratios (43.06, and 42.52). However, overall performance of
the Duke energy is almost same to the performance of Competitor Company
|
|
Duke
Energy |
American
Electric Power |
|
2017 |
43.06 |
44.133 |
|
2016 |
42.52 |
42.10 |
|
2015 |
37.7 |
35.89 |
2. Profitability Ratios
Profit Margin Ratio
The following table represents
ratios of profit margin for Duke Energy and its competitor company in 2017,
2016 and 2015. According to the analysis, profit margin ratio of both companies
are less than 1 that represents the weaknesses of both companies
|
|
Duke
Energy |
American
Electric Power |
|
2017 |
0.13 |
0.12 |
|
2016 |
0.096 |
0.037 |
|
2015 |
0.128 |
0.124 |
Return on Assets Ratio
Return on Assets ratio presented
in the following table elaborate that both companies in all three years were
unable to produce better return on assets ratios. However, relatively
performance of the competitor company American electric power was better than
the Duke energy.
|
|
Duke
Energy |
American
Electric Power |
|
2017 |
0.022 |
0.029 |
|
2016 |
0.016 |
0.009 |
|
2015 |
0.023 |
0.033 |
Financial
Trend Analysis of Duke Energy
Company
Financial trend of the Duke Energy in 2017, 2016 and 2015 for sales and profit are presented below in the chart. According to the trend line of sales there is an increasing trend. Sales are increasing gradually as in 2015 sales were recorded as 21975000 and in 2017 company recorded sales as 23,189,000. However, there is very minor changes occurred in these 3 years in sales. While on the other hand profit trend is almost sale in 2015 and 2017. In 2016 it was decreased but company managed its operations successfully and again in 2017 profit was increased.
The mentioned below graphs represents the stock performance of Duke Energy and its competitor company American Electric power. Trend of the Duke Company is relatively showing minor changes as compared to the graph containing data about stock performance of competitor American Electric power Company. Duke is gradually improving its stock performance while competitor American Electric power Company is showing relatively high and continuous growth
The above
mentioned data is also used for the standard deviation, mean and coefficient of
variance calculations for both companies. In accordance to the above table standard
deviation in the stock performance of both companies (during 2015 to 2017) was
almost same. While there is a big difference in the mean or average values.
According to this average stock value of Duke was higher than the competitor
company but variance is also relatively same.
Investment and Capital Budgeting of Duke
Energy Company
In the energy sector companies are
investing in the plant assets, promotional underground infrastructures, poles,
towers, and the electric transformation. According to the analysis, total
forecasted transmission capital investment of duke energy is almost 3.58
billion dollar. Company is currently investing to improve its infrastructure
growth and investment returns. Company is going to start up a new project known
as Power/forward Carolinas with the purpose to provide strength to the cyber
threats, renewable energy, and grid against the storms. Estimation presents
that transmission infrastructure will cost 900 million dollar for development
while 2.9 billion dollar for maintenance. In accordance with the comparative
analysis with other companies in same sector, Duke is investing high amount of
its profit on such activities to promote their business. Capital budgeting of
Duke is relatively more than the Capital budgeting of other companies.
Recommendations of Duke Energy Company
Duke Energy is performing well in
the environment but there are some limitations and weaknesses that are
requiring changes and recommendations. In accordance to my analysis, the first
recommendation for the company is to bring efficiency in its management of
current liabilities and working capital thus through this company will be able
to perform well in the credit market. Company should also invest in other new
markets that has potential for their services but after analyzing and
understanding market demand forecasting. Company should also try to improve its
sales at least 10% in a year through improving service quality and using
database modern resources to understand demands of the customers, thus through
understand customer requirements company can improve customer experiences that
encourage increase in sales.
References of Duke Energy Company
Annualreports.com. 2017. American Electric Power.
Accessed 12 14, 2018.
http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_AEP_2017.pdf.
Fifield, Paul. 2012. Marketing Strategy.
Routledge. Accessed 12 14, 2018.
Forbes.com. 2018. #227 Duke Energy. Accessed
12 14, 2018. https://www.forbes.com/companies/duke-energy/#14381d436f9b.
Hooley. 2008. Marketing Strategy and Competitive
Positioning. Pearson Education India. Accessed 12 14, 2018.
Knutson, Kent. 2017. OVERHEAD TRANSMISSION
Company Investment in Transmission to Stay Strong. 05 26. Accessed 12 14,
2018.
https://www.tdworld.com/overhead-transmission/company-investment-transmission-stay-strong.
Loughran, Maire. 2011. Financial Accounting For
Dummies. John Wiley & Sons. Accessed 12 14, 2018.
Tulsian, P. C. 2002. Financial Accounting.
Pearson Education India. Accessed 12 14, 2018.
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