An example of the use of financial ratio analysis

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University of Wollongong

Research Online
Faculty of Commerce - Papers Faculty of Commerce

2004

An example of the use of financial ratio analysis: the case of Motorola
H. W. Collier
University of Wollongong, collier@uow.edu.au

T. Grai
Oakland University, USA

S. Haslitt
Oakland University, USA

C. B. McGowan
Universiti Kebangsaan Malaysia, cbmcgowan@nsu.edu

PublicationDetails
This article was originally published as Collier, H, Grai, T, Haslitt, S and McGowan, CB, An example of the use of financial ratio analysis: the case of Motorola, Decision Sciences Institute Conference, Florida, 2-6 March 2004.

Research Online is the open access institutional repository for the University of Wollongong. For further information contact the UOW Library:research-pubs@uow.edu.au

An example of the use of financial ratio analysis: the case of Motorola
Abstract

In this paper, we demonstrate the use of actual financial data for financial ratio analysis. We construct a financial and industry analysis for Motorola Corporation. The objective is to show students exactly how to compute ratios for an actual company. This paper demonstrates the difficulties in applyingthe principles of financial ratio analysis when the data are not homogeneous as is the case in textbook examples. We use Motorola as an example because the firm has several segments, two of which account for the majority of sales and represent two industries (semi-conductor and communications) that have different characteristics. The case illustrates the complexity of financial analysis.Disciplines

Business | Social and Behavioral Sciences
Publication Details

This article was originally published as Collier, H, Grai, T, Haslitt, S and McGowan, CB, An example of the use of financial ratio analysis: the case of Motorola, Decision Sciences Institute Conference, Florida, 2-6 March 2004.

This conference paper is available at Research Online: http://ro.uow.edu.au/commpapers/24

AnExample of the Use of Financial Ratio Analysis: The Case of Motorola
Henry W. Collier, University of Wollongong, collier@uow.edu.au Timothy Grai, Oakland University Steve Haslitt, Oakland University Carl B. McGowan, Jr., Universiti Kegangsaan Malaysia, mcgowan@pkrisc.uu.ukm.my
Abstract: In this paper, we demonstrate the use of actual financial data for financial ratio analysis. We construct afinancial and industry analysis for Motorola Corporation. The objective is to show students exactly how to compute ratios for an actual company. This paper demonstrates the difficulties in applying the principles of financial ratio analysis when the data are not homogeneous as is the case in textbook examples. We use Motorola as an example because the firm has several segments, two of which accountfor the majority of sales and represent two industries (semi-conductor and communications) that have different characteristics. The case illustrates the complexity of financial analysis.

MOTOROLA SEGMENT ANALYSIS
Motorola is a global manufacturer of communication products, semiconductors, and embedded electronic solutions. The company is divided into six operating segments that publiclyreport financial results. The Personal Communication Segment (PCS) designs, manufactures, and markets wireless communication products for service subscribers. Products include wireless handsets, personal 2way radios, and messaging devices, along with the associated accessories. The Personal Communication Segment accounted for 37.8% of 2002 sales, making it the largest of Motorola’s operating segments.The Global Telecommunications Segment (GTS) designs, manufactures, and markets the infrastructure communication systems purchased by telecommunication service providers. Products include electronic exchanges, telephone switches, and base station controllers for various wireless communication standards. This segment accounted for 15.8% of Motorola’s sales in 2002. The Broadband Communication...
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