Key Financial Ratios and Recommendations for BlackRock
Introduction
BlackRock is an American MNC investment management Corporation based in New York City. The company has been initiated with risk management, and fixed-income institutional assets management and provided the investment-related advising proportion. Blackrock was founded in 1988 and it has evolved with the world’s largest assets management aspects with a valuation of amounting to 10 trillion US dollars within the financial year of 2022. The CEO of the company is Larry Fink and the other founders are d Robert S. Kapito, Susan Wagner, and more. BlackRock’s subsidiaries are mentioned as Aperio Group, Creed, LLC, BlackRock real estate, and others. The company is being listed under the NYSE stock exchange with a recent stock valuation amounting to 631.74 dollars. This recent stock valuation of the company is being declined by -0.95% in the 1st quarter of 2023. The headquarters of the company are assessed as New York, US, and have a net income valuation proportion amounting to 5.18 billion US dollars in 2021. On the other hand, the total assets valuation of the company was assessed as 117.60 billion US dollars and the total equity proportion was 37.74 billion US dollars.
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The list of shareholders of the company is being mentioned as The Vanguard Group Inc. has the 8.62% of the holdings with a total valuation amounting to 8924018460 dollars. The company runs with a massive Technology platform usability that helps to create an increased proportional level of Assets and increase the level of revenue generation aspects. The list of competitor companies has been mentioned as Edward Jones, Charles Schwab, Morgan Stanley, State Street, and others. This assessment has been made that the company has the power of huge assets management skills across the globe. This report is going to analyze the financial performance using a ratio analysis tool for 2021 and 2020 and is going to recommend investors to the investment decision.
Financial analysis
Profitability ratio
NP margin
The net margin valuation ratio has been calculated as net profit divided by the revenue proportion of the company. BlackRock's net margin valuation is 84% and 107% for 2021 and 2020. It has been mentioned that the company's revenue valuation and net earnings both increased in 2021 (Islami and Rio, 2019). Due to that, it is said that companies' profit earning situation will be better in 2021 than in 2020 and it indicates that the company's financial earnings capacity is also in a better place.
GP margin
Gross profit valuation also calculated gross profit divided by revenue and BlackRock’s GP proportional ratio was assessed as 90% in 2021 and 78% in 2020. In this assessment, it has been mentioned that the company's gross earnings valuation increased due to having better revenue collection. Hence, it has been mentioned that BalckRock’s profit earning capacity will improve in 2021 rather than 2020 (blackrock.com, 2023).
ROI
The return on investment proportion has been calculated by taking the cost of investment/goods sold along with the total net earnings of the company. Blackrock's return on investment valuation is mentioned as 8.44 in 2021 and 5 in 2020. This level has been mentioned with Blacklock getting a higher return valuation proportion in 2021 as its net earning is better in 2021 (Amalia, 2021). Hence, there are chances of getting a better proportionate amount of the investment in future aspects to the investors.
The calculation of return on total assets takes also the net earnings divided by the total asset acquired by the company. The ROA of BlackRock is mentioned as 5% in 2021 and 2.31% in 2020. It has been noticed that the company's net income increased in 2021 but total assets dropped from the 2020 valuation proportion (Nugraha et al. 2020). Due to having respectively higher earnings acquired in 2021 than 2020 by BlackRock, it has been mentioned that companies' financial earnings capacity improved and their chance of getting a better return in terms of the investors.
Table 1: Profitability ratio
Liquidity ratio
Current ratio
The current ratio is calculated by taking the current assets divided by the current liabilities valuation of the company. Due to that, the current ratio level for BlackRock company is assessed as 11.26 in 2021 and 13.58 in 2020 (Nahar et al. 2020). This preferable situation mentions that the current assets valuation of the company in 2021 declined to 2020 and the current debt valuation increased in 2021. In these preferences, it has been mentioned that the company's liquidity proportion dropped off in 2021 rather than 2020 and this situation mentioned that the company might face critical solvency in the future (blackrock.com, 2023).
Cash ratio
The cash ratio valuation calculated is considered the cash proportion divided by the current liability valuation. The cash ratio of BlackRock company was mentioned as 0.03 in 2021 and 2020. It has been noticed that the company's cash proportion declined in 2021 with an increasing debt proportion (Zeller et al. 2019). In these preferences, it has been mentioned that BlackRock’s financial health leads to critical aspects in the future.
BlackRock
Particulars
Amounts in US$'000
Liquidity ratio
2021
2020
CA
194,873
234,186
CL
17,309
17,239
Current ratio = CA/ CL
11.26
13.58
Cash
463
509
CL
17,309
17,239
Cash ratio = Cash / CL
0.03
0.03
Table 2: Liquidity ratio
Efficiency ratio
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Calculation of the fixed asset turnover ratio taken considered sales divided by the fixed assets valuation of the company. The fixed assets turnover ratio of Blackrock is valued at 0.06 in 2021 and 0.02 in 2020. In this evaluation, it has been mentioned that the company's sales valuation increased in 2021 but FA valuation declined in 2021 rather than 2020. Due to this context, it has been mentioned that BlackRock’s efficiency in proportion to terms of FA turnover is critical (blackrock.com, 2023).
Assets turnover ratio
Evaluation of the total asset turnover ratio can also be calculated by taking the revenue divided by the total assets valuation. In this aspect, BlackRock’s assets turnover proportion is mentioned as 0.06 and 0.02 for 2021 and 2020. This evaluation situation also mentioned that assets valuation declined in 2021 but revenue increased in 2021. Hence, it has been indicated that BlackRock’s financial efficiency is more critical in 2021 than in 2020.
The debt-to-equity valuation ratio has been assessed by considering the debt valuation divided by the equity valuation of the company. In this evaluation, it has been mentioned that BlackRock’s financial debt-to-equity valuation ratio was assessed as 0.09 in 2021 and 0.08 in 2020 (Tenney and Kalenkoski, 2019). Based on that, it has been referred to that the company's debt valuation inscribed in 2021 and equity valuation declined in 2021. This assessment evaluation has referred to the company’s solvency situation in a critical position in 2021 rather than 2020.
Debt to assets ratio
The evaluation of the debt to Assets proportion ratio also calculated debt divided by the total Assets of the company. However, the Debt to assets of Blackrock was mentioned as 0.09 in 2021 and 0.07 in 2020. As the company’s asset valuation declined in 2021 than 2020, and total debt valuation increased in 2021. This situation mentioned that BlackRock’s solvency situation was critical and it might face financial issues due to having a higher debt valuation proportion (blackrock.com, 2023).
Table 4: Solvency ratio
Investment ratio
ROE
Return on equity assists by taking into consideration the net income valuation of the company divided by the total equity proportion. Due to that, Blackrock’s ROE valuation is mentioned as 0.05 in 2021 and 0.02 in 2020. This evaluation has referred to the fact that the company's net earnings increased in 2021 but its equity valuation declined in the same year (Mongwe and Malan, 2020). This analysis of ROE mentions that the company’s equity return valuation is moderately lower in 2021 than in 2020.
Dividend per share
The dividend per share valuation ratio is calculated taking into consideration the total divide and valuation along with the share outstanding proportion of the company. The dividend per share of BlackRock was mentioned as 0.027 in 2021 and 0.023 in 2020. This situation mentions that the company increased the shareholder's dividend payout proportion, hence, it has been indicated that the investor's return valuation increased in 2021 (blackrock.com, 2023). There are also chances for investors of the company to get a more proportioned amount of dividend valuation in future aspects.
The company BlackRock is one of the biggest investment Asset Management companies across the globe. The usability of the financial ratios helps the investors to take the investment decision-making situation in aspects of the financial analysis report. Based on this evaluation, this report has considered liquidity, profitability, efficiency, investment, and solvency aspects to describe the financial health and financial performance evaluation. The company’s profitability ratio describes its net earnings capacity as higher in 2021 than in 2020. This determination has been mentioned that investors should invest in this company’s share proportion as there are chances of getting a higher return for the investment proportion in the future. However, from the liquidity ratio it has been found that BlackRock's cash collection and assets proportion declined in 2021 than in 2020 and there is a higher CL valuation. This analysis has mentioned that companies liquidity prostitution dropped off and it indicated that the company's coverage situation was weak. Additionally, the efficiency ratio evaluation mentions that companies' financial growth moderately declines in 2021, for the effect of the pandemic. The investment ratio proportion explained that the company increased its dividend proportion in 2021.
This part has mentioned that investors get the preferably better return from BlackRock in future aspects. However, the solvency ratio indicated that the company's equity valuation declined and debt increased. Due to this aspect, it is noted that BlackRock might face critical solvency in the future. Investment in Blackrock's shares provides the investors lower risk proportion as the company's earning capacity is higher and it provides the increased proportionate amount of the dividend over to the shareholders. Additionally, the earning trend of the company is being increased till the financial analysis of 2021. Net earnings valuation of BlackRock amnouting 5834000 US dollars in 2020 that increased by 10247000 US dollars in 2021. Due to that, it has been recommended to investors regarding investing in the shares of BlackRock due to achieve a higher return in the future.
References
Amalia, S., 2021. The impact of financial ratio indicators on banking profitability in Indonesia.Turkish Journal of Computer and Mathematics Education (TURCOMAT),12(8), pp.580-588.
Islami, I.N. and Rio, W., 2019. Financial ratio analysis to predict financial distress on property and real estate company listed in indonesia stock exchange.JAAF (Journal of Applied Accounting and Finance),2(2), pp.125-137.
Mongwe, W.T. and Malan, K.M., 2020, December. The efficacy of financial ratios for fraud detection using self organising maps. In2020 IEEE Symposium Series on Computational Intelligence (SSCI)(pp. 1100-1106). IEEE.
Nahar, F.H., Faza, C. and Azizurrohman, M., 2020. Macroeconomic analysis and financial ratios on Sharia Commercial Bank profitability: a case study of Indonesia.Ihtifaz,3(1), p.37.
Nugraha, N.M., Puspitasari, D.M. and Amalia, S., 2020. The effect of financial ratio factors on the percentage of income increasing of automotive companies in Indonesia.International Journal of Psychosocial Rehabilitation,24(1), pp.2539-2545.
Tenney, J.A. and Kalenkoski, C.M., 2019. Financial ratios and financial satisfaction: Exploring associations between objective and subjective measures of financial well-being among older Americans.Journal of Financial Counseling and Planning,30(2), pp.231-243.
Zeller, T., Kostolansky, J. and Bozoudis, M., 2019. An IFRS-based taxonomy of financial ratios.Accounting Research Journal.
