Reald vs Imax Financial Accounting Analysis - 2500 Words

Accounting Analysis | RealD Inc vs. IMAX Corp. | | EXECUTIVE SUMMARY RealD Inc is a leading global licensor of 3D technologies while IMAX Corp specializes motion picture technologies and presentations. While the two markets may seem mutually exclusive, they are not, and with indications of both parties having intentions to foray into broader market segments, the competition between both parties could not be more intense than it is now. Even though it may seem that IMAX is performing better, a deeper look into the financial statements of both companies shows that each company has its own strengths and weaknesses. It is also reassuring to see that RealD is improving upon its financial position while IMAX seems to be†¦show more content†¦The company’s Return on Assets is worrisome as it shows that it loses money on the assets that it has invested in. This number may be amplified by the 741% rise in inventory, but there is still a strong indication that RealD is not using its assets well enough to generate profit. It appears that IMAX is m anaging its assets well. This income may however be generated by using the money that it has raised by borrowing funds. A comparison of both the company’s ROE values indicates that IMAX generated more wealth for its stakeholders. This value however fails to consider the impact that IMAX’s debt may have on its profitability. 2) IMAX’s Financial Position Compared to RealD. IMAX’s higher current ratio would indicate that it is in a better position to meet its short term liabilities than RealD, with RealD being at the shallow end of the liquidity pool. It is however important to note that RealD has improved its position drastically from a current ratio of 0.7 to that of 1.09. This is mostly due to a 183% increase in the number of RealD screens installed. If this trend continues, the company’s position is likely to improve. It must also be noted that IMAX’s current ratio decreased from 4.33 to 0.99. This is due to a 214% increase in bank indebtedness. It is of concern to see that RealD has only 59 cents in cash for every dollar of its current liabilities. This is not the best position when compared to IMAX’s position of 99cents for