TD Bank Accounting Research

TD is a Canada-based financial institution headquartered in Toronto, Canada. The company employs over 80000 people. Toronto-Dominion Bank provides a full range of financial services and products to her over 25 million customers worldwide through three core businesses. A US retail company comprised of Toronto-Dominion Bank. Canadian retailers including TD Insurance, TD Direct Investing, TD Wealth (Canada), Business Banking and TD Canada Trust. According to its 2017 financial statements, the company’s asset base is worth C$1.2 trillion (“Corporate Profile,” 2017). The company was formed in 1955 after the amalgamation the Dominion Bank, chartered in 1855 and the Bank of Toronto.

The company provides financial solutions to the Canadian organizations no matter the size across a wide range of industries. The company delivers customized solutions to meet the need of specific customers drawing on a range of services and products including foreign exchange, international trade, cash management, investment, deposit, and financing. The company also gives customers advice that enables them to achieve their goals. Banking includes Specialized Commercial Banking, Mid-Market Commercial Banking, Small Business Banking, and TD Auto Finance Canada.

Business Strategies

The company’s strategy is to produce a long terms, profitable growth by delivering value and building great Franchises to the communities, shareholders, and customers. The long-term strategy ensures that the marketing, services, and products reflect the cultures and communities that are part of the operational footprint. The company’s main goal is to ensure that people feel supported inspired. TD Company offers employees the best workplace experience. The company has a legendary customer experience. The company has simplified its processes to give the clients reliable and simple services that maximizes value. TD bank has continuously delivered comfort and convenience by actively responding to the customer’s experience. TD Bank has also embarked on global expansion where it has opened up branches in other countries, for instance, the United States.

Profitability Ratio

The profitability ratio estimates the firm’s ability to raise enough funds for operation. The ratio approximates the firm’s ability to payoffs its financial obligations promptly (Melville, 2017).

The Profit Margin Ratio

The ratio evaluates the amount of income that each unit of sale can produce. The ratio measures the percentage of sales that has been left over after all the business expenses have been paid.

Profit Margin Ratio

2016

2015

Net income/Sales

6653.68/30890.09=0.2154

6376.42/30247.71=0.211

The company had a constant profit margin ration in the two years. From the calculation, the efficiency level remained constant (“TD Bank (The) Stock - Yahoo Finance,” 2017) t. However, the company is operating below capacity since the ratio should be above 0.5.

Return on Equity Ratio

The ratio measures the ability of the firm to raise enough profit to pay off its dividends. A higher ratio indicates that the firm generated a lot of revenue.

Return on equity ratio

2016

2015

Net income/shareholders’ equity

6653.68/55979.62=0.1189

6376.42/54019.07=0.1180

The company had a constant return on equity in the last two years. The ratio indicates that the company generated equal revenue on each unit of share capital invested in the company which is an indicator that the management never added value.

The Liquidity Ratio

The liquidity ratio estimates the ability of a firm to pay the short term arrears as the fall due. The ratio is important because they form the basis upon which the decision is made. Those companies that have a higher liquidity ratio indicated that the company is in a position to pay its debts within the stipulated time.

Current Ratio

The ratio estimates the company’s ability to pay its arrears as the fall due.

Current Ratio

2016

2015

Current assets/current liabilities

704493.63/ 730989.81=0.964

717733.63/ 737901.81=0.973

The current ratio is above 0.5 meaning that the TD bank company is in a position to pay off its creditors within the agreed time by the use of current assets. The total current assets exceed the current liabilities.

Acid Test

The acid ratio is more refined or stringent ratio because it excludes the stock. The ratio is more refined because of its focuses more on the cash, account receivable, and the short-term investment.

Acid test

2016

2015

(Current asset-stock)/ current liabilities

(704493.63-0)/ 730989.81=0.964

(717733.63-0)/ 737901.81=0.973

From the balance sheet, the TD Bank did not have any inventory meaning that the acid test ratio is equal to the current ratio. TD Company is in position to repay its short-term debts when they fall due.

The Asset Turnover Ratio

The asset turnover ratio measures the ability of a company to raise funds from its assets by making a comparison between the total assets and the net sales. The ratio measures the firm’s ability to use its assets to raise sales. The ratio calculates the aggregate revenue as a percentage of the total assets to show the exact amount of sales that are raised on each unit of firm’s asset.

Asset turnover ratio

2016

2015

Net sales/ average total assets

30890.09/( 887786.19+ 890034.13)/2=0.035

30247.71/ (890034.13+ 867462.13)/2=0.0344

The above ratio measure TD Bank’s ability to efficiently use its assets to generate sales. The ratio has remained constant in the past two years. For every dollar in the asset that the firm owns it can only generate 0.3 of the cents. From the ratio, it is clear that the organization is not efficient on how it uses its assets.

The Return on Investment Ratio

The ratio measures the revenue that is generated from an investment as a percentage of the original cost. In a nutshell, the return on investment estimates the amount of money that is generated from an investment of a percentage of the purchase price (WAHLEN, 2017). The ratio is exceptionally versatile and simple, and it is often the common investment ratio.

Return on Investment

2016

2015

Profit/cist of investment

6653.68/ 150148.7=0.0443

6376.42/ 136937.59=0.0466

In the two years, the company had a slight variation in the return on investment. The ratio in both the years was positive an indicator that the company’s total revenue was enough to cater for the total cost. From the return on investment ratio, the company managed to generate 0.04 on its investments.

Conclusion

TD bank Company should continue diversifying its business operations and opening more branches in other parts of the world especially the developing nations to spread risk. The company should also strengthen its competitive strength by improving the nature and quality of services it offers to its clients. From the ratio, the company has demonstrated a constant growth, and the focus should be improving business practice to continue dominating the industry and generating more profit.

References

Corporate Profile. (2017). Retrieved from https://www.td.com/about-tdbfg/corporate-information/corporate-profile/profile.jsp

Melville, A. (2017). International financial reporting: A practical guide. Harlow, England: Pearson.

TD Bank (The) Stock - Yahoo Finance. (2017). Retrieved from https://finance.yahoo.com/quote/TD/news?p=TD

WAHLEN, J. A. (2017). FINANCIAL REPORTING, FINANCIAL STATEMENT ANALYSIS AND VALUATION. S.l.: CENGAGE LEARNING.