Help me improve this for my graded assignment:

NO AI - FULL HUMAN RESPONSE - An AI detector will be used to check:

Using the most recent annual financial statements available for the company you selected, analyze the following:

- Profitability (i.e., company's ability to generate profit) - The company is NVIDIA

For Each Ratio, Include the Following Discussion Points:

o Definition: Clearly define the ratio.

o Historical Comparison: Compare the current (i.e., 2023) ratio to the company's past figures (i.e., 2022)

o Implications: Discuss the real-world meaning of the ratio and the change for the company's financial health.

o Factors Influencing the Ratio: Analyze any internal or external factors that might be impacting the results.

o Relevance to Company's Strategy and Mission: Align the ratio with the company's larger goals and strategies.

Liquidity

Current Ratio

Definition: This ratio is used to measure the company's ability to pay off its liabilities using its current assets. This shows if a company is in a good liquidity state and if the ratio is over 1 that means they can cover their liabilities but if it is under 1 then the company might face liquidity issues paying off its debts. This ratio is calculated by dividing current assets by current liabilities.

Historical comparison: The ratio for 2023 was calculated to be 4.17 with the current assets of 44345 million and current liabilities of 10631 million. The ratio for the previous year 2022, was calculated to be 3.52 with the current assets of 23073 million and the current liabilities of 6563 million. (See Appendix A for full calculations)

Implications: NVIDIA's current ratio increased to 4.17 in 2023 from 3.52 in 2022. This shows that the ratio increased compared to previous years meaning that Nvidia is in a stronger liquidity position and can comfortably pay off their current liabilities.

Factors influencing the ratio: Internal factors that can impact this ratio are the growth in cash possibly from an increase in net income compared to previous years, increase in accounts receivable and increase in marketable securities. External factors that can potentially influence this ratio include increased demand of NVIDIA's products caused by their expanding customer base which in turn increases their revenue therefore increasing their current assets.

Relevance to Company's Strategy and Mission: NVIDIA's liquidity position works in accordance with their growth strategy in the AI and computing market, the high ratio which is improving every year shows that they have enough capital to fund their expansion and R&D.

Cash Ratio

Definition: This ratio is more conservative than other ratios like the current ratio and it measures if a company can cover its current liabilities using only cash or cash equivalent assets. This shows the ability of a company to pay its current liabilities right away since it only includes the most liquid assets.

Historical comparison: The cash ratio for 2023 was calculated to be 0.68, while in 2022 it was 0.52. (see Appendix B for full calculations)

Implications: In 2023, The cash ratio points to the fact that NVIDIA has enough liquidity to be able to cover more than 2/3 of its current liabilities. Although this value is not above 1, it still shows a strong liquidity position especially considering how capital demanding the technology industry is. However, in 2022 it was only at 0.52 which is right above half of the current liabilities. This increase shows that NVIDIA is now in a stronger liquidity position compared to the previous year.

Factors influencing the ratio: The increase in the ratio could be caused by internal factors like increase in cash holdings which is likely due to higher income. NVIDIA efficiently managing their cash and generating significant cash flows also played a role. External factors that are likely to have affected the ratio are strong market demand as the company is expanding, favorable market conditions and a significant increase in demand for NVIDIA's innovative and cutting-edge new products.

Relevance to Company Strategy: Their strong cash ratio supports their financial resilience strategy, and it allows them to stay flexible so that they can quickly take on new opportunities like expanding into international markets and R&D. This strong financial position allows them to navigate through uncertain economic times while still functioning at full strength. Finally, it also allows them to fund their long-term projects such as AI-driven products without needing outside investors.

Solvency

Debt to Assets Ratio

Definition: This ratio is used to measure how much of the company's assets are financed through debt. This ratio shows how leveraged a company is based on how much it relies on debt to fund its assets. A higher ratio means the company is heavily leveraged while a lower ratio shows that the company is not heavily reliant on debt.

Historical comparison: The Debt to Assets ratio was 0.35 in 2023 which is a decrease from the previous year 2022, where it was 0.46.

Implications: In 2023, the ratio indicates that just above a third of NVIDIA's assets are funded by debt which indicates a low to moderate leverage level. However, in 2022 the ratio shows that about half of NVIDIA's assets were funded by debt. This decrease shows a reduction in leverage which improves NVIDIA's financial solvency and stability. Therefore, the company is relying less on debt and more on equity and income to fund their operations and projects.

Factors influencing the ratio: Internal factors such as a significant increase in revenue and cash flow can allow NVIDIA to reduce its debt reliance. Asset growth could also be a factor since there is a significant increase in total assets which is due to increase in cash and investments in new projects. External factors could be the boom in demand for AI products and the rising interest rates which may have caused NVIDIA to use their own funding to finance their operations instead of using debt.

Relevance to Company Strategy: Their low debt to asset ratio supports their financial flexibility goals since they can now use the majority of their assets to expand and invest in new projects and development without over leveraging the company. This also aligns with their long-term sustainable growth strategy because lower reliance on debt means they are avoiding the risks associated with debt like economic breakdowns and surges in interest rates.

Times Interest Earned Ratio

Definition: This ratio measures the ability of a company to pay its interest due using its earnings. It shows how many times the earnings without tax and interest can cover the interest expenses.

Historical comparison: The times interest earned ratio increased from 16.96 in 2022 to 132.59 in 2023.

Implications: The ratio in 2023 shows that the company's earnings prior to tax and interest can cover their interest expenses more than 132 times. This indicates that the company is in a strong solvency position because NVIDIA generates significant earnings compared to the interest they have to pay. Although, the ratio in 2022 is still high but it is much lower than in 2023 due to lower net income and the tax benefit that NVIDIA received that year.

Factors Influencing the ratio: Some factors that might impact the TIE ratio are the significant increase in revenue between 2022 and 2023 which is driven by the demand for cloud computing products and other NVIDIA products. Another factor is the tax impact since in 2023 their tax expense was much higher, where in 2022 they had a tax benefit. External factors can include economic conditions since recently there has been a surge in the demand for AI products which are mainly produced by NVIDIA.

Relevance to Company Strategy: This ratio supports their risk management strategies and allows them to pursue growth in the AI and data markets without negatively impacting their financial standing. It also aligns with their flexibility strategies since they can manage debt effectively while being able to quickly act on opportunities, giving them a competitive edge in the market since they are not restricted by their interest obligations.