Summarize Perform Comparison Between Imax Corporation And Reald Finance Essay

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The purpose of this report is to summarize and perform a comparison between the financial information of IMAX Corporation and its expanding competitor RealD Incorporated by examining the most recent financial statements. Please note that more emphasis was given to the 9 month period income statements as the 3 month periods may not portray a true picture of the company operations. Financial performance Return on Equity (ROE) IMAX’s ROE for the 9 month period ended September 30, 2010 is approximately 64.1% which looks solid compared to RealD’s ROE of approximately -24.7%. RealD suffered a loss for the 9 month period ended December 24, 2010 which is why the ROE is negative. The total revenue for the 9 month period between 2009 and 2010 increased by 98.6%, during this time the cost of revenue also increased by 76.8%. The increase in revenue can be attributed to new licensing arrangements with its customers. The total operating expenses during these two 9 month periods increased by 80.8%, out of which the general and administrative expense increased by 155.3%. On July 21, 2010, RealD completed its initial public offering (IPO) which generated $81.9 million in net proceeds. Out of this amount, it repaid $25.1 million under its previous revolving credit facility. If the cash generated from the IPO is excluded from the calculation of ROE, the value would have been an even larger negative percentage. IMAX is profitable and effective in using the capital provided by the shareholders to generate net income. One possibility that the ROE for RealD is not as good as IMAX is because the company recently went public. If the company recently issued common shares that would make the equity part of the ratio larger, and since they just received financing, they have not had a chance to put the money to work yet to start earning revenue. Return on Assets (ROA) The ROA for the period 2010 for IMAX is 18.1% while that of RealD is -4.9%. The negative value for RealD is again because of the $11.1 million loss for the period. RealD is currently in a growth phase compared to IMAX as it just went public. Since the company purchased $63.9 million worth of new assets in 2010, the potential revenues that will be earned by these assets might be in the works. The revenue for IMAX increased by 53.4% between 2009 and 2010. The increase in revenue from rental and services (joint revenue sharing arrangements) was 135.9% and 68.8% respectively. Since the joint revenue sharing arrangements are non-cancellable for 7 to 10 years with provisions for renewals, IMAX will continue to enjoy similar revenues for the next few years. It should also be noted that the cost of revenues only increased by 23.5% during this time. Based on the above, it is evident that IMAX is efficiently able to use its assets to generate profits Earnings Per Share (EPS) IMAX’s EPS showed a significant increase between the period 2009 and 2010. The EPS for 2009 was $0.02 while that for 2010 was $0.73 cents.

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