Ratios play an important role in analyzing the financial health of a company. Wells Fargo’s financial ratios tell the story of where the company stands today and provides insight into where it will be tomorrow. The following ratios were computed using information gathered from the 2001 Wells Fargo Annual Report as well as www.morningstar.com.

Stockholder Profitability Ratios 2001 2000

Earnings per Share (Earnings/Shares Outstanding) 1.99 2.36

P/E Ratio (Price/Earnings) 22.1 15.7

Gross Profit Margin (Revenue-Cost of Goods Sold/Sales) 12.7 14.5

Return on Assets (Earnings after Taxes/Total Assets) 1.52 1.94

Profit Margin (Earnings After Taxes/Sales) 12.7 14.5

Inventory in 2001 was $75 billion in 2001, a $20 billion increase from 2000. The large increase is due primarily to a $19 billion increase in mortgages held available for sale. This increase reflects the refinance boom the company experienced throughout the year. Property, plant, and equipment inventory held steady at $3.5 billion, an increase of just $100 million from 2000. Because Wells Fargo is in the banking industry, there are no provisions for raw materials, works in progress, or finished goods.

arnings After Taxes/Total Assets) 25.31 30.89

The company’s current assets include marketable securities, receivables, and inventories. These amounts total $284 billion. Current liabilities include notes payable, accounts payable, and accrued expenses, totaling $255 billion. An analysis and comparison of the company’s ratios show that Wells Fargo is doing a good job managing their current assets and liabilities, although some analysts believe a better job of leveraging is necessary (www.thestreet.com).

Although they are conservative in managing their assets, the balance sheet of Wells Fargo appears healthy. It does appear that they are keeping too much cash on hand ($16.9 billion), as this money could be put to better use. With today’s current economy, being conservative is often a very good thing. Analysts agree, praising the overall financial health of this company.

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