The following report contains 2 financial statement analyses of 2 companies in cosmetic industry. One is Avon, an American cosmetic company, which is well-known by its direct selling channel; another is Shiseido, a large Japanese cosmetic company. Both of these 2 companies have large operations all over the world. Although Avon and Shiseido have different level consumers according to the price of their products, they are both successful in cosmetic industry.

The last part of this report is a comparison of the financial performance of Avon and Shiseido. We analyzed these 2 companies by their financial ratios in aspects of liquidity, capital structure, profitability and efficiency in year 2001 and 2000. In general, Avon and Shiseido have positive results in liquidity, which means both of these 2 companies had enough abilities to meet their short-term financial obligations as they fall due. Regarding to capital structures of 2 companies, we found that Shiseido had less risk in paying back long-term debts than Avon, since Avon had negative numbers in shareholder's equity in both 2001 and 2000. In the part of profitability, though Avon had high revenues in 2001 and 2000, it had less profitability than Shiseido, because Avon had a lot of expenses in operating its sub-stores, developing and selling its products. Also, Avon priced itself at a medium level in cosmetic market, comparing to Shiseido, it got less profit in year 2001 and 2000.

According to efficiency ratios, we found out same as the term to collect their cash and fixed assets, the term to turn the inventories in cosmetic industry is not very quick. Though the financial performance and the comparison of Avon and Shiseido, we found out how the companies in cosmetic industry manage, and how profitable and efficiency they are.