Posted: February 20th, 2015

Financial Statement Analysis

Paper, Order, or Assignment Requirements

1 Excel spreadsheet 
Details: 
Weekly tasks or assignments (Individual or Group Projects) will be due by Monday, and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time.

Research the publicly held company that you chose in Week 1, and access the company’s Web page on the Internet to read its most recent annual report. The annual report is typically found in an “Investor Relations” or “Company Information” section within the company’s Web site. 

Using the company’s financial statements, perform a complete 2- or 3-year financial statement analysis addressing profitability ratios, turnover control ratios, leverage and liquidity ratio, and common-size statement analysis with constructive narrative. This analysis should not only include the calculation of the required ratios, but an assessment of the firm’s health in each area and a summary of the findings with regards to the overall health of the firm. All related findings, conclusions, and recommendations should be supported with sound financial analysis principles and be properly sourced.

Please see the text (Table 2.5) for suggested ratios and measures to preform and evaluate. You may also use the categories and measures that follow:
•Liquidity Measures: ◦Current ratio [current assets/current liabilities]
◦Quick ratio-acid test [(current assets – inventory)/current liabilities]
◦Net working capital to total assets [net working capital/total assets] 

•Efficiency Measures: ◦Collection period [accounts receivable/average daily sales]
◦Inventory turnover [cost of goods sold/ending inventory]
◦Fixed asset turnover [sales/net fixed assets] 

•Debt (Leverage) Measures: ◦Debt-to-asset ratio [total liabilities/total assets]
◦Debt-to-equity ratio [total liabilities/total stockholder equity]
◦Times-interest-earned (TIE) ratio [earnings before interest and tax [EBIT]/interest] 

•Profitability Measures: ◦Gross profit margin [gross profit/sales]
◦Operating profit margin [EBIT/sales]
◦Net profit margin [net income/sales]
◦Return on assets (ROA) [net income/total assets]
◦Return on equity (ROE) [net income/total stockholder equity] 

•Market-Based Measures: ◦Earnings per share (EPS) [earnings available to common stockholders/common shares outstanding]
◦Price-to-earnings ratio (P/E) [stock price/earnings per share]
◦Market to book [market value of common stock/total stockholder equity]