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(solution) Analysis and Use of Financial Statements Project This assignment


Analysis and Use of Financial Statements Project

This assignment requires financial ratio analysis on a publicly-traded company of your choosing.  Do not select a bank, insurance company, financial institution, or public utility.  I would also strongly suggest avoiding an automobile company. The project is due on the date indicated in your course timeline.  Each student will be required to examine the chosen company?s annual report and calculate the ratios listed below.  Each student will calculate the ratios for the two most recent years from available annual reports.

Once you have performed an analysis of the financial statements, students will write up a report summarizing the findings.  The report will include a brief introduction, synopsis of the company?s business and current business situation, a summary of the student?s interpretation of team?s analysis, and a conclusion.  Written proof of how the ratios were calculated MUST be attached to the report.  You must calculate the ratios yourself.  Use the attached work page behind to show proof of your calculations of the ratios (show all numbers in the calculations ? not just the end result).  The paper should be six (6) double-spaced, typed pages (not including the ratios and the ratio calculations).  Roughly, the paper should have one page of introduction, four pages of analysis and interpretation, and one page of conclusion.  The focus should be on the analysis and your interpretation.

The analysis of the financial ratios should include insights into the meanings behind the ratios.  The ratios should tell a story about how the company is doing and its prospects for the future.  You need to tell that story.  Do not copy directly from the annual report.  In order to make the ratios more meaningful, a benchmark company or industry average for each ratio should also be included.  You must calculate the benchmark company?s ratios as well.  I do not need these calculations attached.  The conclusion should provide insight into the financial future of the company.  An investment recommendation should also be made in the conclusion.

The paper will be worth 100 points, the presentation will be worth 40 points, and the two progress checks will be worth 10 points.

Required ratios:

Liquidity Ratios and Asset Utilization ratios:

  • Current Ratio
  • Quick Ratio
  • Accounts receivable turnover
  • Inventory turnover
  • Average collection period
  • Total assets turnover
  • Fixed Asset turnover

Solvency & Leverage Ratios

  • Times interest earned
  • Debt-to-equity ratio
  • Debt to total assets
  • Fixed charge coverage

Profitability Ratios:

  • Profit margin ratio
  • Gross Margin ratio
  • Return on total assets
  • Return on common stockholders? equity

Places to find Annual Reports and financial information:

  • Your chosen company?s website (look under investor relations)
  • The Securities and Exchange Commission
  • Go to: http://www.sec.gov/edgar.shtml
  • Look under ?Search for company filings?
  • Look under ?Companies & other filers?
  • Type in your chosen company?s name
  • On the left-hand side you will be looking for the Form 10K (that?s the annual report)
  • Yahoo! Finance:  http://finance.yahoo.com/
  • Morningstar.com:  http://www.morningstar.com/
  • CNN Money:  http://money.cnn.com/

Evidence of Ratio Calculations

Please show your calculations of the financial rations of your chosen company in the column labeled ?Your Company.?  You can calculate the ratios by hand or attached a sheet that clearly demonstrates how you calculated the ratio (i.e. X/Y = Z).  The ratios you provide for your competitor or industry average do not need to be calculated (you can find these on various finance websites ? though you will most likely have to calculate some yourself).  Please attached this sheet to the back of your written project.

Ratio

Your Company

Competitor/Industry Avg.

Current Ratio

Quick Ratio

A/R Turnover

Inventory Turnover

Average collection period

Total Assets Turnover

Fixed Asset turnover

Times-interest Earned Ratio

Debt-to-Equity Ratio

Fixed charge coverage

Profit Margin Ratio

Gross Margin Ratio

Return-on-Total Assets Ratio

Return-on-Common Stockholders? Equity Ratio


Analysis and Use of Financial Statements Project

 

This assignment requires financial ratio analysis on a publicly-traded company of your choosing.

 

Do not select a bank, insurance company, financial institution, or public utility. I would also

 

strongly suggest avoiding an automobile company. The project is due on the date indicated in

 

your course timeline. Each student will be required to examine the chosen company?s annual

 

report and calculate the ratios listed below. Each student will calculate the ratios for the two

 

most recent years from available annual reports.

 

Once you have performed an analysis of the financial statements, students will write up a report

 

summarizing the findings. The report will include a brief introduction, synopsis of the

 

company?s business and current business situation, a summary of the student?s interpretation of

 

team?s analysis, and a conclusion. Written proof of how the ratios were calculated MUST be

 

attached to the report. You must calculate the ratios yourself. Use the attached work page

 

behind to show proof of your calculations of the ratios (show all numbers in the calculations ?

 

not just the end result). The paper should be six (6) double-spaced, typed pages (not including

 

the ratios and the ratio calculations). Roughly, the paper should have one page of introduction,

 

four pages of analysis and interpretation, and one page of conclusion. The focus should be on

 

the analysis and your interpretation.

 

The analysis of the financial ratios should include insights into the meanings behind the ratios.

 

The ratios should tell a story about how the company is doing and its prospects for the future.

 

You need to tell that story. Do not copy directly from the annual report. In order to make the

 

ratios more meaningful, a benchmark company or industry average for each ratio should also be

 

included. You must calculate the benchmark company?s ratios as well. I do not need these

 

calculations attached. The conclusion should provide insight into the financial future of the

 

company. An investment recommendation should also be made in the conclusion.

 

The paper will be worth 100 points, the presentation will be worth 40 points, and the two

 

progress checks will be worth 10 points. Required ratios:

 

Liquidity Ratios and Asset Utilization ratios:

 

1. Current Ratio

 

2. Quick Ratio

 

3. Accounts receivable turnover

 

4. Inventory turnover

 

5. Average collection period

 

6. Total assets turnover

 

7. Fixed Asset turnover

 

Solvency & Leverage Ratios

 

1. Times interest earned

 

2. Debt-to-equity ratio 3. Debt to total assets

 

4. Fixed charge coverage

 

Profitability Ratios:

 

1. Profit margin ratio

 

2. Gross Margin ratio

 

3. Return on total assets

 

4. Return on common stockholders? equity

 

Places to find Annual Reports and financial information:

 

1. Your chosen company?s website (look under investor relations)

 

2. The Securities and Exchange Commission

 

a. Go to: http://www.sec.gov/edgar.shtml

 

b. Look under ?Search for company filings?

 

c. Look under ?Companies & other filers?

 

d. Type in your chosen company?s name

 

e. On the left-hand side you will be looking for the Form 10K (that?s the annual

 

report)

 

3. Yahoo! Finance: http://finance.yahoo.com/

 

4. Morningstar.com: http://www.morningstar.com/

 

5. CNN Money: http://money.cnn.com/ Evidence of Ratio Calculations

 

Please show your calculations of the financial rations of your chosen company in the column

 

labeled ?Your Company.? You can calculate the ratios by hand or attached a sheet that clearly

 

demonstrates how you calculated the ratio (i.e. X/Y = Z). The ratios you provide for your

 

competitor or industry average do not need to be calculated (you can find these on various

 

finance websites ? though you will most likely have to calculate some yourself). Please

 

attached this sheet to the back of your written project.

 

Ratio

 

Current Ratio Your Company Competitor/Industry Avg. Quick Ratio

 

A/R Turnover

 

Inventory Turnover

 

Average collection period

 

Total Assets Turnover

 

Fixed Asset turnover

 

Times-interest Earned Ratio

 

Debt-to-Equity Ratio

 

Fixed charge coverage

 

Profit Margin Ratio

 

Gross Margin Ratio

 

Return-on-Total Assets Ratio

 

Return-on-Common Stockholders?

 

Equity Ratio

 


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