Assignment: Ratio Analysis
Purpose of Assignment
The activity requires students to perform research and analysis on competing companies and the potential implications of international standards. This real-world analysis is key to understanding how a company's profitability, liquidity, and solvency can be useful for all users. Students also learn to analyze financial statements and use managerial tools to make decisions from an investor's and creditor's standpoint.
Assignment Steps
Select two competing companies, that are US publicly traded, and locate annual reports for these two companies by going DIRECTLY TO THE COMPANY WEBSITES TO DOWNLOAD THE ANNUAL REPORT OR 10-K. DO NOT USE SUMMARY SITES.
Research the two companies on the Internet and download the Annual Reports with the Income Statement, Statement of Shareholders' Equity, Balance Sheet, and Statement of Cash Flows.
IN EXCEL:
• Make a 5-year trend analysis for each company:
• Net sales.
• Net income.
• Compute for the two most recent years the:
• Debt to assets ratio.
• Compute for two most recent years the:
• Profit margin.
• Asset turnover.
• Return on assets.
Develop a maximum 500-word APA Formatted Paper and include the following:
• Evaluate the financial opportunity presented by the companies. If you were a creditor, which company would you be more likely to lend money to? Defend your decision.
• Which company would you recommend as an investment? Discuss the items that were considered in your decision.
• At which company would you prefer a management position and why?
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.