Assessment: Case Study of Financial Analysis and Operating Ratios (15%)
In this assessment you will use the income statement and balance sheet information identified below and evaluate the firm's financial condition based on three profitability ratios: a) Total Margin, b) Return on Assets and c) Return on Equity. You will also conduct a DUPONT ANALYSIS using the information on the financial statements. You will be graded based on your understanding of the 3 ratios analyzed and the DUPONT ANALYSIS, the accuracy of your calculations, the validity of you conclusions and your ability to clearly communicate your analysis. To complete this assignment, follow these steps.
1. Review Chapter 17 in the Gapinski textbook and Chapter 14 in the Nowicki textbook.
2. Examine the Statement of Operations and Balance Sheet provided as part of Problem 17.4 at the end of Chapter 17 in Gapenski textbook. Attached here: Problem 17-4
3. From this financial information calculate the three profitability ratios: a) Total Margin, b)Return on Assets and c) Return on equity and conduct a Dupont Analysis based on the financial statement information above
4. Write a short paper in the following format:
Cover page with your name, class/section and instructor's name
1. For each ratio, in a paragraph: define the ratio, explain what it measures, show your calculation and explain what the ratio tells you about your organization's health and any limitations of using the ratio.
2. Explain the importance of a Dupont Analysis
3. Write a conclusion about your organization's financial condition based on your ratio analysis. Use Industry benchmarks provided in Problem 17.4 of Gapenski.
4. Describe and discuss the use of operating indicators in additional to financial ratios in measuring financial performance.