Applied Case Assignment
Part I: Strategic Ratio Analysis
1. (a) Compute ROE and a three-factor ROE decomposition for the Company for the years ended 2014 and 2013. For simplicity, use year-end balances in your ratio computations. (4 pts)
Ratio 2014 2013
ROE
Profit Margin
Asset Turnover
Financial Leverage
(b) Has the Company's ROE increased or decreased in 2014? Which component(s) of the ROE decomposition support or contribute to that directional change in the Company's ROE?
(c) Select ONE of the three components of the ROE decomposition and explain what most likely lead to the observed change in that component. (HINT: Explanations for two of the three components are more readily identifiable from the financial statements. You only need to identify ONE of those.)
Applied Case Assignment
Part II: Press Release
2. Are the Company's quarterly financial statements audited by independent CPAs? How do you know?
3. What periods are being reported on the Company's interim income statements? Refer to specific months and years.
4. (a) What level of growth does the Company expect for its Net Sales for the fiscal year 2015? (HINT: Refer to the details of press release, and think carefully about how the Company is describing its sales!)
(b) Would the management guidance for fiscal year 2015's net sales be likely interpreted by investors as an improvement or a deterioration in the Company's performance, relative to 2014?