Essay Instructions: Research and write a paper on financial ratio analysis.
Include in the paper:
• Description of major ratio categories (see below)
• Description/definition of each ratio
• How each category relates to the financial statements (for example income statement, balance sheet etc.)
• Examples of application of ratios calculation and interpretation of ratios to a specific company (Use Costco or Sam’s Club) (one from each category only)
Major Categories of Ratios -
1) Liquidity Measurement Ratios:
- Current Ratio
- Quick Ratio
- Cash Ratio
- Day’s Sales in Receivables Ratio
- Accounts Receivable Turnover Ratio
-Days Sales in Inventory Ratio
-Inventory Turnover Ratio
-Operating Cycle Ratio
-Working Capital Ratio
2) Debt Ratios:
- Times Interest Earned Ratio
- Fixed Charge Coverage Ratio
- Debt Ratio
- Debt-Equity Ratio
- Debt to Tangible Net Worth Ratio
2) Profitability Indicator Ratios:
-Net Profit Margin Ratio
-Total Asset Turnover Ratio
- Return On Assets Ratio
- Operating Income Margin Ratio
-Operating Asset Turnover Ratio
5) Investment Valuation Ratios:
-Degree of Financial Leverage
- Price per Share Ratio
- Earnings per Share Ratio
- Percentage of Earnings Retained Ratio
- Dividend Payout Ratio
- Dividend Yield Ratio
- Book Value per Share Ratio
- Maturity of Options Ratio
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Excerpt From Essay:
Total Pages: 8 Words: 2163 References: 8 Citation Style: APA Document Type: Research Paper
Essay Instructions: ASSIGNMENT ON FINANCIAL STATEMENT ANALYSIS
You have $50,000 and are looking for investment opportunities. You think there are stocks in the Australian Stock Exchange that are undervalued because of the recent spate of bad news from the US, Europe and the local economy. You are to identify 2 possible good investment opportunities from the list of ASX listed stocks from different sectors within the ASX listing. Your investment is to be of a medium-term nature (more than 12 months) and you prefer to invest in companies with strong financial fundamentals.
You need to (1) select 2 listed companies for potential investment; (2) analyse the companies using financial ratio analysis that you have learned from this course and (3) provide evidences justifying your recommendation. You have to collect comparative financial statements and use them to undertake a detailed financial analysis to help you decide if the companies are good investment opportunities.
Based on your analysis of the chosen companies, your final recommendation may be to BUY the stock or DEFER your decision.
Students with problems understanding the assignment should seek help from the Lecturer as soon as possible. You are advised to start preparation as soon as you have received the assignment question. The following companies from the 7 main sectors within the ASX listing are to be used for your assignment:
Company Name ASX Code
Sims Metal Management SGM
Macquarie Atlas Roads International MQA
Qantas Airways QAN
BHP Billiton BHP
Jupiter Mines JMS
Origin Energy ORG
Energy Developments ENE
Ramsay Health Care RHC
The list above comprises 2 companies from 7 different sectors and you are required to select 2 companies, 1 each from a different sector/subsector, for your investment strategy. (Note: BHP, Jupiter Mines, Origin Energy and Energy Developments are from 2 subsectors within the ?Resources? Sector and you may select 1 company from each subsector for your assignment if you so desire.)http://www.asx.com.au/research/industry-sectors.htm
GUIDELINES TO ASSIGNMENT
Using Chapter 13 ?Contemporary Accounting? (Bazley and Hancock) as a guide, your decision should include an analysis of the companies? last three years (2009 to 2011) financial performance. Definitions of ratios together with actual ratio calculations should be tabulated and attached to your report as appendices.
(a) This analysis should include financial ratios. Financial ratios selected should consider the following issues:
iv. Market-based ratios
You should be selective in your choice of ratios as not all ratios are applicable to the business you have chosen. For example, ratios on inventory will usually not be applicable for a business providing services. While you are expected to discuss the above issues, greater coverage should be given to the components of each ratio. You should investigate to determine the significant or determining factors in any change to the ratio.
(b) A discussion of the financial ratios you have calculated, highlighting the financial strengths and weaknesses for each of the companies as revealed by your ratio analysis is important. For example, dividend yield and its sustainability can be a deciding factor because of your intention to invest for the medium term.
(c) A trend analysis over the last three years? financial ratios and year-to-year comparisons, sometimes call horizontal analysis. This analysis should seek to identify significant trends e.g. significant differences in revenue growth rates between the years. Other techniques such as index numbers may be used in this part of your analysis.
(d) Some elementary vertical analysis (e.g. profit margins) to identify items in the financial statements which have showed the most significant changes over the last three years. Try to identify reasons for those changes e.g. global economy, interest rates, exchange rates or competition from e-commerce.
(e) Summarise your analysis and use them as justifications for your recommendation.
Excerpt From Essay:
Essay Instructions: typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all
sides; references must follow APA
Google, a leader in Internet information searching, is being challenged by other big names in Internet
technology. Compare and contrast Google’s business model and financial management with Microsoft’s,
which launched Bing.
Access Google and Microsoft’s annual reports and financial statements at their Websites. you may access some other sites and or sources to understand the how to analyze an income
statement and a balance sheet. For example, the following sites can provide guidance:
• Understanding the Income Statement at: http://www.investopedia.com/articles/04/022504.asp
• Reading the Balance Sheet at: http://www.investopedia.com/articles/04/031004.asp
However, if these sites are not available, there are other sites that can be accessed that will provide
sufficient information and guidance.
Write a 7-8 page paper in which you:
1. Calculate or identify from each company’s most recent annual report the six (6) specific financial
ratios listed and provide as an appendix to the paper.
• Liquidity measurement ratio:
o Current ratio
• Profitability indicator ratios:
o Return on assets
o Return on equity
• Debt ratio:
o Debt ratio
• Operating performance ratio:
o Fixed asset turnover ratio
• Cash flow indicator ratio:
o Dividend payout ratio
• Investment valuation ratio:
o Price / Earnings ratio
(If you need help with ratios you could access Web sites that provide guidance such as:
However, if this site is not available, other sites can be accessed that offer similar information.)
2. Compare and contrast each company’s business model: (1) core business, (2) leading products
and/or services, (3) management/leadership style, and (4) innovation track record.
3. Use the financial ratio analysis and explain which company is better able to withstand a major
4. Explain what the profitability ratios can tell about Google and Microsoft’s performance and how
that information would influence investing decisions.
5. Identify and explain three (3) primary financial-based guidelines that should be used when
selecting which of these two companies to invest in.
6. Use a minimum of three (3) quality external resources from the last three (3) years to support the
content of the paper. (Note: Do not use Wiki sites.)
Excerpt From Essay:
Essay Instructions: This assignment consists of four different subprojects about the same company. Each one is refered to as assignment 1,2,3, and 4. The first paper is five pages, the second for pages, the third four pages, and the fourth four pages. Extensive research is necessary to complete the assignment and several resources of information.
Obtain an annual report and perform an analysis of Smith & Wesson and their customers. Also research Smith & Wesson by searching for articles and/or analyst reports from any of the major financial news web sites available to you. Sites that I have used in the past have included www.moneycentral.msn.com, www.quicken.com, www.fool.com among others. Read the annual reports in an effort to determine a general outline of who S&W?s customers are, and what business they are in.
Write a profile what S&W do, highlighting any key aspects/hot button issues that you find. By hot button, I refer to any particular aspects that give them some sort of competitive advantage or ?uniqueness?. Who are their main competitors? What industry are they in? What are their key products? Which customer segments do they primarily serve? How successful have they been?, etc. Please note that I am not asking for their entire history just a profile that gives a broad picture of S&W.
In total it should be five (5) pages.
Research Smith & Wesson and its industry and perform a Porter Five Forces analysis. For this assignment a minimum of five separate pieces of research material should be obtained, which can include periodical articles, investor analysis, and trend analysis for S&W?s industry.
A Five Forces chart should begin theanalysis to serve as a quick reference point. Beneath each of the forces, a brief one or two word description should be presented about the pages that will follow (see example in picture).
Each of the Five Forces; namely, Ease of Entry, Rivalry, Supplier Power, Buyer Power, and Available Substitutes, should then be discussed beneath their own headings in the paper. Also, please conclude the paper with a brief (1-3 paragraphs are probably good) summary of the key competitive forces that are facing the company.
In total four (4) pages.
Perform an External Factor Evaluation Matrix on Smith & Wesson. The critical thing to remember about this analysis is to develop a thorough understanding of the factors chosen. Because of the importance of factor knowledge, a minimum of five external sources of information should be acquired regarding the factors chosen. The analysis should include a chart similar to the one below
Choose 7-10 external factors for analysis
For each factor write a paragraph or two as necessary discussing the nature of the factor, how it will impact the firm, and its importance to the future strategy of the firm (i.e., tell the reason for the assigned rating score).
The essay should be a total of four (4) pages.
Perform an Internal Factor Evaluation on Smith & Wesson The analysis should include a chart similar to the one shown in Assignment #3 with the notable exception that categories should be ?Strengths? and ?Weaknesses? instead of opportunities and threats.
A financial ratio analysis can be critical in finding some internal factors. The basic idea is to use ratio analysis (comparison of Smith & Wesson to its industry and competitors) to support the factors chosen.
Do a chart identical to the EFE, except of course that the factors will be internal.
Choose 8-10 internal factors for analysis
For each factor write a paragraph or two as necessary discussing the nature of the factor, how it will impact Smith & Wesson, and its importance to the future strategy of the firm.
The paper should be four (4) pages in total.
A total of 17 pages.
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