Financial Ratio Analysis Essays and Research Papers

Instructions for Financial Ratio Analysis College Essay Examples

Title: Ratio Analysis Paper

  • Total Pages: 5
  • Words: 1390
  • Sources:3
  • Citation Style: APA
  • Document Type: Essay
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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Reference List

Accounting For Management. 2011. Retrieved from http://www.accountingformanagement.com/index.htm

NetMBA.com. (nd) Financial Ratios. Retrieved from http://www.netmba.com/finance/financial/ratios/

Siegel, J. Ph.D.,CPA, & Shim, J. Ph.D. 2006. Financial Statement Analysis, Barron's Accounting Handbook (pp.238-269). Hauppage, NY: Barron's Educational Series, Inc.

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Title: ASSIGNMENT ON FINANCIAL STATEMENT ANALYSIS You 50 000 investment opportunities You stocks Australian Stock Exchange undervalued recent spate bad news US Europe local economy You identify 2 good investment opportunities list ASX listed stocks sectors ASX listing

  • 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
EnviroMission EVM
Westpac WBC
Macquarie Atlas Roads International MQA
Amcor AMC
Qantas Airways QAN
BHP Billiton BHP
Jupiter Mines JMS
Origin Energy ORG
Energy Developments ENE
Wesfarmers WES
Navitas NVT
Ramsay Health Care RHC
Impedimed IPD
Telstra TLS
Mikoh MIK


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:

i. Profitability
ii. Efficiency
iii. Solvency
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.

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References

Amcor, (2011) Annual Report 2011. Australia.

Business Week,(2011). AMCOR LIMITED (AMC:ASX). Bloomberg.

Financial Times,(2011). Westpac Banking Corp. Financial Times. London.

Financial Times,(2011). Amcor Ltd. Financial Times. London.

Salmi, T & Martikainen, T (1994). A Review of the Theoretical and Empirical Basis of Financial Ratio Analysis. The Finnish Journal of Business Economics 4(94): 426-448.

Thomson Reuters, (2011). Westpac Banking Corporation. Analyst Rating. Thomson Reuter.UK.

Westpac, (2011). Westpac Banking Corporation Disclosure Statement. Westpac Banking Corporation. Australia.

Westpac, (2010) Annual Report 2010. Australia.

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Title: Financial Management

  • Total Pages: 8
  • Words: 2173
  • Works Cited:8
  • Citation Style: APA
  • Document Type: 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:
http://www.investopedia.com/university/ratios/
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
recession.
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.)

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References

Ahmed, M. (2011, March 3). Eric Schmidt (ex CEO and current chairman -- Google)

management style and CIO. Retrieved from, http://mubbisherahmed.wordpress.com/201 1/03/03/eric-schmidt-ex-ceo-and-current-chairman-google-management-style-and-cio/

Google Inc., (2010). Financial information. Retrieved from, http://investor.google.com/earn ings/2010/Q4_google_earnings.html

Investopedia Ulc., (2011). Return on assets. Profitability indicator ratios. Retrieved from, http://www.investopedia.com/university/ratios/profitability-indicator/ratio3.asp#axzz1f gAHil7c

Investopedia Ulc., (2011). Return on equity. Profitability indicator ratios. Retrieved from, http://www.investopedia.com/university/ratios/profitability-indicator/ratio4.asp#ixzz1f gSqy85G

Investopedia Ulc., (2011). Fixed-asset turnover. Operating performance ratios. Retrieved from, http://www.investopedia.com/university/ratios/operating-performance/ratio1 .asp#axzz1f gAHil7c

Investopedia Ulc., (2011). Recession. Retrieved from, http://www.investopedia.com/terms/r/recession.asp#axzz1fsCx9N8r

Kurtz, D.L. (2011). Contemporary business (13th ed.). L. Johnson (Ed.). Danvers, MA: John

Wiley & Sons, Inc.

Loth, R. (2011). The Debt ratio. Debt ratio. Retrieved from, http://www.investopedia.com / terms/d / debtratio.asp#axzz1fsCx9N8r

Loth, R. (2011). Dividend payout ratio. Cash flow indicator ratio. Retrieved from, http://www.

inv estope dia.com/terms/d/dividendpayoutratio.asp#axzz1fsCx9N8r

Loth, R. (2011). Price/earnings ratio. Investment valuation ratio. Retrieved from, http://www.

investopedia.com/terms/p/price-earningsratio.asp#axzz1fsCx9N8r

Microsoft Corp., (2010). Balance sheets. Financial review. Retrieved from, http://www.microso

ft.com/investor/reports/ar10/10k_fr_bal.html

Microsoft Corp., (2010). Income statements. Financial review. Retrieved from, http://www.mi crosoft.com/investor/reports/ar10/10k_fr_inc.html

Microsoft Corp., (2010). Cash flow statements. Financial review. Retrieved from, http://www.

microsoft.com/investor/reports/ar10/10k_fr_cas.html

Rashid, A. & Abbas, Q. (2011, September 1). Predicting bankruptcy in Pakistan. Theoretical & applied economics, 18, 9. (Accession No. 66620466) Retrieved from, https://web-ebscohost-com.libdatab.strayer.edu/ehost/pdfviewer/pdfviewer?vid=4&hid=123&s id=47f4ec82-1d1e-44c9-886f-f400d1f25aed%40sessionmgr110

The Datamonitor Group, (2011, August 1). Google inc. SWOT analysis. Business source complete. 4. (Accession No. 65541979). Retrieved from, https://web-ebscohost-com.libdatab.strayer.edu/ehost/pdfviewer/pdfviewer?vid=4&hid=125&sid=c134a04d-b5a8-4b77-b38b-64597ab2e2a1%40sessionmgr112

The Datamonitor Group, (2011, June 1). Microsoft corporation SWOT analysis. Business source complete. 4. (Accession No. 65541814) Retrieved from, https://web-ebscohost-com.libdatab.strayer.edu/ehost/pdfviewer/pdfviewer?vid=5&hid=125&sid=c134a04d-b5a8-4b77-b38b-64597ab2e2a1%40sessionmgr112

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Title: Smith and Wesson

  • Total Pages: 17
  • Words: 5119
  • Bibliography:0
  • Citation Style: MLA
  • Document Type: Research Paper
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.


Assignment #1
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.


Assignment #2
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.



Assignment #3
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
Parameters:
EFE
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.


Assignment #4
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.
IFE
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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References for Assignment #3:

Form 10-K (2006) - Smith & Wesson Form 10-K Filed with the Securities and Exchange Commission on July 14, 2006. Accessed from the Internet on November 13, 2006 at http://ir.smith-wesson.com/phoenix.zhtml?c=90977&p=irol-sec&control_selectgroup=Annual%20Filings

Bureau of Alcohol, Tobacco and Firearms BATF (2005) - Accessed from Research provided to the public from this agencies' website on November 14, 2006:

http://www.atf.treas.gov/firearms/stats/index.htm

BusinessWeek (2005) - Top 100 Global Brands Scorecard. BusinessWeek Online. Data Provided by Interbrand. Part of the Innovation Metrics Series. Accessed from the Internet on November 20, 2006 from http://bwnt.businessweek.com/brand/2005/

License! Magazine (2005) - Why and How Harley-Davidson Has Maintained its Customer Loyalty. License! Magazine. August, 2005. Accessed from the Internet on November 20, 2006: http://www.licensemag.com/licensemag/data/articlestandard/licensemag/332005/174785/article.pdf

Sarbanes-Oxley Act (2002) - Discussion of the Act, downloaded from the Internet on November 20, 2006 at http://www.sarbanes-oxley.com/section.php

Wainwright (2006) - Initiate Smith & Wesson With Buy Rating: Plenty of Bang for the Buck. Michael Rindos, Analyst. July 20, 2006. Published by the firm in New York, NY.

Assignment #4: Internal Factor Evaluation Matrix

The following are the key strengths and weaknesses of Smith & Wesson and are used for completing the Internal Factor Evaluation Analysis:

Strengths

From FY2004 forward the company has posted significant financial performance as measured by key financial ratios. These ratios are provided below:

04/30/2006 04/30/2005 Variance 07/31/2006 10/31/2005 Variance Compound Annual Growth Rate USD USD % USD USD % 3-Year 5-Year ROE % 21.05-19.38 1.67 8.62 7.3-2.14 5.16-241.12 0.37 - ROA % 9.19 6.4-2.79-43.59 3.35 0.8-2.55-318.75 0.89 - Gross Margin % 31-33 (2) (6.06) 35-29 6-20.69 (0.01) 0.04 EBITA % of Revenue 11.82-11.08 0.74 6.68-14.82 3.44-11.38-330.81 0.27 0.26 Pre-Tax Margin % 8.6-6.9-1.70-24.64-11.34 3.04 8.30-273.03 0.99 - Net Profit Margin % 5.44 4.17 1.27-30.46 7.02 1.92 5.10-265.63 0.67 - Quick Ratio 0.99 1.03 (0.04) (3.88) 0.95 0.83 0.12-14.46 (0.02) (0.05) Current Ratio 1.68 1.83 (0.15) (8.20) 1.71 1.7-0.01 0.59 0.00 (0.04) Long-Term Debt to Equity 0.35 0.59 (0.24) (40.68) 0.3-0.47 (0.17) (36.17) (0.46) (0.48) Total Debt To Equity 0.39 0.65 (0.26) (40.00) 0.4-0.66 (0.26) (39.39) (0.46) (0.47) Interest Coverage 9.4-4.24 5.16-121.70-16.78 4.02-12.76-317.41 0.89 0.85 Working Cap/Total Assets 0.23 0.28 (0.05) (17.86) 0.24 0.25 (0.01) (4.00) 0.07 (0.07)

Return on Equity (ROE) has grown 241% from 10/31/05 to 7/31/06 and has a 37% compound annual growth rate, mainly as the result of larger margins being generated and repurchase of stock to drive up valuations. The ROE performance of Smith & Wesson far outpaces the competitive set as defined by Dun & Bradstreet with a median level of 9% annually.

Due to significantly increased manufacturing efficiencies Smith and Wesson has been able to complete a major turn-around on their Return on Assets (ROA, posting a 318% increase from 10/31/2005 to 7/31/2006.

Smith & Wesson is outperforming its industry, sector and S&P 500 peers on key financial metrics of performance measuring management effectiveness.

Source:

http://www.investor.reuters.wallst.com/stocks/Ratios.asp?rpc=66&ticker=SWHC.O

Return on Assets (ROA) is leading across all three areas of comparison due to production efficiencies and best practices in sourcing, fulfillment, and manufacturing as has been discussed throughout this assignment.

Through more aggressive hiring of competitive sales force management, Smith & Wesson has been able to grow sales in both the Asian and Latin American Markets as shown in the following table from their 8K filed during FY2006.

Revenues

Report Date

Europe

Asia

Latin America

All Others

Total Region

Excellent Marketing strategies in the Sporting Goods Channel and the continually strengthening of the brand messaging in this specific market.

The Engraving/Performance Center and Commemoratives sales are up 250% during FY 2006 as a result of efforts in this specific market.

Smith & Wesson is holding constant at 87% unaided awareness across the U.S. public, with significantly higher awareness in key markets served as a result of efforts in the Sporting Goods Channel.

Union-free manufacturing makes labor costs more predictable for the long-term and therefore the entire company will be more profitable as a result.

With greater predictability of direct labor costs Smith & Wesson will be able to more effectively budget for new product development and gain greater market share in selected segments.

Smith & Wesson is actively defining best practices for manufacturing efficiencies in their industry.

According to the company's 8-K (2006) throughout FY 2006 Smith & Wesson has held inventory flat while increasing sales 27%, improving on-time delivery from 60% to 85%, increasing machine uptime from 60% to 80%, increased guns/day output by 40% compared to the previous year, and increased guns per labor hour produced by 20% over the previous year.

Weaknesses

Lack of influence on handgun laws and pro-gun legislators in Washington, D.C.

While the current legislative climate is favoring gun manufacturers, with a major shift in the political climate in 2008 probable there is the need to get closer to pro-gun members of Congress to ensure the costly Sarbanes-Oxley like controls advocated by some candidates do not turn into law. This would impact Smith & Wesson's profitability significant and for the l, ong-term.

No participation in the hunting rifle, security systems and ammunition markets.

According to the many filings by the company with the SEC, there is ample production capacity in the two factories in the U.S. In addition to the one Turkey for initiating production of these products. This scope of these products and their inclusion in the broader Smith & Wesson product line could significantly increase revenues in all served markets.

Lagging the industry, sector and S&P 500 on many factors regarding revenue per employee and net income per employee. The following table taken from Reuters Investor's site shows the wide variation in performance. It is important to note that while the company has achieved significant gains in asset productivity it still has room to improve in terms of driving up revenue and net income per employee.

Source:

http://www.investor.reuters.wallst.com/stocks/Ratios.asp?rpc=66&ticker=SWHC.O

Key Internal Factor Evaluation Analysis

Strengths

Weight

Rating

Weighted Score

From FY2004 forward the company has posted significant financial performance as measured by key financial ratios.

Smith & Wesson is outperforming its industry, sector and S&P 500 peers on key financial metrics of performance measuring management effectiveness.

Through more aggressive hiring of competitive sales force management, Smith & Wesson has been able to grow sales in both the Asian and Latin American Markets as shown in the following table from their 8K filed during FY2006

Excellent Marketing strategies in the Sporting Goods Channel and the continually strengthening of the brand messaging in this specific market.

Union-free manufacturing makes labor costs more predictable for the long-term and therefore the entire company will be more profitable as a result.

Smith & Wesson is actively defining best practices for manufacturing efficiencies in their industry.

Weaknesses

Weight

Rating

Weighted Score

Lack of influence on handgun laws and pro-gun legislators in Washington, D.C.

No participation in the hunting rifle, security systems and ammunition markets.

Lagging the industry, sector and S&P 500 on many factors regarding revenue per employee and net income per employee.

THREAT OF SUBSTITUTES

SUPPLIER POWER

High - integration is critical

BUYER POWER

High - many different vendors

BARRIERS TO ENTRY

High - greater production efficiencies

RIVALRY

Intense/

Cutthroat

Figure 1:

Porters' Five Forces Model

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