Assignment 1,2, &3

A1

Company Ratios: Appendix C [WLO: 3] [CLO: 1] Any equity research report will typically include a ratio analysis of the financial performance of

the company. For this assignment, you will use the Mergent database available in the university

library to retrieve 3 years of financial ratios for the publicly traded company you chose for this

class. In addition, you will download and format the financial ratios using Excel. You will save

that Excel sheet as a PDF and submit it to Waypoint as Appendix C.

Prepare:

Prior to beginning work on this assignment,

• Complete the Week 2 - Learning Activity in Amplifire.

• Review Chapter 11 of Essentials of finance.

• Watch the following video:

(Links to an external site.)

BUS401 | Retrieving a Company’s Ratios Using Mergent (Links to an external site.)

(Links to an external site.)Construct Appendix C:

Using the Mergent (Links to an external site.) database in the university library, and following

the instructions in the BUS401 | Retrieving a Company’s Ratios Using Mergent (Links to an

external site.) video from above complete the following:

• Find your company within the Mergent database.

• Download your company’s financial ratios for the last 3 years as an Excel document.

• Format the Excel spreadsheet according to the video instructions.

• Save the 3 years of financial ratios as a PDF. Title this PDF file “Appendix C” and submit it

to Waypoint.

The Company Ratios: Appendix C must contain your company’s financial ratios for the last 3

years.

A2

Industry Competitor Ratios: Appendix D [WLOs: 2, 3] [CLOs: 1, 2] Ratios are rarely used in isolation. For a good understanding of a company’s financial

performance, it is important to evaluate the company’s ratios relative to the industry in which it

operates. For this assignment, you will use Mergent through the university library to download

the most recent year of financial ratios for top competitors in your publicly traded company’s

industry. You will download the competitor financial ratios into Excel. Once you have these

competitor financial ratios in Excel, you will save that Excel sheet as a PDF and submit it to

Waypoint.

Prepare:

Prior to beginning work on this assignment,

• Complete the Week 2 - Learning Activity in Amplifire.

• Review Chapter 11 of Essentials of finance.

• Watch the following video: (Links to an external site.)

(Links to an external site.)BUS401 | Retrieving Industry Ratios Using Mergent (Links to an

external site.)

Construct Appendix D:

Using the Mergent (Links to an external site.) database in the university library, and following

the instructions in the BUS401 | Retrieving Industry Ratios Using Mergent (Links to an external

site.) video from above complete the following:

• Retrieve the industry competitor ratios for the most recent year.

• Download the competitor ratios you retrieved as an Excel document.

• Calculate the average ratio for the industry for each ratio.

• Format the Excel spreadsheet according to the video instructions.

• Then save competitor ratios as a PDF. Title this PDF file “Appendix D” and submit it to

Waypoint.

The Company Ratios: Appendix D,

• Must contain industry competitor ratios for the most recent year.

• Must include the calculations for the average ratio for the industry for each ratio.

A3

Section 2: Financial Ratio Analysis [WLOs: 1, 2] [CLOs: 1, 2] Ratio analysis provides another set of patterns to evaluate before deciding to buy or sell a

company’s stock. Ratios reveal more than just the past performance; ratios reveal how

effectively the company converts product sales into shareholder returns. Ratios provide a gauge

for comparison across time and across the industry (competitors), while removing the impact of

size differences. Would you rather invest in Company A, with $1.0 million in earnings, or

Company B, with $10.0 million in earnings? It’s hard to say. However, if Company A earns a ROA

of 25%, while Company B earns a ROA of 2%, the decision becomes clear.

Liquidity ratios provide clues to how effectively the company manages its cash collection cycle.

Asset turnover ratios reveal how efficiently the company uses its assets to generate profits.

Debt management ratios reveal how leveraged a company is, which provides an indication of

future risk. Taken together, a company’s ratios and its ratios compared to the industry

competitors provide important insight to the investment strength of the company’s stock. In

this assignment, you will review the trend in your chosen company’s financial ratios over the

past 3 years and compare your chosen company’s ratios to the average ratios from top

competitors in the industry.

Prepare:

Prior to beginning work on this assignment,

• Make sure you have completed the Company Ratios: Appendix C and Industry

Competitor Ratios: Appendix D assignments. It is recommended that you keep those

two PDFs open or printed when completing this assignment.

• Review Chapter 11 in Essentials of finance.

• Review the Week 2 Model Assignment (Links to an external site.).

Write:

In your paper, address the following four parts in a Word document:

Part 1: (three to five paragraphs)

• Summarize the trends in your company’s ratio performance over the 3 most recent

years. Be sure to address the following ratios included in Appendix C:

o Profitability ratios: ROA, ROE, return on investment (ROI).

o Liquidity ratios: quick ratio, current ratio.

o Debt management ratios: long-term debt to equity, total debt to equity, interest

coverage ratio.

o Asset management ratios: total asset turnover, receivables turnover, inventory

turnover, and accounts payable turnover.

o Per share: book value per share.

Part 2: (two paragraphs)

• Interpret whether the trend for each ratio (listed in Part 1) is an improvement or a

decline in performance for the company.

• Create a table that lists each ratio as either a strength or a weakness in the most current

year, based on its trend and your interpretation.

• Determine the overall financial strength of the company based on the ratios identified

as either strengths or weaknesses.

o Consider all of the ratios discussed so far. Is the company’s strength the fact that

the debt management ratios are improving? Or is it that the liquidity ratios are

increasing? Is the company’s weakness that the turnover ratios are declining? Or

is the company’s weakness that debt management ratios are weakening?

o Categorize the company’s overall ratio performance as either strong, neutral, or

weak, based on your determination from the ratios.

Part 3: (one to two paragraphs)

• Compare your chosen company’s ratio performance to the industry competitor ratios in

the most recent year based on Appendix D. Be sure to address the following ratios

included on Appendix D:

o Profitability ratios: ROA, ROE, gross margin, and net margin.

o Liquidity ratios: quick ratio and current ratio.

o Debt management ratios: long-term debt to equity, total debt to equity, and

interest coverage ratio.

o Asset management ratios: asset turnover and inventory turnover.

• Create a table that lists each ratio as either higher or lower than the average ratio for

the competitors in the industry.

Part 4: (one paragraph)

• Categorize the company’s overall financial performance as either better than average,

average, or worse than average compared to the industry based on the ratios.

• Interpret which ratios are the most important and explain your reasoning.

• Justify your conclusion based on the table you created, your interpretation of which

ratios are the most important, and the company’s overall ratio performance compared

to the industry competitors.

Need Help? Sturggling? Click the tutoring button below to get immediate help with content-related questions or issues.

Connect Now: Finance Tutoring Don’t know what to ask the tutor? How about: • I don’t understand which ratios are good or bad. Could you explain it to me? • I am struggling with describing trends in the ratios. Can you help me?

The Section 2: Financial Ratio Analysis paper

• Must be two to three double-spaced pages in length including any tables or calculations

(but not including title and references pages) and formatted according to APA Style

(Links to an external site.) as outlined in the Writing Center’s APA Formatting for

Microsoft Word (Links to an external site.)

• Must include a separate title page with the following:

o Title of paper in bold font

▪ Space should be between title and the rest of the information on the title

page.

o Student’s name

o Name of institution (The University of Arizona Global Campus)

o Course name and number

o Instructor’s name

o Due date

• Must utilize academic voice. See the Academic Voice (Links to an external site.) resource

for additional guidance.

• Must include a separate references page that is formatted according to APA Style as

outlined in the Writing Center. See the APA: Formatting Your References List (Links to an

external site.) resource in the Writing Center for specifications.

• Must cite where the financial statement information comes from (i.e., Mergent)

o For help citing the information from Mergent, see the BUS401: Principles of

Finance Research Guide (Links to an external site.).

Note: Since this is Section 2 of the Week 5 final project, there is no need for an introduction

paragraph.