Financial Management

500-800 WORD DOCUMENT AND EXCEL SPREADSHEET SHOWING THE CALCULATIONS

Locate a publicly traded U.S. company of your choice. Then, calculate the following ratios for the company for 2012 and 2013:

• Liquidity Ratios
  • Current ratio [current assets / current liabilities]
  • Quick ratio [(current assets – inventory) / current liabilities]
• Asset Turnover Ratios
  • Collection period [accounts receivable / average daily sales]
  • Inventory turnover [cost of goods sold / ending inventory]
  • Fixed asset turnover [sales / net fixed assets]
• Financial Leverage Ratios
  • Debt-to-asset ratio [total liabilities / total assets]
  • Debt-to-equity ratio [total liabilities / total stockholders’ equity]
  • Times-interest-earned (TIE) ratio [EBIT / interest]
• Profitability Ratios
  • Net profit margin [net income / sales]
  • Return on assets (ROA) [net income / total assets]
  • Return on equity (ROE) [net income / total stockholders’ equity]
• Market-Based Ratios
  • Price-to-earnings (P/E) ratio [stock price / earnings per share]
  • Price-to-book (P/B) ratio [market value of common stock / total stockholders’ equity]

You are now ready to interpret the ratios that you have calculated.

If a ratio increased from 2012 to 2013, why do you think that it increased?

Is it a good or bad sign that the ratio increased? Please explain.

If a ratio decreased from 2012 to 2013, why do you think that it decreased?

Is it a good or bad sign that the ratio decreased? Please explain.

If a ratio was unchanged from 2012 to 2013, why do you think that it was unchanged?

Is it a good or bad sign that the ratio was unchanged? Please explain