Assignment: Applying Ratio Analysis

 

Getting Started

Ratio analysis is useful in evaluating a firm’s financial performance. Being able to apply ratio analysis is an important skill for a manager. This assignment will teach you how to understand a company’s financial performance from year to year and draw conclusions from your analysis. 

Upon successful completion of the course material, you will be able to:

• Employ ratio analysis to make informed business decisions.
• Apply biblical truth to the functioning of the financial markets.

Resources

• Textbook: Foundations of Financial Management
• Website: Connect 

Background Information

One way to more fully understand and interpret the financial information provided in financial statements is through the use of financial ratios. In this workshop, you will learn how to compute various ratios and interpret the results for use in financial decision-making.

Instructions

1. Review the rubric to make sure you understand the criteria for earning your grade.
2. Review Chapter 3 of Foundations of Financial Management and respond to the following questions provided: 
   
   1. What is liquidity, and what is the rationale for its measurement?
   2. What are the differences among a firm’s gross profit margin, operating profit margin, and net profit margin?
   3. Explain what determines a company’s return on equity.
3. When you have completed your assignment, save a copy for yourself and submit a copy to your instructor by the end of the workshop.