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finance.docx#1 Library Research Assignment
Calculate and analyze financial ratios, make recommendations for improvement in financial performance.
Analyze financial statements, develop cash flow analysis, and pro forma statements.
Use effective communication, team and problem-solving skills to collaborate on a project
400 words
Locate a publicly traded U.S. company of your choice. Then, calculate the following ratios for the company for 2014 and 2015:
•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 2014 to 2015, 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 2014 to 2015, 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 2014 to 2015, why do you think that it was unchanged? Is it a good or bad sign that the ratio was unchanged? Please explain.
#2 Assignment Objectives
Apply the time value of money in making financial decisions.
Use effective communication, team and problem-solving skills to collaborate on a project.
350 words
The time value of money concept is one of the 3 major principles of the study and practice of financial management. It is used to evaluate potential investments, determine a rate of return on a project, calculate the required payments on a loan or annuity, and estimate a future value of funds currently invested and the present value of funds to be received at some future date. It is imperative that managers at all levels of business have a working knowledge of this topic. In your first task, you have been asked to engage your colleagues in a detailed and documented discussion about the time value of money concept: what it is, why it is important, how it is used, and generally, how the applications to single and periodic payments are computed using various calculation methods and formulas.
In your initial post, identify and recommend at least 1 credible Web site that an investor can visit to find the current market value of market indexes such as the Dow Industrial Averages, and address at least 3 of the following:
•What is the discounted cash flow concept, and why is it essential for financial managers to understand and employ this important concept?
•What are the methods associated with evaluating single or periodic payments, and what is at least 1 application of each?
•Discuss the different methods that can be used to calculate these amounts, and explain how at least 1 of these models can be used.
•How can the time value of money models or formulas be used to determine the rate of return for an investment or the time it will take for a current sum to grow to a desired future amount?
•Discuss the "Rule of 72" and how it can be used to estimate how long it takes for money to double at various rates of return.
•Identify and recommend at least 1 credible Web site that an investor can visit to find the current market value of market indexes such as the Dow Industrial Averages.
