Conducting Financial Ratio Analysis
Select a publicly traded U.S. company that has paid a dividend for at least the last three years, and conduct a financial ratio analysis. You will be using this company for other assignments in this course; thus, please spend adequate time locating a company. Please consider reviewing http://finance.yahoo.com to locate a company. The company must have data available for you to conduct a financial ratio analysis. It’s important to select a company in an industry that has industry ratio numbers. You cannot select a privately held company.
Calculate all the following ratios for the company for the past three years and compare them to the appropriate industry benchmarks:
Liquidity ratios:
Current
Quick
Asset Management ratios:
Inventory turnover
Total assets turnover
Fixed assets turnover
Days sales outstanding
Debt Management ratios:
EBITDA coverage
Times-interest-earned
Total debt to total assets
Profitability ratios:
Return on common equity
Return on total assets
Basic earning power
Profit margin on sales
Market Value ratios:
Market/book
Price/earnings
Price/cash flow
Create a table that contains the ratios for the various years. Then analyze the information. Look at the trends in the ratios and comment on how they compare to the industry benchmarks. Which ratios are strong? Which ratios need improvement? If you were a stock investor, would you buy the company’s common stock? Why or why not? If you were a bond investor, would you buy the company’s bonds? Why or why not?
SLP Assignment Expectations
You are expected to:
Describe the purpose of the report and provide a conclusion. An introduction and a conclusion are important because many busy individuals in the business environment may only read the first and the last paragraph. If those paragraphs are not interesting, they never read the body of the paper.
Answer the SLP Assignment question(s) clearly and provide necessary details.
Write clearly and correctly—that is, no poor sentence structure, no spelling and grammar mistakes, and no run-on sentences.
Provide citations to support your argument and references on a separate page. (All the sources that you listed in the references section must be cited in the paper.) Use APA format to provide citations and references.
Type and double-space the paper.
