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The BA 620 Financial Management

Group Project Part 2/Financial Analysis

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The purpose of the second part of the comprehensive project is to compute financial statement ratios. Based on the company you selected in Part I, complete the following:

 

A.    Compute the following ratios for two years. You may use Excel to compute your ratios.

1.     Debt ratio

2.     Gross profit margin

3.     Free cash flow

4.     Times interest earned

5.     Accounts receivable turnover

6.     Inventory turnover

 

The BA 620 Financial Management

Group Project Part 2/Financial Analysis

 

The purpose of the second part of the comprehensive project is to compute financial statement ratios. Based on the company you selected in Part I, complete the following:

 

B.    Prepare a DuPont Analysis of ROE for two years, including computations of

1.     Return on Sales

2.     Asset Turnover

3.     Return on Assets

4.     Financial Leverage

5.     Return on Equity

 

C.    Evaluate the ratio trends. Your evaluation should be consistent with your calculations for the two (2) years.

 

The BA 620 Financial Management

Group Project Part 2/Financial Analysis

 

Write a 3-6 page report evaluating trends in all of the above ratios. Discuss whether your company’s profitability, efficiency, liquidity, and solvency are improving or deteriorating. Suggest ways the company can improve the ratios that show problems.

The report should be well written with a cover page, introduction, the body of the paper (with appropriate subheadings), conclusion, and reference page.

References must be appropriately cited.

Use APA throughout.

Format: Double-spaced, one-inch margins, using a 12-point Times New Roman font.

 

Financial Analysis: Group Project, Part 2

Based on your company’s financial statements, calculate and comment on each of the ratios identified listed in your Group Project, Part 2 Guidelines.

 

There are several sources you can use to find the financial statements of the company assigned to your group including:

 

https://finance.yahoo.com/ If you use this link, search for your company. This site the very user friendly and easier to understand. However, you are encouraged to use other sources.

 

 

Financial Analysis: Group Project, Part 2

Inventory turnover measures the activity, or liquidity, of a firm’s inventory.

 

Inventory turnover = Cost of goods sold ÷ Inventory

 

The average age of inventory is the average number of days’ sales in inventory.

 

Average Age of Inventory = 365 ÷ Inventory turnover

Financial Analysis: Group Project, Part 2

The Accounts Receivable Turnover: This ratio gives the business a solid idea of how efficiently it collects on debts owed toward credit it extended, with a lower number showing higher efficiency. The ratio can be calculated in the following ways:

Beginning accounts receivable + Ending accounts receivable)/2 = Average Accounts Receivable

1. Sales/Average Accounts Receivable = Accounts Receivable Turnover

OR

2. Sales/Ending Accounts Receivable

 

Either method is acceptable.

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