Financial analysts must evaluate the performance of the company and compare that performance over time. One way to evaluate the financial performance of a company is to calculate financial ratios. Ratios can be used to assess a company’s profitability, liquidity, efficiency, and financial risk (leverage). Changes in these ratios over time can alert a financial analyst to poor management or strong shareholder returns. For this discussion, you will calculate some common financial ratios for your chosen publicly traded company.
Prior to beginning work on this discussion forum,
- Calculate two ratios for your chosen company, according to your last name and the list below. Using Appendix A from Week 1, calculate the ratios for your chosen company for the two most recent years available in the financial statements.
- Last names A through C: Return on assets (ROA) and return on equity (ROE).
- Last names D through F: Long-term debt to equity ratio and interest coverage ratio.
- Last names G through I: Gross profit margin and net profit margin.
- Last names J through L: Current ratio and quick ratio.
- Last names M through O: Inventory turnover and receivables turnover.
- Last names P through R: Days sales outstanding and days inventory outstanding.
- Last names S through U: Book value per share and price-to-book.
- Last names V through Z: Earnings per share and price-earnings (P/E) ratio.
Need help with your calculations? Check out the videos included in this resource: Week 2 Discussion Help (Links to an external site.).
In your initial discussion forum post,
- Create a table within your discussion post that includes the following information:
- the financial data used to calculate each ratio in the 2 years for your chosen company assigned
- the last 2 years (clearly labeled)
- the calculations
- the concluded ratio
- Explain the two ratios you were assigned measure.
- Attach your Appendix A (that you completed in Week 1) to your discussion post so that other students can review your data and calculations.