Discuss and analyze financial statements ratios used to measure the financial performance of a business entity. Part 1
You will use this Excel workbook® with two worksheets to assist you in completing this part of the assessment. The first worksheet is the Balance Sheet and Income Statement for ABC Company. The second worksheet contains a breakdown of categories of ratios where you will complete the calculations for each ratio. You will also enter the formula written out as to what information you have used to do the calculations.
You are going to use the five classifications of financial ratios to assess the financial performance of ABC Company.
You will present a definition of the classification by citing the course text and other scholarly sources.
Your paper should include a measure of, and analysis of, financial outcomes based on the ratios for each financial ratio classification (i.e., the liquidity classifications of ratios are based upon the quick and current ratio outcomes).
You will calculate ratios for each classification for the 3 years of data (i.e., the current ratio may have been 1.5 the first year, 1.35 the second year, and .75 in the most recent year). It is based on these results that you will measure financial performance, or trends, from one year to the next. It is imperative that the ratios numbers, and quantitative outcomes, support your analysis.
Using the data from the Income Statement and Balance Sheet, provide the correct calculation of the liquidity ratios and an assessment of the company’s ability to maintain liquidity and the management of current assets and current liabilities. Include the proper assessment of outcomes as positive or negative trends when all ratio outcomes are factored as a group.
Liquidity Ratios
Current Ratio
Quick Ratio
Using the data from the Income Statement and Balance Sheet, provide the correct calculation of the activity ratios and an assessment of the company’s ability to maintain liquidity. Include the proper assessment of outcomes as positive or negative trends when all four ratio outcomes are factored as a group.
Activity Ratios
Inventory Turnover
Accounts Receivables Turnover
Total Asset Turnover
Average Collection Period
Using the data from the Income Statement and Balance Sheet, provide the correct calculation of the financing ratios. Include the proper assessment of outcomes as positive or negative trends when all three ratio outcomes are factored as a group.
Financing Ratios
Debt Ratio
Debt-to-Equity Ratio
Times Interest Earned Ratio
Using the data from the price per share data, the Income Statement, and the Balance Sheet, provide the correct calculation for the market value ratios below.
Market Value Ratios
Earnings per Share (EPS)
Price Earnings (PE)
Using the data from the Income Statement and Balance Sheet, provide the correct calculation of these four profitability ratios and an assessment of the company’s ability to maintain, if not improve, profitability based on the amounts of equity, assets, and levels of profits from sales. Include the proper assessment of outcomes as positive or negative trends when all four ratio outcomes are factored as a group.
Profitability Ratios
Return on Equity (ROE)
Return on Assets (ROA)
Net Profit Margin
Operating Profit Margin
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