# University of Illinois at Chicago Accurate Reporting of Social Media Use Discussion

This is an assignment on ratio analysis. You need to obtain a copy of the financial statements for a publicly traded company. Then choose as many ratios as possible. (I suggest choosing 4-5, the professor’s requirement is at least three) I will send you the specific requirements as an attachment.

Financial Statement Analysis

New Focus Consulting, 2014

Chapter 13

Ratios and Trend Analysis

Chapter 13

Horizontal Analysis: source, value investing basics

Chapter 13

Calculate Income Statement 2013 vertical

amounts and 2011 to 2013 horizontal

amounts.

Chapter 13

Current Ratio: Used to determine a company’s

ability to repay short-term debts.

Current Assets

Current Liabilities

Chapter 13

Quick Ratio: Addressed liquidity by using cash

and current assets that can be most quickly

converted to cash(quick assets).

Quick Assets

Current Liabilities

Chapter 13

Inventory Turnover Ratio: Number of times the inventory of

a company is sold and replaced over a specified period

of time.

Cost of Goods Sold

Average Inventory at Cost

Chapter 13

Accounts Receivable Turnover Ratio: Calculates

how quickly a company turns it credit sales into

cash.

Credit Sales

Average Accounts Receivable

Chapter 13

Average Collection Period Ratio: The

average number of days it takes for a

company to collect its accounts receivable.

Avg. Accounts Receivable

(Sales/360)

Chapter 13

Debt to Equity Ratio: Calculates the amount

of debt as a percentage of equity. Some

analysts will use total liabilities as debt.

Total Debt

Total Equity

Chapter 13

Gross Profit Margin Ratio: Determines the

profitability of a company through direct

expenses. Used to evaluate efficiency of

operations.

Sales – Cost of Goods Sold

Sales

Chapter 13

Operating Margin Ratio: Determines the

profitability percentage from a company’s

operations.

Operating Income

Sales

Chapter 13

Net Profit Margin Ratio: Determines the profit

of a company after it meets the obligations

for a specific period.

Net Profit

Sales

Chapter 13

Return on Equity Ratio: Indicates the return

earned by the owners(investors) for a

period.

Net Profit

Average Owners Equity

Chapter 13

Earnings Per Share Ratio: The theoretical

earnings per each outstanding share.

Net Income – Preferred Dividends

Average Number of Common

Shares Outstanding

Chapter 13

The prior ratios were some examples of

ratios and analysis. There are a number

more. Some not presented were ratios

using assets as a denominator. In my

opinion, they are less telling than other

ratios.

New Focus Consulting

Financial Statement & Ratio Assignment

Obtain a copy of the financial statements for a publicly traded company.

Select three of the ratios presented in class or from Financial Statement Analysis

and show the calculations for your selected company.

CALCULATE FOR AT LEAST THE LAST THRE YEARS. ONE OF THE

YEARS MUST BE DURING THE YEAR ENDED IN 2018.

Remember, ratios are most relevant when compared to a companies’ own

historical, industry or competitors trends. For the above calculations, what

story do they tell? Provide an explanation for each of the three ratios presented.

The assignment will be at least two pages, not more than four pages.

Note: Apple Inc, Samsung or Tesla are not allowed to be used for this assignment.

New Focus Consulting

2007

New Focus Consulting

Financial Indicators & Ratios

Used to understand trends of a company. Most useful when compared to

a company’s historical information or industry average.

Accounts Receivable Turnover: Net credit sales over average accounts receivable. Measures

how quickly customers pay their bills.

Capitalization Rate: Calculated as net income over owners investment, and

(Cap Rate) reflects the rate of return a property will produce on an

investment.

Cash Debt Coverage Ratio: Net cash from operating activities over total liabilities.

Measures a company’s ability to repay its liabilities from cash

generated from operations without liquidating assets.

Cost/Income Ratio: Total expenses divided by total expenses.

Current Ratio: Current assets over current liabilities. Used by lending

institutions to determine a company’s ability to repay

short-term debts.

Debt Coverage Ratio: Net income of an investment over the debt service of the

investment.

Debt to Equity Ratio: Total debt(longterm and shortterm) over total equity. Lending

institutions will usuall be concerned with a companies

Debt to Equity ratio over .5 to .75.

Dividend Yield Ratio: Annual dividends over current market share price of stock.

Long Term Debt to Equity Ratio: Long term debt over owner’s equity. In general, a zero to .3

New Focus a

Consulting

ratio is considered

relatively low debt exposure.

2006

Operating Ratio: Operating revenues over operating expenses. When

compared to other periods or industry averages, helps

measure a company’s operating efficiency.

Price/Earnings Ratio: Current price of a stock divided by actual earning per share.

(P/E Ratio)

Return on Investment: Net Income divided by net book value(total assets minus

(ROI) intangible assets and liabilities).

New Focus Consulting

2006