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
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
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
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
Sales – Cost of Goods Sold
Chapter 13
Operating Margin Ratio: Determines the
profitability percentage from a company’s
Operating Income
Chapter 13
Net Profit Margin Ratio: Determines the profit
of a company after it meets the obligations
for a specific period.
Net Profit
Chapter 13
Return on Equity Ratio: Indicates the return
earned by the owners(investors) for a
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
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.
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
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
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
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
ratio is considered
relatively low debt exposure.
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

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