compute financial statement ratios.

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:

Based on formulas in your textbook, compute the following ratios for two years. You may use Excel to compute your ratios.

Debt ratio

Gross profit margin

Free cash flow

Times interest earned

Accounts receivable turnover

Inventory turnover

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

Return on Sales

Asset Turnover

Return on Assets

Financial Leverage

Return on Equity

 

Briefly evaluate the ratio trends. Indicate on your worksheet whether each ratio is:

stronger / weaker

quicker /slower

more / less liquid

more / less risk

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.