Ratio Analysis. Using the Ashford University Library as a resource, find two articles that discuss financial ratio analysis. Identify two advantages and two disadvantages to using ratios in financial analysis. Be sure to cite your sources using APA format as outlined in the Ashford Writing Center.
Week 5 DQ 2
Applying Ratios to a Business. Access the Evaluating Business Performance: Small Business Case Studies video in your online course.
The video focuses on profitability, liquidity, efficiency, and stability of business. Given what you have learned about ratio analysis, choose one of the businesses from the video (Rose Chong Costumes, Anro’s Floor Maintenance, or John Osborne’s Gym and Squash Center) and identify two ratios that would be helpful for the owner of the business to monitor. Be sure to explain what the ratio would tell the owner, and how it can be improved for the business.
Week 5 Final Paper
Focus of the Final Paper
Evaluation of Corporate Performance
For the Final Paper, you will apply the concepts learned in class to an analysis of a company using data from its annual report. Using the concepts from this course, you will analyze the strengths and weaknesses of the company. You will then write a report either recommending or not recommending purchase of the company stock.
Research Tip: The Mergent database in the Ashford University Library contains company profiles and financial information for publicly traded companies and their competitors. To access this database, enter the Ashford University Library by clicking the “Library” link on the left navigation bar in your online course. Once you are in the Library, select “Find Articles and More” in the top menu panel. Next, select “Databases A-Z” and go to section M to access the Mergent database. For help with using Mergent, use “Mergent Online Quick Tips.”
For help with reading an annual report access this handy guide from Money Chimp.
The completed report should include:
a. An introduction to the company, including background information.
b. A complete and thorough financial statement review.
c. Pro Forma financial statements (balance sheet and income statement) for the next fiscal year, assuming a 10% growth rate in sales and cost of goods sold (COGS) for the next year.
d. Complete ratio analysis for the last fiscal year using at least two ratios from each of the following categories:
e. Calculate return on equity (ROE) using the DuPont system.
f. Calculate economic value added.
g. A synopsis of your findings, including your recommendations and rationale for whether or not to purchase stock from this company.
This report should be eight to ten pages long excluding title page and reference page(s). Use APA 6th edition formatting guidelines as outlined in the Ashford Writing Center. Support your findings and recommendations with evidence from at least five scholarly resources; such as the textbook, industry reports, and articles from the Ashford University Library.