Individual Research Project Part 2
Individual Research Project Part 2
Ratio Analysis
Due at the end of week 5.
Based on the course materials studied during week 1 > Chapter 6
This project is closely aligned with the Course Outcomes and Finance Program Objectives. Completion of this project can be used as part of a portfolio to show potential employers the student is skilled at performing company valuations and financial statement analysis and can be included on the student’s resume.
OBJECTIVE
Specifically, the primary question to answer is: will THE COMPANY be financially viable over the next two to three years, and which steps should be taken to improve its financial stability?
The project will be completed as an Individual Assignment. THE COMPANY to be analyzed for this project is selected by the instructor.
YOUR SPECIFIC ASSIGNMENT
Please note that you don’t need to sign up for any premiums or to pay for any information for the project.
Using the information from the websites the students will develop ratio analysis of the financial performance for THE COMPANY (selected by instructor). (The evaluation portion will total 85% of the assignment grade)
-1—Introduction (5% of the project grade)- The paper should begin with a short introduction, explains the purpose of the paper, and provides an overview of the contents that follow (one short paragraph).
-2— Ratio analysis. (65% of the project grade)
In this part of the project you will complete ratio analysis of THE COMPANY. Please remember that you are the financial analyst of THE COMPANY and should prepare the report to be read by the chairman (CEO) of THE COMPANY.
Collect the following ratios for your COMPANY for the last 3 years. Present the ratios as the table(s) in your project. Create graphs for some ratios on your choice to show trends. If you are using published ratios you must cite the source.
Liquidity ratios: current ratio, quick ratio
Operating efficiency ratios: Days of Sales in Inventory, Accounts Receivable Turnover, Inventory Turnover, Total Assets Turnover
Profitability ratios: Gross Profit Margin, Operating Profit Margin, Net Profit Margin
Debt-to-Equity, Time Interest Earned (TIE), Financial leverage (also called Equity Multiplier)
ROA, ROE
Liquidity ratios, Debt-to-Equity, and Financial leverage ratios are available on www.morningstar.com > type the stock symbol in the Search window to get into the company’s page. Click on Valuation and scroll down to Key Statistics > choose Financial Health tab.
Operating efficiency ratios, Profitability ratios, ROE, and ROA ratios are available on www.morningstar.com > type the stock symbol in the Search window to get into the company’s page. Click on Valuation and scroll down to Key Statistics > choose Operating and Efficiency tab.
c) Write 2-3 pages (or more) of analysis of the ratio results that you collected. In your analysis you should answer the following questions:
How liquid is the company?
Analyze operating efficiency ratios. What important information does this analysis provide?
Is management generating a substantial profit on the company’s assets?
How is the company financing its assets? Discuss how much risk is associated with the financial structure the company.
Have the company’s ROA and ROE changed over the last three years? What was the main factor that influenced this change? To answer this question, apply DuPont analysis and three factors of the DuPont formula: Net profit margin, asset turnover, financial leverage. What ratio(s) has (have) been changed mostly over these three years and why?
-3- Develop a specific recommendation, with supporting rationale, as to whether the assigned company’s recent results in ratio analysis is of sufficient financial strength, will THE COMPANY be financially sustainable over the next several years, and which steps should be done to improve its financial stability? If the management of the company would like to improve the company’s financial performance, what should the management of THE COMPANY do? Your recommendations should be based on the results of your analysis in the project. (About 1 page) (10% of the project grade).
-4- Reflection – the student should write a paragraph in their own words reflecting on specifically what they learned from the assignment and how they think they could apply what they learned in the workplace. (5% of the project grade)
PRESENTATION OF PAPER AND WRITING (15%) of the project grade):
-Organization, Format and Presentation of Paper including the Title page, Introduction, Body, and Summary. Each section of the paper must begin with sub-headings. Please use the sub-headings included in the assignment. Please use double space, with one-inch margins, and use 12-point Times New Roman font. (4% of the project grade)
Use of Tables, Figures and Other Graphics to Summarize and Support Analysis Presented in the Paper. All tables and charts should have the numbering system, like “Table 1…”, the title, and foot/end note to reference the source of the information. (3% of the project grade)
Logical and Smooth Flowing Transitions and Relationships among Sections of the Written Report (3% of the project grade)
Research Sources and Significance of Research Information and Data, Use of APA Citation Methodology (5% of the project grade)…………..
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