Balance Sheet Analysis

This week’s DQ focuses on the Balance Sheet. It builds on the insights we gained in Week 2 but goes a little deeper in our use of financial statement analysis skills.

1. Locate and post a screenshot of a Balance Sheet from the company’s latest annual report (which can be found in the investor relations section of the website) for one of the following companies:

A. Delta Airlines

B. Kohls

C. Caesar’s

2. Pick a Balance Sheet line item from the following list:

A. Accounts Receivable

B. Inventory

C. Property, Plant, and Equipment (PP&E)

D. Accounts Payable

E. Long-Term Debt

F. Total Equity

G. Retained Earnings

3. What does this line item measure and why is it important item for Management to understand this number?

4. Share a financial ratio that could be devised using the balance sheet line item selected. Explain what the ratio means and calculate the ratio for the current year for the selected company.

5. From the Balance Sheet, identify the Current Year and the Previous Year closing amounts for your line item. Share these with the class using a data table similar to the below:

Mary’s Perfume Shop

(in thousands)

2022

2023

Inventory

$336.0

$304.5

6. Answer the following questions:

· Have the amounts for the line item and ratio increased or decreased, and by how much (dollar and/or percentage)?

· Is this a “good” thing or a “bad” thing for this company?

· What might this mean for the organization?

· What might management do to improve this line item?

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