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Ratio Analysis

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 **** GRADING RUBRIC AND APA TEMPLATE ATTACHED BELOW****

Purpose of Assignment 

The activity requires students to perform research and analysis on competing companies and the potential implications of international standards. This real-world analysis is key to understanding how a company’s profitability, liquidity, and solvency can be useful for all users. Students also learn to analyze financial statements and use managerial tools to make decisions from an investor’s and creditor’s standpoint. 

Assignment Steps 

Select two competing companies, that are US publicly traded,  and locate annual reports for these two companies by going DIRECTLY TO THE COMPANY WEBSITES TO DOWNLOAD THE ANNUAL REPORT OR 10-K. DO NOT USE SUMMARY SITES. 

Research the two companies on the Internet and download the Annual Reports with the Income Statement, Statement of Shareholders’ Equity, Balance Sheet, and Statement of Cash Flows. 

IN EXCEL:

  • Make a 5-year trend analysis for each company:
  • Net sales.
  • Net income. 
  • Compute for the two most recent years the:
  • Debt to assets ratio.
  • Compute for two most recent years the:
  • Profit margin.
  • Asset turnover.
  • Return on assets.

Develop a maximum 500-word APA Formatted Paper and include the following:

  • Evaluate the financial opportunity presented by the companies. If you were a creditor, which company would you be more likely to lend money to? Defend your decision.
  • Which company would you recommend as an investment? Discuss the items that were considered in your decision.
  • At which company would you prefer a management position and why?

Show your work in  Excel®.

Complete calculations/computations using  Excel®

Include the four financial statements along with your assignment or a working link, clearly indicated.

Format your assignment consistent with APA guidelines USING THE APA TEMPLATE PAPER I PROVIDED.

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Ratio Analysis

Description

Ratio Analysis

OBJECTIVE: You are to assume you have been recently hired by The Company and have been assigned to a team that reports to the CEO of HOME DEPOT. The head of your team is the CFO who is concerned about HOME DEPOT’s current financial performance and comparison against major competitors in the industry and the impact that may have on the firm’s stock price. The CFO would like your team to provide insights that will help them to project future financial performance. Specifically, the primary question to answer is: will HOME DEPOT be financially viable over the next two to three years, and which steps should be done to improve its financial stability?

SUGGESTED WEBSITES

· www.morningstar.com – To find the information for your company you need to type the stock symbol in the Quotes window to get into the company’s page.

· www.marketwatch.com  -To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.

· www.Finviz.com – To find the information for your company you need click on Screener on the top of the screen, type the stock symbol in the Ticker window to get into the company’s page., and click on the company in the list.

· www.money.cnn.com  -To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.

· www.finance.yahoo.com – To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.

· www.nyse.com – Click on Data, then click on Stocks (under Quotes), and type the name of the company or the stock symbol in the window “Keyword or symbol” to get into the company’s page.

· www.nasdaq.com – To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.

· Company’s websites

YOUR SPECIFIC ASSIGNMENT

Using the information from the websites the students will develop evaluation of the financial performance for HOME DEPOT. (The evaluation portion will total 85% of the assignment grade)  

-1—Background and Industry (one short paragraph). (DON’T WORRY about #1)

-2— Common size analysis (15% of the project grade). You can find the common size financial statements for the company for the last 3-5 years on www.morningstar.com. Type the stock symbol in the Quotes window to get into the company’s page. Scroll down and click on All Financial Data. Switch View from “$” to “%”.

Create a table that contains the most significant common size financial performance results for the last 3-5 years for THE COMPANY and for the last year for the major competitor. Present the table with this information in your report.

Write about 2-2.5 pages of the analysis of the financial conditions, its stability, and trends.

 –6- Develop a specific recommendation, with supporting rationale, as to whether the assigned company’s recent trends and results in financial performance is of sufficient financial strength, will THE COMPANY be financially sustainable over the next two to three years, and which steps should be done to improve its financial stability? (about 1 page) (15% of the project grade). 

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