MAURICE, please see

ASSIGNMENT

Purpose of Assignment

The purpose of this assignment is to help students gain a better understanding of the financial statements used for corporate financial reporting and the key ratios used to make business decisions. 

Assignment Steps 

1. Select a Fortune 500 Company from one of the following industries:

• Pharmaceutical

• Energy

• Retail

• Automotive

• Computer Hardware

1. Review the balance sheet and income statement in the company’s 2015 Annual Report.

2. Calculate the following ratios using Microsoft® Excel®:

• Current Ratio

• Quick Ratio

• Debt Equity Ratio

• Inventory Turnover Ratio

• Receivables Turnover Ratio

• Total Assets Turnover Ratio

• Profit Margin (Net Margin) Ratio

• Return on Assets Ratio

1. Analyze in 1,050 words why each ratio is important for financial decision making.

Each type of ratio should have its own section in the paper: Section headings are required by APA.

Look at the ratios and make sure that they’re appropriate. For example, a service company (e.g. FedEx, Yahoo) doesn't produce a product, so there is no inventory, thus an inventory turnover ratio would be meaningless, so that is why the list above is restricted. A company with little or no debt would have a debt-to-equity ratio that might not change much from year to year.   

Put small tables for each category in the paper and discuss each set.

Like this:

Or this:

Liquidity ratios

DO NOT put huge tables in your paper as it is too hard to read and will cause you to lose points.

Here's a list of the ratios from the textbook:

SHORT-TERM SOLVENCY RATIOS

Current ratio = Current assets ÷ Current liabilities

Quick ratio = (Current assets - Inventory) ÷ Current liabilities

Cash ratio = Cash ÷ Current liabilities

FINANCIAL LEVERAGE RATIOS

Total debt ratio = Total debt ÷ Total assets = (Total assets - Total equity) ÷ Total assets

Debt-equity ratio = Total debt ÷ Total equity

Equity multiplier = Total assets ÷ Total equity = 1 + debt-equity ratio

Times interest earned = Earnings before interest and taxes ÷ Interest

Cash coverage = (Earnings before interest and taxes + depreciation + amortization) ÷ Interest

TURNOVER RATIOS

Inventory turnover = Cost of goods sold ÷ Inventory

Days sales in inventory = 365 ÷ Inventory turnover

Receivables turnover = Sales ÷ Receivables

Days' sales in receivables= 365 ÷ Receivables turnover

Total asset turnover = Sales ÷ Total assets

Days in inventory = Days in period ÷ Inventory turnover

PROFITABILITY MEASURES

Profit margin = Net income ÷ Sales

Return on assets = Net income ÷ Total assets

Return on equity = Net income ÷ Total equity

EBITDA margin = EBITDA ÷ Sales

MARKET VALUE RATIOS

Price-to-earnings ratio = Market price per share ÷ Earnings per share

Market-to-book ratio = Market price per share ÷ Book value per share

Market capitalization = Market price per share x Shares Outstanding

Enterprise Value (EV) = Market capitalization + Market value of interest bearing debt - cash

EV Multiple = EV ÷ EBITDA

Microsoft® Excel®