Financial analysts must evaluate the performance of the company and compare that performance over time. One way to evaluate the financial performance of a company is to calculate financial ratios. Ratios can be used to assess a company’s profitability, liquidity, efficiency, and financial risk (leverage). Changes in these ratios over time can alert a financial analyst to poor management or strong shareholder returns. For this discussion, you will calculate some common financial ratios for your chosen publicly traded company.
Prepare:
Prior to beginning work on this discussion forum,
Read Chapter 11 of the Essentials of finance.Specifically review the “A Closer Look” feature box in Section 11.3.Complete the Week 2 – Learning Activity.Make sure you have completed the Week 1 – Assignment 1.
Calculate:
Calculate the following two ratios for your chosen company, Using Appendix A from Week 1, calculate the ratios for your chosen company for the two most recent years available in the financial statements.
Gross profit margin and net profit margin
Write:
In your initial discussion forum post,
Create a table within your discussion post that includes the following information:the financial data used to calculate each ratio in the 2 years for your chosen companythe last 2 years (clearly labeled)the calculations and the concluded ratio. Explain what your two ratios measure.Attach your Appendix A (that you completed in Week 1) to your discussion post so that other students can review your data and calculations.
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