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## Financial analysts must evaluate the performance of the company and compare that

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.

## Financial Ratio Analysis [WLOs: 1, 2] [CLOs: 1, 2] Ratio analysis provides anoth

Financial Ratio Analysis [WLOs: 1, 2] [CLOs: 1, 2]
Ratio analysis provides another set of patterns to evaluate before deciding to buy or sell a company’s stock. Ratios reveal more than just the past performance; ratios reveal how effectively the company converts product sales into shareholder returns. Ratios provide a gauge for comparison across time and across the industry (competitors), while removing the impact of size differences. Would you rather invest in Company A, with \$1.0 million in earnings, or Company B, with \$10.0 million in earnings? It’s hard to say. However, if Company A earns a ROA of 25%, while Company B earns a ROA of 2%, the decision becomes clear.
Liquidity ratios provide clues to how effectively the company manages its cash collection cycle. Asset turnover ratios reveal how efficiently the company uses its assets to generate profits. Debt management ratios reveal how leveraged a company is, which provides an indication of future risk. Taken together, a company’s ratios and its ratios compared to the industry competitors provide important insight to the investment strength of the company’s stock. In this assignment, you will review the trend in your chosen company’s financial ratios over the past 3 years and compare your chosen company’s ratios to the average ratios from top competitors in the industry.
Prepare:
Prior to beginning work on this assignment,
Make sure you have completed the Company Ratios: Appendix C and Industry Competitor Ratios: Appendix D assignments. It is recommended that you keep those two PDFs open or printed when completing this assignment.Review Chapter 11 in Essentials of finance.Review the Week 2 Model Assignment (Links to an external site.).
Write:
In your paper, address the following four parts in a Word document:
Part 1: (three to five paragraphs)
Summarize the trends in your company’s ratio performance over the 3 most recent years. Be sure to address the following ratios included in Appendix C:Profitability ratios: ROA, ROE, return on investment (ROI).Liquidity ratios: quick ratio, current ratio.Debt management ratios: long-term debt to equity, total debt to equity, interest coverage ratio.Asset management ratios: total asset turnover, receivables turnover, inventory turnover, and accounts payable turnover.Per share: book value per share.
Part 2: (two paragraphs)
Interpret whether the trend for each ratio (listed in Part 1) is an improvement or a decline in performance for the company.Create a table that lists each ratio as either a strength or a weakness in the most current year, based on its trend and your interpretation.Determine the overall financial strength of the company based on the ratios identified as either strengths or weaknesses.Consider all of the ratios discussed so far. Is the company’s strength the fact that the debt management ratios are improving? Or is it that the liquidity ratios are increasing? Is the company’s weakness that the turnover ratios are declining? Or is the company’s weakness that debt management ratios are weakening?Categorize the company’s overall ratio performance as either strong, neutral, or weak, based on your determination from the ratios.
Part 3: (one to two paragraphs)
Compare your chosen company’s ratio performance to the industry competitor ratios in the most recent year based on Appendix D. Be sure to address the following ratios included on Appendix D:Profitability ratios: ROA, ROE, gross margin, and net margin.Liquidity ratios: quick ratio and current ratio.Debt management ratios: long-term debt to equity, total debt to equity, and interest coverage ratio.Asset management ratios: asset turnover and inventory turnover.Create a table that lists each ratio as either higher or lower than the average ratio for the competitors in the industry.
Part 4: (one paragraph)
Categorize the company’s overall financial performance as either better than average, average, or worse than average compared to the industry based on the ratios.Interpret which ratios are the most important and explain your reasoning.Justify your conclusion based on the table you created, your interpretation of which ratios are the most important, and the company’s overall ratio performance compared to the industry competitors.
The Section 2: Financial Ratio Analysis paper
Must be two to three double-spaced pages in length including any tables or calculations (but not including title and references pages) and formatted according to APA Style (Links to an external site.) as outlined in the Writing Center’s APA Formatting for Microsoft Word (Links to an external site.)Must include a separate title page with the following:Title of paper in bold fontSpace should be between title and the rest of the information on the title page.Student’s nameName of institution (The University of Arizona Global Campus)Course name and numberInstructor’s nameDue dateMust utilize academic voice. See the Academic Voice (Links to an external site.) resource for additional guidance.Must include a separate references page that is formatted according to APA Style as outlined in the Writing Center. See the APA: Formatting Your References List (Links to an external site.) resource in the Writing Center for specifications.Must cite where the financial statement information comes from (i.e., Mergent)For help citing the information from Mergent, see the BUS401: Principles of Finance Research Guide.
Note: Since this is Section 2 of the Week 5 final project, there is no need for an introduction paragraph.
Nike. (2019-2021). NIKE Inc (NYS:NKE): As reported annual balance sheet [Data set]. Mergent Online