Assessment #4: Case Study of Financial Analysis and Operating Ratios (15%)
In this assessment you will use the income statement and balance sheet information identified below and evaluate the firm's financial condition based on three profitability ratios: a) Total Margin, b) Return on Assets and c) Return on Equity. You will be graded based on your description, understanding of the 3 ratios and description of at least 3 nonfinancial indicators. Grading will also reflect the accuracy of your calculations, the validity of your conclusions and your ability to clearly communicate your analysis. To complete this assignment, follow these steps.
Review the reading requirements and powerpoint summary for Week 6 Financial Ratios and non-Financial ratios.
Examine the Income Statement and Balance Sheet provided in the excel file under Week 6 content. This data should be used for this assignment. The data also includes industry benchmarks for comparison.
From this financial information calculate the three profitability ratios: a) Total Margin, b) Return on Assets and c) Return on equity.
For each ratio, in a paragraph: define the ratio, explain what it measures, show your calculation and explain what the ratio tells you about your organization’s health and any limitations of using the ratio.
Write a conclusion about your organization’s financial condition based on your ratio analysis.
Describe and discuss the use of non-financial operating indicators in additional to financial ratios in measuring financial performance.