Ratio Analysis Memo Answers

Resources: Virtual Organizations

 

Click the Virtual Organization link on the student website to access the Virtual Organizations.

 

Select one of the Virtual Organizations as the basis for this assignment.

 

Ensure the organization you choose has the financial reports you will need.  They can normally be found on the Intranet tab of their web page.  Intranet not Internet. 

 

Access the information contained in your selected organization’s balance sheet and income statement to calculate the following:

·         Liquidity ratios

        Current ratio

         Acid-test, or quick, ratio

         Receivables turnover

        Inventory turnover

         Profitability ratios

               Assets turnover

               Profit margin

               Return on assets

               Return on common stockholders’ equity

 

        ·         Solvency ratios

         Debt to total assets

         Times interest earned

 

 Show your calculations for each ratio.

 

Create a horizontal and vertical analysis for the balance sheet and the income statement.

 

 

Write a 400- to 750 word memo to the CEO of your selected organization in which you discuss your findings from your ratio calculations and your horizontal and vertical analysis. In your memo, address the following questions:

 

·         What do the liquidity, profitability, and solvency ratios reveal about the financial position of the company?

·         Which users may be interested in each type of ratio?

·         What does the collected data reveal about the performance and position of the company?

 

·         Include your calculations and horizontal and vertical analysis at some point in your paper.

Submit everything as one Word document

Format your memo consistent with APA guidelines.