ACC 495 Week 3 Assignment
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Memorial University of Newfoundland *
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Nov 24, 2024
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Assessing Company Financial Performance
For this assignment, answer the following questions on the 2 companies: The Home Depot Inc.
and Lowe's Companies Inc.
Perform
FIVE
(5)
ratio
analyses
for
the recent
two years
of
financial statements
(Example: 2018 and 2017). Select two ratios from each liquidity and profitability and
1.
Perform five (5) ratio analyses for the
year 2022's financial statements for both companies.
Select two ratios from each liquidity and profitability and one ratio from solvency ratios.
2.
Explain and interpret each ratio for both companies.
3.
Compare and comment on the performance of each of the companies for the year.
4.
Provide your overall opinion/assessment on the liquidity, profitability and solvency of the
companies.
5.
Perform a risk analysis of each company that discusses potential issues that could negatively
affect key business initiative or projects. Assess changes in the financial markets, legal
liabilities or any event that can disrupt business operations.
6.
Once you identify potential risks, prioritize them and provide ways to mitigate those risks,
like how to avoid them or how to reduce their harmful effects, etc.
7.
Indicate which of the companies a potential investor should invest.
8.
Based on the opinion/assessment that you have provided, suggest and explain two ways to
improve the current condition of the company that the investor should not invest.
The format for this assignment is an APA research paper with properly cited references and intent
citation.
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Related Questions
River Valley Production Inc. seeks to increase its market share and improve its results. The company takes as a starting point the current scenario and the results obtained in 2018 and 2019. Like other companies, River Valley uses financial ratios (ratios) as tools for analyzing the results obtained at the end of the period. Consider the data presented in the financial statements below and analyze the company's results based on the financial ratios.1. Use the financial statements to calculate the following financial ratios for the years 2018 and 2019:1.8 Return on Investment (ROI)1.9 Profit Margin1.10 Debt to Equity Ratio1.11 Price/Earning Ratio
Balance Sheet
2018
2019
Cash
$63,000
$201,000
Accounts Receivable
199,000
305,000
Marketable Securities
81,000
42,000
Inventories
441,000
455,000
Prepaids
5,000
9,000
Total Current Assets
789,000
1,012,000
Property, Plant, and Equipment, net
858,000
858,000…
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River Valley Production Inc. seeks to increase its market share and improve its results. The company takes as a starting point the current scenario and the results obtained in 2018 and 2019. Like other companies, River Valley uses financial ratios (ratios) as tools for analyzing the results obtained at the end of the period. Consider the data presented in the financial statements below and analyze the company's results based on the financial ratios.1. Use the financial statements to calculate the following financial ratios for the years 2018 and 2019: 1.1 Days Sales Outstanding (DSO)1.2 Assets Turnover Ratio1.3 Return on Assets (ROA)1.4 Return on Equity (ROE)
Balance Sheet
2018
2019
Cash
$63,000
$201,000
Accounts Receivable
199,000
305,000
Marketable Securities
81,000
42,000
Inventories
441,000
455,000
Prepaids
5,000
9,000
Total Current Assets
789,000
1,012,000
Property, Plant, and Equipment, net
858,000
858,000…
arrow_forward
River Valley Production Inc. seeks to increase its market share and improve its results. The company takes as a starting point the current scenario and the results obtained in 2018 and 2019. Like other companies, River Valley uses financial ratios (ratios) as tools for analyzing the results obtained at the end of the period. Consider the data presented in the financial statements below and analyze the company's results based on the financial ratios.1. Use the financial statements to calculate the following financial ratios for the years 2018 and 2019:1.1 Current Ratio1.2 Quick Ratio1.3 Inventory Turnover Ratio 1.4 Days Sales Outstanding (DSO)1.5 Assets Turnover Ratio1.6 Return on Assets (ROA)1.7 Return on Equity (ROE)1.8 Return on Investment (ROI)1.9 Profit Margin1.10 Debt to Equity Ratio1.11 Price/Earning Ratio
Balance Sheet
2018
2019
Cash
$63,000
$201,000
Accounts Receivable
199,000
305,000
Marketable Securities
81,000
42,000
Inventories…
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Prepare the common-size financial statement for the entities below and provide a reasoned
explanation of the benefits relative to ratios when used to compare performance and establish
trends.
Income Statements for year ending 31 December 2022
Timber Co. ltd
$.000
Biscuit Co. Ltd.
$'000
35,119
30,990
12.693
11.088
22,426
13,158
Net revenue
Cost of goods sold
Gross profit
Selling & administrative expenses
Other operating expenses
Operating income
Interest income
Other income (net of expenses)
Profits before tax
Income tax expense
Profits after taxes
819
8,449
833
6,447
14,193
2.384
11,809
19,902
11,358
313
8,231
355
988
8,864
2,040
6,824
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- Please refer to the following Income Statement and Balance Sheet (see attached picture):
Prepare a vertical analysis for both the income statement and balance sheet.
Write a paragraph comparing the company’s performance with the industry average.
Compute the following ratios and comment on what the results mean when evaluating the company:
Current ratio
Gross profit percentage ratio
Debt ratio
Profit margin ratio
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Please explain how you get the answer
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VII. Direction: Compute and interpret.
The following comparative financial statements are provided by Avatar Industries. You were asked
to compute the different financial ratios and provide your interpretations with regards to
profitability, efficiency, liquidity and solvency of the company. Use the Answer Sheet template
below to input your answer and solution.
AVATAR INDUSTRIES
AVATAR INDUSTRIES
Comparative Statement of Financial Position
For the years 2019 and 2018
Comparative Income Statement
For the years 2019 and 2018
2019
2018
2019
2018
ASSETS
Current Assets:
Sales
P200,000
P210,000
Cash & Cash Equivalent
P65,000
P70,000
Sales Returns and Allowances
40,000
25,000
Accounts Receivable
40,000
35,000
Net Sales
160,000
185,000
Marketable Securities
40,000
35,000
Cost of Goods Sold
100,000
115,625
Inventory
100,000
80,000
Gross Profit
60,000
69,375
Total Current Assets
245,000
220,000
Operating Expenses:
Fixed Assets
200,000
160,000
Selling Expenses
22,000
25,000
Total Assets
P445,000…
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Use this data to compute the following ratios:
1.Current ratio (Dec 2020
)2.Acid-test Ratio (Dec 2020)
3.Accounts Receivable Turnover
4.Inventory Turnover
5.Return on Assets
6.Profit Margin on Sales
7.Return on Equity
8.Times Interest Earned
b.Discuss the financial condition of ABC Company, Inc. based on what you learn from computing the ratios.
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Compare Delta to two of its competitors, JetBlue and Southwest, by answering the following questions. You do not need to calculate all of the ratios for JetBlue and Southwest, only the ones required to answer the questions below:
How much bigger is Delta from each of its competitors, by Revenue, in each year from 2018-2022? Plot the Revenue number for each company for these years on a single line graph.
Which company has the highest Net Income in each year from 2018-2022?
Which company has the highest Net Profit Margin in 2018? In 2022?
Which company is the most profitable based on Gross Profit percentage each year from 2018-2022? (This is a trick question.)
Which company is best at using its short-term assets to pay off its short-term liabilities in 2019? Which company has the best cash ratio in 2019? Is it the same company that is best at using its short-term assets to pay short-term liabilities? If not, why do you think it's different?
Which company is the most leveraged in 2022?
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You are required to calculate:1. Liquidity ratios 2. Solvency rations
3. Profitability ratios For the selected companies and shortly write your comments and findings.
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Calculate the financial indicators of the firms J&J for the year 2018 and fill in the spaces marked in the table.
Company Name:
Year 2018
Chemicals and Allied Products Industry Ratios
…………..
Solvency or Debt Ratios
Merck
J&J
2018
Debt ratio
….
….
0.47
Debt-to-equity ratio
….
….
0.38
Interest coverage ratio
….
….
-9.43
Liquidity Ratios
Current ratio
….
….
3.47
Quick ratio
….
….
2.12
Cash ratio
….
….
2.24
Profitability Ratios
Profit margin
….
….
-93.4%
ROE (Return on equity), after tax
….
….
-248.5
ROA (Return on assets)
….
….
-146.5
Gross margin
….
….
55.3%
Operating margin (Return on sales)
….
….
-42.9%
Activity or Efficiency Ratios
Asset turnover
….
….
1.08
Receivables turnover (days)
….
….
16
Inventory turnover (days)…
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Alex is currently considering to invest his money in one of the companies betweenCompany A and Company B. The summarized final accounts of the companies for theirlast completed financial year are as follows : (please check the images)
a. Calculate the following ratios for Company A and Company B. State clearly theformulae used for each ratio:i. Gross Profit Marginii. Net Profit Marginiii. Inventory Turnover Period (days)
+ Comment on each of the ratios calculated in part (a) above.
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Calculate the financial indicators of the firm Merck for the year 2018 and fill in the spaces marked in the table.
Company Name:
Year 2018
Chemicals and Allied Products Industry Ratios
…………..
Solvency or Debt Ratios
Merck
J&J
2018
Debt ratio
….
….
0.47
Debt-to-equity ratio
….
….
0.38
Interest coverage ratio
….
….
-9.43
Liquidity Ratios
Current ratio
….
….
3.47
Quick ratio
….
….
2.12
Cash ratio
….
….
2.24
Profitability Ratios
Profit margin
….
….
-93.4%
ROE (Return on equity), after tax
….
….
-248.5
ROA (Return on assets)
….
….
-146.5
Gross margin
….
….
55.3%
Operating margin (Return on sales)
….
….
-42.9%
Activity or Efficiency Ratios
Asset turnover
….
….
1.08
Receivables turnover (days)
….
….
16
Inventory turnover (days)…
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A company’s comparative statements are given below. Please conduct the following analyses:
c. Calculate the three profitability ratios for year 2017 and show how ROE can be derived from the DuPont formula for this company.
d. What do the analyses tell you about the company’s financial performance?
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Question 1
Mabel is a potter and sells her pottery at stalls that she rents in four tourist information centres
across the south of England.
Extracts from her financial statements for the years ended 31 December 2021 and 2020 are
shown below.
Statement of profit or loss for the year ended 31 December:
2021
28,900
|(16,500)
12,400
(3,800)
8,600
|(4,000)
4,600
2020
Revenue
27,200
(14,000)
13,200
(3,600)
9,600
Cost of sales
Gross profit
Operating expenses
Operating profit
Non-operating expenses
Net profit
9,600
Statement of financial position as at 31 December:
2021
Non-current assets
Current assets
Total assets
22,660
4,360
27,020
2020
20,920
3,750
24,670
Equity
Non-current liabilities
Current liabilities
Equity and liabilities
20,940
3,000
3,080
27,020
16,340
3,500
4,830
24,670
The following information is also relevant:
In July 2021 the rent on one of Mabel's stalls was increased significantly for the third time in
three years so she decided not to renew the annual contract. She sold…
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Instructions
Using the financial statements and additional information, compute the following ratios for the El
Camino Company for 2021. Show all computations.
Computations
1. Current ratio
2. Return on common stockholders' equity
3.
Price-earnings ratio
4.
Inventory turnover
5. Accounts receivable turnover
6.
Times interest earned
7.
Profit margin
8.
Days in inventory
9.
Payout ratio
10. Return on assets
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Required:a)Analyseand evaluatethe financial performance over the twoyear period by using appropriate ratios: Liquidity, Profitability, Efficiency, and Investment. b)Based on findings in (a), providerecommendations how the firm can improve its financial position.
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Resolve and explain the result of the current ratio for XYZ Company and compare andexplain this result with the Industry average, where current liabilities = $581,000 andcurrent assets = $832,000.
a. Resolve the current ratio for XYZ Company
b.Explain the result of the current ratio for XYZ Company
c.Compare and explain the result of the current ratio for XYZ Company with the Industryaverage.
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Please answer ALL QUESTIONS, and show ALL WORK. All work includes equations, and how you got each number to plug into the equation.
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compute the dupont framework ratios for company A for year three only. the income statement and balance sheet for company A follows. Compute A) return on equity, B) return on sales Compute A) return on equity, B) return on sales, Asset turnover, D) Asset-to-equity ratio.
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Must solve it please.
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Use the information provided from Sapphire Ltd calculate and comment on the following ratios:1. Profit margin2. Return on equity
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a) Calculate the following ratios for 2016 and 2015, showing detailed calculations as to how you arrive at each number.
A ROE
B Gross profit margin
C Total asset turnover
D Inventory turnover
E Current ratio
F Debt-to-equity
G Interest coverage ratio.
b) Using the financial statements and the ratios calculated above (and any other ratios you like to calculate), discuss the performance of Cobham PLC in 2016.
c) Critically discuss the need for the public limited companies to prepare a Statement of Cash Flows and explain the usefulness of the information contained therein from the perspective of a financial analyst.
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Related Questions
- River Valley Production Inc. seeks to increase its market share and improve its results. The company takes as a starting point the current scenario and the results obtained in 2018 and 2019. Like other companies, River Valley uses financial ratios (ratios) as tools for analyzing the results obtained at the end of the period. Consider the data presented in the financial statements below and analyze the company's results based on the financial ratios.1. Use the financial statements to calculate the following financial ratios for the years 2018 and 2019:1.8 Return on Investment (ROI)1.9 Profit Margin1.10 Debt to Equity Ratio1.11 Price/Earning Ratio Balance Sheet 2018 2019 Cash $63,000 $201,000 Accounts Receivable 199,000 305,000 Marketable Securities 81,000 42,000 Inventories 441,000 455,000 Prepaids 5,000 9,000 Total Current Assets 789,000 1,012,000 Property, Plant, and Equipment, net 858,000 858,000…arrow_forwardRiver Valley Production Inc. seeks to increase its market share and improve its results. The company takes as a starting point the current scenario and the results obtained in 2018 and 2019. Like other companies, River Valley uses financial ratios (ratios) as tools for analyzing the results obtained at the end of the period. Consider the data presented in the financial statements below and analyze the company's results based on the financial ratios.1. Use the financial statements to calculate the following financial ratios for the years 2018 and 2019: 1.1 Days Sales Outstanding (DSO)1.2 Assets Turnover Ratio1.3 Return on Assets (ROA)1.4 Return on Equity (ROE) Balance Sheet 2018 2019 Cash $63,000 $201,000 Accounts Receivable 199,000 305,000 Marketable Securities 81,000 42,000 Inventories 441,000 455,000 Prepaids 5,000 9,000 Total Current Assets 789,000 1,012,000 Property, Plant, and Equipment, net 858,000 858,000…arrow_forwardRiver Valley Production Inc. seeks to increase its market share and improve its results. The company takes as a starting point the current scenario and the results obtained in 2018 and 2019. Like other companies, River Valley uses financial ratios (ratios) as tools for analyzing the results obtained at the end of the period. Consider the data presented in the financial statements below and analyze the company's results based on the financial ratios.1. Use the financial statements to calculate the following financial ratios for the years 2018 and 2019:1.1 Current Ratio1.2 Quick Ratio1.3 Inventory Turnover Ratio 1.4 Days Sales Outstanding (DSO)1.5 Assets Turnover Ratio1.6 Return on Assets (ROA)1.7 Return on Equity (ROE)1.8 Return on Investment (ROI)1.9 Profit Margin1.10 Debt to Equity Ratio1.11 Price/Earning Ratio Balance Sheet 2018 2019 Cash $63,000 $201,000 Accounts Receivable 199,000 305,000 Marketable Securities 81,000 42,000 Inventories…arrow_forward
- Prepare the common-size financial statement for the entities below and provide a reasoned explanation of the benefits relative to ratios when used to compare performance and establish trends. Income Statements for year ending 31 December 2022 Timber Co. ltd $.000 Biscuit Co. Ltd. $'000 35,119 30,990 12.693 11.088 22,426 13,158 Net revenue Cost of goods sold Gross profit Selling & administrative expenses Other operating expenses Operating income Interest income Other income (net of expenses) Profits before tax Income tax expense Profits after taxes 819 8,449 833 6,447 14,193 2.384 11,809 19,902 11,358 313 8,231 355 988 8,864 2,040 6,824arrow_forward- Please refer to the following Income Statement and Balance Sheet (see attached picture): Prepare a vertical analysis for both the income statement and balance sheet. Write a paragraph comparing the company’s performance with the industry average. Compute the following ratios and comment on what the results mean when evaluating the company: Current ratio Gross profit percentage ratio Debt ratio Profit margin ratioarrow_forwardPlease explain how you get the answerarrow_forward
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- You are required to calculate:1. Liquidity ratios 2. Solvency rations 3. Profitability ratios For the selected companies and shortly write your comments and findings.arrow_forwardCalculate the financial indicators of the firms J&J for the year 2018 and fill in the spaces marked in the table. Company Name: Year 2018 Chemicals and Allied Products Industry Ratios ………….. Solvency or Debt Ratios Merck J&J 2018 Debt ratio …. …. 0.47 Debt-to-equity ratio …. …. 0.38 Interest coverage ratio …. …. -9.43 Liquidity Ratios Current ratio …. …. 3.47 Quick ratio …. …. 2.12 Cash ratio …. …. 2.24 Profitability Ratios Profit margin …. …. -93.4% ROE (Return on equity), after tax …. …. -248.5 ROA (Return on assets) …. …. -146.5 Gross margin …. …. 55.3% Operating margin (Return on sales) …. …. -42.9% Activity or Efficiency Ratios Asset turnover …. …. 1.08 Receivables turnover (days) …. …. 16 Inventory turnover (days)…arrow_forwardAlex is currently considering to invest his money in one of the companies betweenCompany A and Company B. The summarized final accounts of the companies for theirlast completed financial year are as follows : (please check the images) a. Calculate the following ratios for Company A and Company B. State clearly theformulae used for each ratio:i. Gross Profit Marginii. Net Profit Marginiii. Inventory Turnover Period (days) + Comment on each of the ratios calculated in part (a) above.arrow_forward
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ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
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