Use the Internet search engine of your choice and do a general search on the name of a company of interest to you (e.g., General Motors, Procter & Gamble, Coca-Cola, etc.). Explore the website of the company you choose and locate that company’s most recent financial statements. You may need to look under a category that provides general information about the company and/or investor information. 

Instructions

a. Find and read the description of the company, including the type of business it is. Why is gaining an understanding of the industry and type of business an important starting point for financial statement analysis? 

b. Locate the company’s most recent financial statements. Find the summary table of ratios in this chapter in Exhibit 14–26. Calculate three of the listed ratios under each of the following categories: “Measures of short-term liquidity” and “Measures of profitability.” Show your work in calculating these ratios. Write a brief statement describing what you have learned about your company’s liquidity and profitability. 

c. Why do you think the Internet has become such a widely used source of financial information by investors and creditors?

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Ratios or Other Measurements Measures of short-term liquidity Current ratio Quick ratio Working capital Net cash provided by operating activities Cash flow from operations to current liabilitles Accounts receivable turnover rate Days to collect average accounts recelvable Inventory turnover rate Days to sell the average Inventory Operating cycle Free cash flow Measures of long-term credit risk Debt ratlo Trend In net cash provided by operating activities Interest coverage ratio Measures of profitability Percentage changes; that is, In net sales and net Income Gross profit rate Operating expense ratio Method of Computation Current Assets Current Liabilitles Quick Assets Current Labilities Current Assets - Current Liabilities Appears in the statement of cash flows Cash Flows from Operating Activities Current Liabilitles Net Sales Average Accounts Receivable 365 Days Accounts Receivable Turnover Rate Cost of Goods Sold Average Inventory 365 Days Inventory Turnover Rate Days to Sell Inventory + Days to Collect Receivables Net Cash from Operating Activities - Cash Used for Investing Activities and Dividends Total Liabilities Total Assets Appears in comparative statements of cash flows Income before Interest and Taxes Annual Interest Expense Dollar Amount of Change Financial Statement Amount in the Earller Year Gross Profit Net Sales Operating Expenses Net Sales Significance A measure of short-term debt-paying ability A measure of short-term debt-paying ability A measure of short-term debt-paying ability Indicates the cash generated by operations after allowing for cash payment of expenses and operat- Ing liabilitles Indkates ability to cover currently maturing obligations from recurring operations Indicates how quickly receivables are collected Indicates In days how quickly receivables are collected Indkates how quickly Inventory sells Indicates in days how quickly Inventory sells Indicates in days how quickly cash Invested in Inventory converts back Into cash Excess of operating cash flow over basic needs Percentage of assets financed by creditors; Indicates relative size of the equity position Indicator of a company's ability to generate the cash necessary to meet its obligations Indicator of a company's ability to meet its interest payment obligations The rate at which a key measure Is Increasing or decreasing; the "growth rate" A measure of the profitability of the company's products A measure of management's ability to control expenses