Income Statement$-$Balance Sheet

Retio Calculations

Appendix $A$

PC$-1\mathrm{.}1$: Engage in a team setting with professional integrity and respect.

Financial statement analysis is the process of analyzing a company's financial statements to make better economic decisions. The process for financial statement analysis includes specific techniques for evaluating risks, performance, and future prospects of an organization.

This assessment is separated into three parts and based on a fictitious company. In Part $1,$ you will use the Balance Sheet and Income Statement to calculate the five categories of ratios. You will calculate and explain the significance of liquidity, activity, financing, profitability, and market value, and provide a year$-$to$-$year comparison of assessed financial trends. In Part $2,$ you will compose an analytical study to assist the CEO of your company to determine if ABC Company, a technology company dealing with software and hardware, would be a good investment as an acquisition.

Part $1$

You will use this Excel workbook ${?}^{}$ with two worksheets to assist you in completing this part of the assessment. The first worksheet is the Balance Sheet and Income Statement for ABC Company. The second worksheet contains a breakdown of categories of ratios where you will complete the calculations for each ratio. You will also enter the formula written out as to what information you have used to do the calculations.

You are going to use the five classifications of financial ratios to assess the financial performance of ABC Company.

Instructions

You will present a definition of the classification by citing the course text and other scholarly sources.

Your paper should include a measure of$,$ and analysis of$,$ financial outcomes based on the ratios for each financial ratio classification $($i$.$e$.,$ the liquidity classifications of ratios are based upon the quick and current ratio outcomes$).$

You will calculate ratios for each classification for the $3$ years of data $($i$.$e$.,$ the current ratio may have been $1\mathrm{.}5$ the first year, $1\mathrm{.}35$ the second year, and $\mathrm{.}75$ in the most recent year$).$ It is based on these results that you will measure financial performance, or trends, from one year to the next. It is imperative that the ratios numbers, and quantitative outcomes, support your analysis.

Using the data from the Income Statement and Balance Sheet, provide the correct calculation of the liquidity ratios and an assessment of the company's ability to maintain liquidity and the management of current assets and current liabilities. Include the proper assessment of outcomes as positive or negative trends when all ratio outcomes are factored as a group.

Liquidity Ratios

Current Ratio

Quick Ratio

Using the data from the Income Statement and Balance Sheet, provide the correct calculation of the activity ratios and an assessment of the company's ability to maintain liquidity. Include the proper assessment of outcomes as positive or negative trends when all four ratio outcomes are factored as a group.

Activity Ratios

Inventory Turnover

Accounts Receivables Turnover

Total Asset Turnover

Average Collection Period

Using the data from the Income Statement and Balance Sheet, provide the correct calculation of the financing ratios. Include the proper assessment of outcomes as positive or negative trends when all three ratio outcomes are factored as a group.

Financing Ratios

Debt Ratio

Debt$-$to$-$Equity Ratio

Times Interest Earned Ratio

Market value ratios

Eps

Pe

Profitability ratios

Roe

Roa

Net profit margin

Operati g margin

Using the data from the price per share data, the Income Statement, and the Balance Sheet, provide the correct calculation for the market