INSTRUCTIONS For this assignment, you will create an Excel document to perform ratio analysis and explain the significance of financial ratios in evaluating a company's financial performance. Follow the instructions below to complete the assignment. Click to Open: Assignment 2 Financial Statements.docx Click to Open: Assignment 2 Ratio Analysis.xlsx Part 1: Excel Document Open the Excel spreadsheet with the following sheets: Sheet 1: "Financial Statements" Sheet 2: "Ratio Analysis" On the "Financial Statements" sheet, input the financial data of a selected company for at least two consecutive years. Include the following financial statements: Income Statement (Revenue, Cost of Goods Sold, Operating Expenses, Net Income) Balance Sheet (Assets, Liabilities, Equity) Cash Flow Statement (Operating, Investing, Financing) Calculate the relevant financial ratios on the "Ratio Analysis" sheet. Include the following ratios: Liquidity Ratios (Current Ratio, Quick Ratio) Profitability Ratios (Gross Profit Margin, Net Profit Margin, Return on Assets, Return on Equity) Efficiency Ratios (Inventory Turnover Ratio, Days Sales Outstanding, Asset Turnover Ratio) Debt Ratios (Debt-to-Equity Ratio, Debt Ratio, Interest Coverage Ratio) Market Ratios (Price-to-Earnings Ratio, Price-to-Sales Ratio) Use Excel formulas to calculate each ratio based on the financial data provided on the "Financial Statements" sheet. Ensure that the formulas are accurately applied to calculate the ratios for both years.

Financial Statements -

Income Statement	Year 1	Year 2
Revenue	$1,000,000	$1,200,000
Cost of Goods Sold	$600,000	$720,000
Gross Profit	$400,000	$480,000
Operating Expenses	$250,000	$280,000
Net Income	$150,000	$200,000
Balance Sheet	Year 1	Year 2
Assets
Cash	$100,000	$120,000
Accounts Receivable	$80,000	$90,000
Inventory	$150,000	$180,000
Total Assets	$330,000	$390,000
Liabilities
Accounts Payable	$50,000	$60,000
Short-term Debt	$30,000	$40,000
Long-term Debt	$100,000	$100,000
Total Liabilities	$180,000	$200,000
Shareholders' Equity	$150,000	$190,000
Total Liabilities and Equity	$330,000	$390,000
Cash Flow Statement:	Year 1	Year 2
Operating Activities
Net Income	$150,000	$200,000
Depreciation	$50,000	$50,000
Changes in Working Capital	$20,000	$10,000
Net Cash from Operating Activities	$220,000	$260,000
Investing Activities
Purchase of Property, Plant, and Equipment	($80,000)	($100,000)
Net Cash from Investing Activities	($80,000)	($100,000)
Financing Activities
Issuance of Long-term Debt	$0	$0
Repayment of Long-term Debt	($20,000)	($20,000)
Net Cash from Financing Activities	($20,000)	($20,000)
Net Change in Cash	$120,000	$140,000
Cash at Beginning of Year	$100,000	$120,000
Cash at End of Year	$220,000	$260,000

Ratio	Formula
Liquidity Ratios
Quick Ratio	(Current Assets - Inventory) / Current Liabilities
Cash Ratio	(Cash + Cash Equivalents) / Current Liabilities
Operating Cash Flow Ratio	Operating Cash Flow / Current Liabilities
Working Capital Ratio	Current Assets / Current Liabilities
Cash Conversion Cycle	Days Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding
Defensive Interval Ratio	(Cash + Cash Equivalents + Marketable Securities) / Average Daily Expenses
Profitability Ratios
Quick Ratio	(Current Assets - Inventory) / Current Liabilities
Gross Profit Margin	(Gross Profit / Net Sales) * 100
Net Profit Margin	(Net Income / Net Sales) * 100
Return on Assets (ROA)	(Net Income / Average Total Assets) * 100
Efficiency Ratios
Return on Equity (ROE)	(Net Income / Average Shareholders' Equity) * 100
Inventory Turnover	Cost of Goods Sold / Average Inventory
Days Sales Outstanding	(Accounts Receivable / Average Daily Sales) * 365
Debt Ratios
Debt-to-Equity Ratio	Total Debt / Shareholders' Equity
Debt Ratio	Total Debt / Total Assets
Asset Turnover Ratio	Net Sales / Average Total Assets
Market Ratios
Price-to-Earnings Ratio	Market Price per Share / Earnings per Share
Price-to-Sales Ratio	Market Price per Share / Sales per Share
Interest Coverage Ratio	EBIT / Interest Expense