Project instructions and grading scheme. 1. Perform the vertical and horizontal analysis and calculate the ratios as instructed (42.7 points-50% of your grade). Fill the grey cells by using formulas NOT hardcoding. You will not earn credit for hardcoding (entering the figures manually). 2. You are a financial analyst. Based on your analysis of Macy's financial statements, provide a report to guide investors whether Macy's is a buy (keep) or sell stock. Your report should include the following (42.7 points-50% of your grade): a. An interpretation of trends illustrated by supportive ratios, horizontal and vertical analysis and focus on the main ratios that "tell the story". (-not to exceed two pages, single space, 12 font size). i. horizontal and vertical analysis (9 points) ii. Liquidity analysis (9 points) iii. Profitability analysis (9 points) iv. Solvency analysis (9 points) b. Your informed recommendation (buy or sell) about Macy's with justifications. What is your general impression about Macy's ? Support your conclusion (6.7 points) 3. To calculate ratios, use the formulas that are provided in your textbook (page 4-51). However, you should use the following formulas for the following ratios: Acid test ratio is the same as Quick ratio Days Sales in Inventory is the same as inventory turnover in days: 365/Inventory turnover Average collection period is the same as Accounts receivable turnover in days: 365/Accounts receivable turnover Return on Assets: Net Income (net earnings)/ Average total assets Debt ratio: (total debts)/ (total Assets) Time interest earned: (net earnings + interest expense+ provision for income taxes)/ interest expense Free cash flow: Net Cash Provided by Operating Activities - Capital Expenditures - Cash Dividends paid Dividend Payout Ratio= Dividends per share/ EPS 4. Vertical analysis [common size analysis in your textbook] expresses the items of each statement for the period relative to a base figure. For example, exhibit 4.4 expresses each item of the B/S as a percentage of total assets whereas exhibit 5.6 expresses each item of the I/S as a percentage of total sales. 5. Horizontal analysis [rate of change in your textbook] evaluates the trends over a period of time. For example, exhibit 4.5 calculates the rate of change of each item of the B/S from 2016 to 2017 whereas exhibit 5.7 reports the rate of change of each item of the I/S from 2016 to 2017.