The purpose of this exercise is to refresh students$’$ knowledge of basic financial skills and understanding financial ratios. This is important to developing successful strategies as students must understand that financial analysis of a company over time can help both internal and external existing and prospective stakeholders understand the firm$’$s strategic behavior.

Why is this Assignment Necessary? Strategists must understand how companies perform using economic terms. The most common way to understand a company$’$s financial performance is to be able to compute its financial ratios and benchmark the ratio results with similar companies in its industry. Without being able to understand and compare companies in terms of financial performance, a manager cannot thoughtfully craft a business strategy or assess the impact of a business strategy, therefore preventing them from being able to add significant economic value to a business. Being able to assess companies using financial data enables managers to examine competitor firms more thoroughly. Being able to compare the performance of their firm to others in the industry is an essential component of strategic analyses.

Instructions: You have been provided with the $2022$ Fiscal Year Annual Report for $138$ Student Living Inc.. Your responsibility is to perform the financial calculations necessary, and use this information to answer the questions. You may use a calculator to assist with the calculations but no textbooks or other materials may be used. Good Luck.

$1.$ RATIO ANALYSIS

You will need to know the formula for each ratio, how to interpret each ratio, and have each ratio computed for $138$ Student Living Inc. annual financial data. If you cannot compute a certain ratio, please state why.

a$.$ Profitability ratios:

i$.$ Gross profit margin

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

ii$.$ Return on assets

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

iii. Return on equity

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

b$.$ Liquidity ratios:

i$.$ Current Ratio

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

ii$.$ Quick Ratio

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

iii. Inventory to Net Working Capital

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

c$.$ Leverage ratios:

i$.$ Debt to Assets Ratio

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

ii$.$ Debt to Equity Ratio

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

iii. Times Interest Earned Ratio

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

d$.$ Activity Ratios:

i$.$ Inventory Turnover

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

ii$.$ Fixed Assets Turnover

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

iii. Total Assets Turnover

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

iv$.$ Accounts Receivable Turnover

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

v$.$ Average Collection Period

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

e$.$ Other Operating Ratios:

i$.$ Advertising Intensity

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

ii$.$ Capital Intensity

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

iii. Plant and equipment Newness

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

iv$.$ R&D Intensity

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

v$.$ Overhead Inefficiency

Ratio formula:

How to assess this ratio:

Compute $138$ Student Living Inc. ratio for $2021$ and $2022.$

What trend is represented?

f$.$ Market Ratio:

i$.$ Price Earnings Ratio