Instructions: Due Tuesday 03/3
At least 2 pages long with 3 peer-reviewed references.
Mini Cases
A14-53. Calculating ratios for companies within the same industry
Select an industry you are interested in and select three companies within that industry. Obtain their annual reports by going to each company’s website and downloading the report for the most recent year. (On many companies’ websites, you will need to visit the Investor Relations section to obtain the company’s financial statements.) You may also collect the information from the company’s Form 10-K, which can be found by searching online for “SEC Edgar database” and then using that site to locate the Form 10-K of interest to you.
Basic Discussion Questions
For each of the three companies you selected, answer the following:
1. Calculate two ratios that measure the ability to pay current liabilities.
2. Calculate at least two ratios that measure the ability to sell inventory and collect receivables.
3. Calculate at least two ratios that measure the ability to pay long-term debt.
4. Calculate at least two ratios that measure profitability.
5. Calculate at least two ratios that help to analyze the stock as an investment.
Now that you have crunched the numbers, interpret the ratios. What can you tell about each company and its financial position? Is one company clearly better than the others in terms of its financial position, or are all three companies similar to each other?