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Guide - Part 1
Guide - Part 2
Guide - Part 3
Guide - Part 4
Guide - Part 5
Guide - Part 6
Ratio Analysis
EBIT & EBITDA
Print Version

Guidance for Performing Financial Analysis
 

Part 4.  Assess the company's general condition (no more than 5 to 8
              minutes):

a.  Using the financial ratios, you are required to analyze your firms’ profitability, solvency, and operating efficiency.  The information discussed above should provide support for your conclusions based on ratios.

b.  You should compare your company’s ratios across at least three years and also compare them with at least one competitor or to industry averages. Which ratios you choose to discuss in your presentation will depend on which issue are critical to your conclusions.

c.  Your presentation should cover many of the following ratios:
Liquidity Ratios:
bulletCurrent or Working Capital Ratio
bulletQuick Ratio
bulletTimes Interest Earned Ratio
bulletInterest Coverage
bulletDefensive-interval ratio
Financing Ratios:
bulletDebt-to-Assets
bulletDebt-to-Equity
bulletFixed Charge Coverage
bulletCash-Flow Coverage
Activity (Efficiency) Ratios:
bulletReceivables Turnover
bulletAverage Days in Receivable
bulletInventory Turnover Ratio
bulletAverage Days in Inventory
bulletAsset turnover
 Profitability Ratios:
bulletGross Profit Percentage
bulletReturn on Equity
bulletReturn on Financing
bulletReturn on Assets
Stock Ratios:
bulletEarnings per Share
bulletPrice Earnings Ratio
bulletDividend Payout Ratio
bulletDividend Yield

d.  Cash flows are important because investors want cash dividends or they want cash reinvested to increase future earnings.  Creditors want debt to be repaid and to receive interest payments.  From the investors’ and creditors’ perspective, you should discuss where cash come from and how is it used.  Items that you may want to present include:
bulletThe method that your company uses to report cash flows -- direct method or the indirect method
 
bulletThe change in the cash balance over the past few years
 
bulletA comparison net cash flow from operating activities to net cash flow from investing activities to determine whether operating cash flows used to purchases of operating assets or if it was necessary to incur debt to purchased assets