Economics Homework Help

Financial Ratio Analysis

• you will be looking at financial ratios over time.
• Go to S&P NetAdvantage CapitalIQ.
• Find Google company and click on “ratios.”
• Sort the ratios from the most recent on the left.
• Download the ratios into a spreadsheet and include this with your project. (Note that you do not necessarily need to include the growth numbers at the bottom of the chart – growth over the year, over the last two years, etc.- but just the ratios themselves).
• In a separate Word document, interpret the following ratios and compare across years. Identify if the pattern that you see represents a strength or weakness for each ratio.
  • Current ratio
  • Quick (acid test) ratio
  • Total asset turnover
  • Accounts receivable turnover
  • Total Debt/Equity
  • Price-Earnings
  • ROCE
  • ROA
• Then, explain why you said it represents a strength or a weakness. Explanations should include some insight as to why the ratio increased or decreased or stayed the same. It should be detailed – in other words, do not simply say “it went up” or “the number decreased,” but rather “the reason that the ratio represents a strength is because the firm is now collecting receivables faster due to having reduced accounts receivable and increased sales…” (for example.)

Summarize findings and make a statement about value creation.

• In a separate paragraph, you will determine whether your company is creating value based on all three parts of your project: stock price analysis, CAPM results, and financial ratios.
• Specifically, is your company creating value for shareholders? You need to answer this question directly. Support your statement with relevant ratios, stock price movements, and news events.
• This statement is separate from your statements in the financial ratio analysis. This should be fairly detailed and consist of several paragraphs.
• Note that this is not a summary of your project but instead a specific question as to whether you think your firm is creating value and why.