Business Finance
Financial Accounting & Business Investment Analysis

Question Description

I need help with a Accounting question. All explanations and answers will be used to help me learn.

I will upload a document that is called (project info) that will have all the important information for you to do the project. also, I will upload a slides show that have information that will be used and helpful ignorer to do the project. if you have any question let me know. there is also a rubric that will be helpful for you to follow.

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Metric-Analysis of Financial Statements Chapter 9 ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Learning Objectives • Describe the usefulness of financial statements and methods of analysis • Describe and illustrate global analysis of financial statements • Describe and illustrate metrics used to analyze liquidity ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Learning Objectives (continued) • Describe and illustrate metrics used to analyze solvency • Describe and illustrate metrics used to analyze profitability • Describe corporate annual reports ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Learning Objective 1 Describe the usefulness of financial statements and methods of analysis ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Financial Statements • Objective • To provide information to a company’s stakeholders about the company’s financial condition and performance • Stakeholders use general-purpose financial statements ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Liquidity, Solvency, and Profitability Liquidity • Ability of a business to convert assets into cash Solvency • Ability of a business to pay its debts as they become due over a long period of time Profitability • Ability of a company to generate net income related to its invested assets ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Methods of Analysis • Global analysis • Computes changes in amounts, percentages of amounts, and percentage changes in amounts for each financial statement • Component analysis • Computes metrics for liquidity, solvency, and profitability for components of financial statements ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Learning Objective 2 Describe basic financial statement analytical methods ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Global Analysis: Horizontal Analysis • Percentage analysis of increases and decreases in related items in comparative financial statements • Each item on the most recent statement is compared with the related item on one or more earlier statements in terms of: • Amount of increase or decrease • Percentage of increase or decrease ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Exhibit 1 - Comparative Balance Sheet— Horizontal Analysis ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Exhibit 2 - Comparative Schedule of Current Assets—Horizontal Analysis ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Exhibit 3 - Comparative Income Statement—Horizontal Analysis ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Exhibit 4 - Comparative Statement of Stockholders’ Equity—Horizontal Analysis ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Global Analysis: Vertical Analysis • Percentage analysis of the relationship of each component in a financial statement to a total within the statement • Percentages in the balance sheet are computed as follows: • Each asset item is stated as a percent of the total assets • Each liability and stockholders’ equity item is stated as a percent of the total liabilities and stockholders’ equity ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Exhibit 5 - Comparative Balance Sheet— Vertical Analysis ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Exhibit 6 - Comparative Income Statement— Vertical Analysis ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Global Analysis: Common-Sized Statements • All items are expressed as percentages with no dollar amounts shown ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Learning Objective 3 Describe and illustrate metrics used to analyze liquidity ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Metrics Used to Assess Liquidity Current position metrics Accounts receivable metrics Inventory metrics ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Current Position Analysis • Uses measures to assess a company's ability to pay its current liabilities • Includes the computation and analysis of: • Working capital • Current ratio • Quick ratio ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Working Capital • Computed as follows: • Working capital = Current assets – Current liabilities • Illustration • Computation of working capital for Mooney Company for 20Y6 and 20Y5 ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Current Ratio • Computed as follows: Current assets Current ratio = Current liabilities • Illustration • Current ratio for Mooney Company for 20Y6 and 20Y5 ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Current Assets and Liabilities for Mooney Company and Wendt Corporation as of December 31, 20Y6 ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Quick Ratio Quick assets Quick ratio = Current liabilities • Computation of quick ratio for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Accounts Receivable Metrics • Reflect the efficiency of a company to collect accounts receivable • Include: • Accounts receivable turnover • Days’ sales in receivables • Quick collection of receivables: • Improves a company’s liquidity • Cash collected from receivables may be used to improve or expand operations • Reduces the risk of uncollectible accounts ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Accounts Receivable Turnover Sales Accounts receivable turnover = Average accounts receivable • Accounts receivable turnover for Mooney Company for 20Y6 and 20Y5 ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Days’ Sales in Receivables Average accounts receivable Days' sales in receivables = Average daily sales = 365 days  Accounts receivable turnover Sales Average daily sales = 365 days • Computation of days’ sales in receivables for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Inventory Metrics • Reflect the efficiency of purchasing and selling inventory • Include: • Inventory turnover • Days’ sales in inventory • Excess inventory decreases liquidity and increases the risk of losses ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Inventory Turnover Cost of goods sold Inventory turnover = Average inventory • Inventory turnover for Mooney Company for 20Y6 and 20Y5 ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Days’ Sales in Inventory Average inventory Days' sales in inventory = Average daily cost of goods sold = 365 days ÷ Accounts receivable turnover Cost of goods sold Average daily cost of goods sold = 365 days • Computation of days’ sales in inventory for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Learning Objective 4 Describe and illustrate metrics used to analyze solvency ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Solvency Metrics • Solvency: Ability of a company to pay its debts as they become due over a long period of time • Include: • • • • • Net assets Debt ratio Ratio of liabilities to stockholders’ equity Ratio of fixed assets to long-term liabilities Times interest earned ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Net Assets • Equals a company’s stockholders’ equity • Computed as: • Net assets = Total assets − Total liabilities • Net assets for Mooney Company for 20Y6 and 20Y5 are as follows: ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Debt Ratio • Computed as: Total liabilities Debt ratio = Total assets • Computation of debt ratio for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Ratio of Liabilities to Stockholders’ Equity • Measures how much of the company is financed by debt and equity • Computed as: Ratio of liabilities to stockholders' equity = Total liabilities Total stockholders' equity • Computation of ratio of liabilities to stockholders’ equity for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Ratio of Fixed Assets to Long-Term Liabilities • Indicates the margin of safety for note-holders or bondholders Ratio of fixed assets to long - term liabilities = Fixed assets (net) Long - term liabilities • Computation of ratio of fixed assets to long-term liabilities for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Times Interest Earned • Measures the risk that interest payments will not be made if earnings decrease Income before income tax + Interest expense Times interest earned = Interest expense • Computation of times interest earned for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Times Preferred Dividends Earned Net income Times preferred dividends earned = Preferred dividends • The higher the ratio, the more likely preferred dividend payments will be paid if earnings decrease ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Learning Objective 5 Describe and illustrate metrics used to analyze profitability ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Profitability Analysis • Assessed by examining the income statement and balance sheet assets • Common profitability analyses • • • • • • • • Asset turnover Return on total assets Return on stockholders’ equity Return on common stockholders’ equity Earnings per share on common stock Price-earnings ratio Dividends per share Dividend yield ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Asset Turnover • Measures how effectively a company utilizes its long-term operating assets to generate sales Asset turnover = Sales Average long - term operating assets • Computation of asset turnover ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Return on Total Assets Net income + Interest expense Return on total assets = Average total assets • Computation of return on total assets for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Return on Operating Assets • Computed when there are large amounts of nonoperating income and expense Income from operations Return on operating assets = Average operating assets ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Return on Stockholders’ Equity • Measures the rate of income earned on the amount invested by the stockholders Return on stockholders' equity = Net income Average total stockholders' equity • Computation of return on stockholders’ equity for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Return on Common Stockholders’ Equity Return on common stockholders' equity Net income - Preferred dividends = Average common stockholders' equity • Computation of Mooney Company's common stock equity • $500,000 of common stock was outstanding in 20Y4 ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Return on Common Stockholders’ Equity (continued) • Computation of return on common stockholders’ equity for Mooney Company • The company had $150,000 of 6% preferred stock outstanding on December 31,20Y6 and 20Y5 ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Earnings per Share (EPS) on Common Stock • Income earned for each share of common stock outstanding Net income - Preferred dividends EPS on common stock = Shares of common stock outstanding • Computation of EPS on common stock for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Diluted Earnings per Share • Known as earnings per common share assuming dilution • Possible effects of different types of securities on the shares of common stock outstanding are considered in reporting earnings per share ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Price-Earnings (P/E) Ratio • Measures a firm’s future earnings prospects Market price per share of common stock Price - earnings (P / E) ratio = Earnings per share on common stock • Computation of P/E ratio for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Dividends per Share • Measures the extent to which earnings are being distributed to common shareholders Common stock dividends Dividends per share = Shares of common stock outstanding • Computation of dividends per share for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Dividend Yield • Measures the rate of return to common stockholders from cash dividends Dividends per share of common stock Dividend yield = Market price per share of common stock • Computation of dividend yield for Mooney Company ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Learning Objective 6 Describe the corporate annual reports ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Corporate Annual Reports • Summarize operating activities for the past year and plans for the future • Include the following sections: • Management’s Discussion and Analysis • Report on Internal Control • Report on Fairness of the Financial Statements ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Management Discussion and Analysis (MD&A) • Includes management’s analysis of current operations and its plans for the future • Required in annual reports filed with the Securities and Exchange Commission ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Report on Internal Control • Prepared by the management to comply with the requirement of Sarbanes-Oxley Act • States: • Management’s responsibility for establishing and maintaining internal control • Management’s assessment of the effectiveness of internal controls over financial reporting ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Audit Report • Publicly held corporations need to have an independent audit of their financial statements • Conducted by a Certified Public Accounting (CPA) firm • Report of Independent Registered Public Accounting Firm - Opinion rendered by the firm on the fairness of the statements • Any report other than an unqualified opinion is alarming for financial statement users • Requires further investigation ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part. Unusual Financial Statement Items • Required by generally accepted accounting principles to be reported separately in the financial ...
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Final Answer

please find the attached document for the work bets regards

Running head: BUSINESS INVESTMENT ANALYSIS

1

Business Investment Analysis
Name
Institution

BUSINESS INVESTMENT ANALYSIS

2

10 000 for investment
1) Show me the analysis of rationale behind choosing the company you did. Explore
industry choice why it was selected vs. another industry and company choice vs other
companies in that respective industry.
Apple vs. Microsoft vs. Google Inc.
Selected company

Company 1

Company 2

Apple Inc. companyIT industry

GOOGLE INC. – IT
INDUSTRY

Microsoft company- IT
industry

Apple is in the IT
industry but the
performance has been
dwindling due to the
emergence of other
aggressive competitors
like Microsoft

Google has been depicting a
high and constant performance
in its financial progress. This
will be depicted by the
appended in the financial
statements

Like Google and apple,.
Microsoft is in the IT industry.
This makes it easy to mete the
performance of the company
i9n comparison of its
competitors

Apple has seen progress
in it...

Melodyh (3873)
Cornell University

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