Description
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Deliverable Length: 800
Choose a public company, and present findings from your financial analysis in a report. Your report must include the following:
- Give a description of the operating profit margin.
- Give a description of the asset turnover.
- Give a description of the equity multiplier.
- Give a description of the return on equity.
- Give a description of the return on assets.
- Calculate the operating profit margin. Explain your answer.
- Calculate the asset turnover. Explain your answer.
- Calculate the equity multiplier. Explain your answer.
- Calculate the return on assets. Explain your answer.
- Calculate the return on equity. Explain your answer.
- What does the DuPont analysis describe about the company chosen?
- Which ratio demonstrates the company’s weakest area? Explain your answer.
I also will need an outline of this assignment as well what will consist of
Explanation & Answer
Here is the answer. Thanks
Report Title: Ratio and Financial Statement Analysis
Introduction
Understanding of the financial performance of a company requires to analyze the figures
of the financial statements1 (Chandra, 2014). Ratio analysis is a widely recognized and used tool
to analyze the figures of the financial statements. In the ratio analysis, the figures of the financial
statements are converted in to ratios for meaningful comparison and find out unusual shift, and
trend (Business Dictionary, 2017).
This paper aims at calculation and analysis of some selected financial ratios of the Dow
Chemical Company for the last year (2016) to understand its financial performance. Dow
Chemical Company, established in 1897, is an American based chemical manufacturing
company (Dow Chemical Company, 2017). It is a public limited company. The stock of the
company is actively traded in the NYSE2 (Yahoo Finance, 2017).
Ratio and Financial Statement Analysis
Operating Profit Margin Ratio
Operating profit margin ratio of a company shows the operating income as a percentage
of its sales (Brigham & Houston, 2015). From the operating profit margin ratio, the ability of a
company to manage its operation cost, and generate return can be understood. The operating
profit margin is calculated by dividing the operating income with total sales revenue of the
company (Chandra, 2014).
The operating profit margin ratio of the Dow Chemical is 10.56% in 2016. The operating
profit margin ratio of 10.56% of the company indicates that Dow Chemical has generated
1
Financial Statement: Financial statements comprises of income statement, cash flow statement, and balance sheet
(Arnold, 2013).
2
NYSE: New York Stock Exchange.
10.56% operating revenue from its sales after covering of its cost of sales, and other operational
costs.
Assets Turnover Ratio
Assets turnover ratio shows how many times the sales revenue has been generated with
the assets of the company (Brigham & Houston, 2015). From the assets turnover ratio, the ability
of the company to generate sales revenue with utilization of its total assets can be understood.
Assets turnover ratio is calculated by dividing the total sales revenue by the total assets of the
company (Chandra, 2014).
The assets turnover ratio of the Dow Chemical is 0.61 in 2016. The assets turnover ratio
of 0.61 is an indication that the sales generated by the company was 0.61 times of its total assets.
The assets management efficiency of the Dow Chemical is not too good ...
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