Financial Analysis

Jun 19th, 2013
DreamIt
Category:
Accounting
Price: $35 USD

Question description

Go to  http://finance.yahoo.com/q?s=EA&ql=1

Part 1: Please complete the following for Electronic Arts Inc.  in an Excel spreadsheet:

Horizontal and vertical analysis of the Income Statements for the past three years (all yearly balances set as a percentage of total revenues for that year).

Horizontal and vertical analysis of the Balance Sheets for the past three years (all yearly balances set as a percentage of total assets for that year).

Ratio analysis (eight ratios of your choosing) for the past three years PLUS a measurement for the creditworthiness of your firm as measured by Altman’s Z-score.  Compare Electronic Arts Inc to their major competitor Zynga Games, Inc. (  http://finance.yahoo.com/q?s=ZNGA ).

Part 2: The Paper:

4 pages in length.

Include a proper introduction and conclusion.

Include a reference page.

Your paper should provide your reader with an overall understanding of the financial health of Electronic Arts Inc including the following:

Discussion of the ratio analysis results, including rationale for the ratios chosen.

Discussion of all horizontal and vertical analysis from above.

Discussion of four items from the management discussion of the firm that support the conclusion formed in your discussion of the financial results.

Notes….

If you see sales rise by 20% and assets rise by 40%, we have to ask why this is happening. It would appear that assets have risen too far given the sales that are generated from those assets—why did this occur?  You may have to research that type of question and discuss it in your analysis.

I’d suggest that you start your ratio analysis with the four ratios found in the DuPont equation. If you discover a weakness in one component of the DuPont ratios, then it would make sense to look at ratios that are closely related to the troublesome ratio. For example, if you discover that the asset turnover is declining over time, then take a look at some related ratios such as the inventory turnover rate or the average collection period. If you discover that the equity multiplier is increasing (indicating greater reliance on debt), then look at some related ratios such as the debt ratio or Times Interest Earned. 


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