In this discussion, you must obtain information from Finance!Yahoo (http://finance.yahoo.com), or any other website that provides financial statements for the last three years to estimate financial health of the company of your choice.
DO NOT CHOOSE FINANCIAL COMPANIES/BANKS! The balance sheet and the income statement of a bank differ from the financial statements we study in this course.
In your initial response to the topic you have to answer all 5 questions.
You are expected to make your own contribution in a main topic as well as respond with value added comments to at least two of your classmates as well as to your instructor.
- Look at the company’s sales revenue, EBIT, and net income over the three-year period. Would you classify it as a growing, diminishing, or stable company? Please explain your answer.
- Look at the company’s expense accounts, cost of goods sold, and selling and administrative expenses. Do they seem to be roughly proportional to sales? Do any of these categories seem to be growing out of control? Please explain your answer.
- Look at the company’s EBIT, interest expense, current liabilities, long-term debt, and other liabilities over the three-year period. Comparing debt to equity, do you think the company seems to have excessive debt? Would you expect the company to have any problems meeting its interest payments? Please explain your answer.
- Compare current assets with current liabilities. Would you expect the company to have any problems meeting its short-term obligations?Please explain your answer.
- Calculate the financial ratios for the company for the last year. Present the table with the ratio results for the last year.
a. What are the firm's financial strengths and weaknesses?
b. Should the bank make the loan? Why or why not?
c. Is management generating adequate operating profit on the firm’s assets?
d. How is the firm financing its assets?
e. Are the common stockholders receiving a good return on their investment?