Description
Purpose of Assignment
The purpose of this assignment is to help students gain a better understanding of the financial statements used for corporate financial reporting and the key ratios used to make business decisions.
Assignment Steps
Select a Fortune 500 Company from one of the following industries:
- Pharmaceutical
- Energy
- Retail
- Automotive
- Computer Hardware
Review the balance sheet and income statement in the company's 2015 Annual Report.
Calculate the following ratios using Microsoft® Excel®:
- Current Ratio
- Quick Ratio
- Debt Equity Ratio
- Inventory Turnover Ratio
- Receivables Turnover Ratio
- Total Assets Turnover Ratio
- Profit Margin (Net Margin) Ratio
- Return on Assets Ratio
Analyze in 1,250 words why each ratio is important for financial decision making.
Submit your analysis as well as your calculations.
Click the Assignment Files tab to submit your assignment.
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Outline
Analysis of Ratios Apple Inc.
Important for financial decision making:
I.
II.
Current Ratio
Quick Ratio
III.
Debt Equity Ratio
IV.
Inventory Turnover Ratio
V.
Receivables Turnover Ratio
VI.
Total Assets Turnover Ratio
VII.
VIII.
IX.
Profit Margin (Net Margin) Ratio
Return on Assets Ratio
References
Running head: ANALYSIS OF RATIOS
Analysis of Ratios: Apple Inc.
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ANALYSIS OF RATIOS
Executive Summary
The financial statements provide the information about the financial performance and
position of the corporation. These statements are in condensed form and are needed to be
analyzed to draw inferences from them. Ratio analysis is a tool that determines the financial
position of the corporation by making comparisons among the various numbers. Ratios also
facilitate to compare the numbers in relation to other numbers and provide the results in form of
percentage or times. Ratios are also useful to make internal analysis by comparing the ratios of
current year with the ratios of past years. They can also be compared with other corporation of
the industry by setting it as a benchmark or by making comparison among industry averages.
Ratios are also important for financial decision making. This paper makes an attempt to calculate
the ratios of Apple, Inc. for the fiscal year 2015 and to analyze the results that the ratios indicate.
Analysis of Ratios
Ratio analysis helps in determining the financial health of the company by making
investigating various areas such as liquidity, solvency activity and profitability. Auerback (2005)
explained that the ratios are helpful for the investors to gain more knowledge about the financial
health of company and also enable them to know about the earning potential.
(i)
Current ratio
This refers to a liquidity ratio that determines a company’s ability to clear the short-term
and long-term obligations or liabilities. If the current ratio is high this means the company is in
danger of not able to pay the debts. This ratio, will help the company in knowing if the company
can comfortably pay its debt or it will have to look for an outside source of income to settle its
disputes, therefore knowing its way forward. Having a look at the current ratio of the Apple
Company, it is notable that this ration has gone through a tremendous increase such that it was
ANALYSIS OF RATIOS
1.08 in the year 2014, but it increased to 1.11 year 2015. This is an indication that the company
has sufficient current asse...
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