Ratio Analysis

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Business Finance

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Below I attached the essay that needs to be completed make sure to answer the two questions when looking at the assignment.

1. Calculate the firm’s 2007 financial ratios. 2. Prepare an executive summary on the firm’s overall financial condition and performance. Your summary must be at least one page, but no more than 3 pages (NOT doubled space). Comment on the meaning of each ratio, discussing its trend and its comparison to the industry average.

*Include a reference page with at least 2-3 sources. Make sure the sources are cited within text!

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Critical Thinking assignment Module 2 Ratio Analysis The Vanguard Group, Inc. has compiled the following financial statements and comparative financial ratios for the year-end review. Balance Sheet Vanguard Group, Inc. December 31, 2007 Assets Current assets Cash Accounts receivable Inventory Total current assets Gross fixed assets Less: Accumulated depreciation Net fixed assets Total assets Liabilities and stockholders’ equity Current liabilities Accounts payable Notes payable Accruals Total current liabilities Long-term debt Total liabilities Stockholders’ equity Common stock Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity $ 118,750 296,250 303,750 $ 718,750 $625,000 93,750 531,250 $1,250,000 $ 111,250 211,250 108,750 $ 431,250 235,000 $ 666,250 318,750 265,000 $ 583,750 $1,250,000 Income Statement Vanguard Group, Inc. for the Year Ended December 31, 2007 Sales revenue Cost of sales Gross profits Less: Operating expenses Selling expense General and administrative expense Depreciation expense Total operating expense Operating profits Less: Interest expense Net profits before taxes Less: Taxes (40%) Net profits after taxes $1,680,000 1,362,480 $ 317,520 $ 125,600 81,600 24,000 $231,200 $ 86,320 15,600 $ 70,720 28,288 $ 42,432 Historical and Industry Average Ratios Vanguard Group, Inc. Industry Average Ratio Current ratio Quick ratio Inventory turnover Average collection period Total asset turnover Debt ratio Times interest earned Gross profit margin Operating profit margin Net profit margin Return on investment Return on equity 2005 2006 2007 2007 1.6 0.9 6.0 40 days 1.5 60% 2.5 20% 4.7% 2.0% 3.0% 7.5% 1.7 1.0 5.0 50 days 1.5 56% 3.5 19.7% 4.8% 2.3% 3.5% 7.95% — — — — — — — — — — — — 1.6 0.9 8.4 40 days 1.75 50% 4.0 20% 6% 3% 5.25% 10.5% 1. Calculate the firm’s 2007 financial ratios. 2. Prepare an executive summary on the firm’s overall financial condition and performance. Your summary must be at least one page, but no more than 3 pages. Comment on the meaning of each ratio, discussing its trend and its comparison to the industry average.
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Explanation & Answer

Done, thank you so much.

Running head: RATIO ANALYSIS

1

Financial Ratio Analysis
Name of Student
Name of Professor
Course Title
Date

RATIO ANALYSIS

2

Vanguard Group 2007 financial ratios

RATIO ANALYSIS

3

Vanguard Group executive summary
Ratio analysis has been utilized to determine financial condition and performance of
Vanguard Group organization. This has been attained through creation of a comparison between
items on the balance sheet with the ones on the statement of financial performance. Normally, total
assets on the balance sheet have an impact to items in income statement for example, the revenues
and expenses (Bhat & Rau, 2008).
The financial performance of Vanguard Group is achieved through creating liquidity
position as well as financial risk of the firm. The liquidity risk is computed using both quick and
current ratio value of the firm. As per the financial data, both the current ratio and the quick ratio
are almost constant for the three years. When compared to the industrial averages, both current
and quick ratios are hig...


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