Financial Valuation Project Milestone 2 Ratio Analysis
This is the second of three milestones assignments that will lead to the completion of the Financial Valuation course project. In this assignment, you will
complete the ratio analysis and interpretations for the chosen company.
The financial statements, the notes, and management’s discussion and analysis (MD&A) provide valuable insights into the business strategies, profitability,
and risk of the firm. Many firms explicitly disclose elements of the business that are performing well or poorly, while also providing explanations about the
company’s overall performance. Many firms explicitly disclose (or one can infer) projections of future business activities, such as expected future sales
growth rates or capital expenditures, which is helpful information for projecting future financial statements. You will prepare forecasted financial statements
in the next milestone.
Enter the financial statement data from the 10-K into the Excel template (FSAP). FSAP will automatically calculate the profitability and risk ratios.
Analyze the financial ratios that have changed significantly over time. The MD&A section of the annual report to shareholders or the Form 10-K (Item 7) may
provide explanations for the changes. Then relate the changes and differences to the economics of the industry and strategies of the firms. A summary of
and explanations for large variances within a company may glean from reviewing the financial statements note disclosures.
Specifically, the following elements must be addressed:
Ratio Analysis
Be sure to analyze and explain the ratios calculated, particularly noting risks and profitability. Be sure you address liquidity, solvency, and operational
efficiency.
Explain the changes in financial ratios. Has anything changed in these years of financial statements?
What are the reasons for these changes?
Analyze the changes in the financial reports regarding cash. Be sure to examine the statement of cash flows.
What are the reasons for these changes?
Describe the type of valuation method that the company uses and explain why it uses this method. What are the benefits of this method?
Common-Size (Percentage) Financial Statements
Be sure to analyze and explain the common size financials from the FSAP spreadsheet.
Compare results to industry data.
Summary
Compare the financial ratios for your company to the industry averages.
Provide a summary of the variances with your rationale.
Guidelines for Submission:
Prepare your paper using Microsoft Word. Follow APA formatting guidelines using appropriate headings, double spacing, 12-point Times New Roman font,
and one-inch margins. Support your information with scholarly sources cited in APA format. Additionally, submit your excel spreadsheet.
Assignment Grading Criteria
Points
Provided clear detailed explanations and analysis of the ratios and their variances.
30
Provided accurate common size financial statements with detailed explanations.
30
Provided a summary of the overall financial health of the organization with detailed explanations.
30
Formatted the paper and cited all sources using APA format.
10