Consider a publicly held company whose products you are familiar with. Some examples might include: Access the

Question:

Consider a publicly held company whose products you are familiar with. Some examples might include:

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Access the company’s public website and search for its most recent annual report. (Some companies will provide access to their financial data through an “investor relations” link, while others will provide a direct link to their “annual reports.”) After locating your company’s most recent annual report, open the file and review its contents. After reviewing the annual report for your selected company, prepare answers to the following questions:

a. Prepare common-size income statements and common-size balance sheets for the past two years. What significant trends can you identify from these common-size statements?

b. Calculate the following ratios for the past two years. (Use the ratio definitions in Exhibit 4.6.)
Gross profit margin ratio Cash and marketable securities to total assets
Return on sales Quick ratio
Return on assets Current ratio
Return on shareholders’ equity Accounts payable turnover
Receivable turnover Days’ payable period
Receivable collection period Long-term debt to total assets
Inventory turnover Long-term debt to shareholders’ equity
Inventory-on-hand period Interest coverage ratio
Asset turnover

What significant trends in the company’s profitability, asset management, liquidity, or solvency can you identify from your calculations?

c. Identify several key competitors of your selected company. Go to Yahoo.Finance.com and benchmark your company against its key competitors on the following metrics:
Market capitalization Return on assets Return on sales Return on equity

d. Review the company’s long-term debt footnotes. Is the company subject to any debt covenants? If so, what are the covenants and is the company currently in compliance with the covenant(s)?

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