Objective: The objective of this assignment is to develop students' ability to analyze and interpret the financial health of a company using financial statements, ratio analysis, and key financial indicators. Company:

AlphaTech Inc. Industry: Technology (Comparable Industry Benchmarks Provided) Instructions: Use the financial statements provided to perform the following analysis:

1. Horizontal Analysis: Compare year-over-year changes in key financial statement items.

2. Vertical Analysis: Express key items as a percentage of total assets (for the balance sheet) and revenue (for the income statement).

3. Ratio Analysis: Compute and interpret at least six financial ratios.

4. Industry Benchmarking: Compare AlphaTech's financial performance to industry averages. Financial Statements for AlphaTech Inc.

(All values in $ millions) Income Statement Item

2023 2022 2021 Revenue 5,200 4,800 4,500 Cost of Goods Sold (COGS) 2,700 2,500 2,300 Gross Profit 2,500 2,300 2,200 Operating Expenses 1,200 1,100 1,000 Operating Profit 1,300 1,200 1,200 Interest Expense 120 100 80 Tax Expense 280 250 240 Net Income 900 850 880 Balance Sheet Item 2023 2022 2021 Cash & Equivalents 1,200 1,100 1,000 Accounts Receivable 700 650 600 Inventory 600 550 500 Total Current Assets 2,500 2,300 2,100 Fixed Assets (Net) 4,500 4,200 4,000 Total Assets 7,000 6,500 6,100 Accounts Payable 500 480 450 Short-term Debt 600 580 560 Total Current Liabilities 1,100 1,060 1,010 Long-term Debt 2,500 2,400 2,300 Shareholders' Equity 3,400 3,040 2,790 Total Liabilities & Equity 7,000 6,500 6,100 Industry Benchmarks for Comparison (Technology Industry) Ratio Industry Average Current Ratio 2.5 Debt-to-Equity 1.0 Gross Profit Margin 48% Net Profit Margin 18% Return on Assets (ROA) 14% Return on Equity (ROE) 26% Questions:

1. Horizontal Analysis: o Calculate the percentage change in Revenue, Gross Profit, Net Income, Total Assets, and Shareholders' Equity over the past three years. o Identify key trends in financial performance.

2. Vertical Analysis: o Express all balance sheet items as a percentage of total assets. o Express all income statement items as a percentage of revenue. o What insights can you derive from these percentages?

3. Ratio Analysis: Compute and interpret the following ratios for AlphaTech Inc. and compare them with industry benchmarks: o Liquidity Ratios: Current Ratio = (Total Current Assets / Total Current Liabilities) o Leverage Ratios: Debt-to-Equity Ratio = (Total Debt / Shareholders' Equity) o Profitability Ratios: Gross Profit Margin = (Gross Profit / Revenue) Net Profit Margin = (Net Income / Revenue) Return on Assets (ROA) = (Net Income / Total Assets) Return on Equity (ROE) = (Net Income / Shareholders' Equity)

4. Industry Analysis: o Compare AlphaTech's ratios with industry benchmarks. o Is the company performing better or worse than its competitors? o Provide a final investment recommendation based on the analysis. Formatting Guidelines: Word Count: 1,500 - 2,000 words All calculations in Tables Font & Spacing: Times New Roman, 12 pt, 1.5 line spacing