Please do not use JPM and BOA.

FINANCIAL RATIO ANALYSIS ASSIGNMENT

Financial ratios provide a method for standardizing the financial information in the income statement and balance sheet. Ratios can help us answer the following questions about the firms financial health:

Question	Category of Ratios Used to Address the Question
1. How liquid is the firm? Will it be able to pay its bills as they come due?	LIQUIDITY RATIOS
2. How has the firm financed the purchase of its assets?	CAPITAL STRUCTURE RATIOS
3. How efficient has the firms management been in utilizing its assets to generate sales?	ASSET MANAGEMENT EFFICIENCY RATIOS
4. Has the firm earned adequate returns on its investments?	PROFITABILITY RATIOS
5. Are the firms managers creating value for shareholders?	MARKET VALUE RATIOS

When analyzing ratios, it is critical that you always compare and contrast the financial ratios of one business with its industry average and/or its peer competitors. For example, knowing that the current ratio for Coca Cola is 1.03 is somewhat useful, but knowing what Pepsis current ratio also allows us to compare and contrast direct competitors with one another. This type of analysis, provides insight into the management performance of a company, as well as provide a platform for additional questions i.e. why does Coke have a lower current ratio than Pepsi?

ASSIGNMENT

In this assignment, you will compare and contrast two publicly traded firms (a company that has shares of stock trading on the stock exchange) from the same industry (i.e. Coke and Pepsi), and analyze their financial ratios. Once you complete the following steps, fill out the assignment form at the bottom of this page, save the file, and then upload this file to this blackboard assignment.

STEP 1: Identify two businesses within the same industry that you are going to analyze.

STEP 2: Identify a source website that you will use to gather the data. For example, if you go to http://finance.yahoo.com/q?s=ko&ql=1 you will see some basic data for Coca Cola. On the left hand menu are various options that provide detailed financial data. For example if you scroll down on the left hand tool bar to where it says Financials, you will see links to the income statement, balance sheet, and statement of cash flows. If you wanted to calculate the current ratio, you would click on the balance sheet to see the data that would allow you to calculate the current ratio.

Another tool on the left hand menu is Key Statistics. This section provides you with some of the financial ratios already calculated. You do not need to use Yahoo Finance for this assignment. There are many other websites (wsj.com, usatoday.com, msnbc.com etc.) that have the data you will need to complete this assignment.

STEP 3: In addition to some basic information, calculate the following financial ratios: current ratio, quick ratio, gross profit margin, operating profit margin (EBIT), price/earnings ratio, debt ratio, total asset turnover ratio, return on equity, and book value.

STEP 4: Fill out the fields below and then your summary analysis

	Company 1	Company 2
	(type name of first company here)	(type name of second company here)
Ticker symbol
Stock price
Annual revenue
Market capitalization
Current ratio
Quick Ratio
Gross profit margin
Operating profit margin
Price/earnings ratio
Debt ratio
Total asset turnover ratio
Return equity (ROI)
Book value

SUMMARY ANALYSIS: Describe below what the ratios above indicate. Which company appears to have a stronger financial profile? Why does one company have stronger or weaker ratios? What is ratio analysis used for? What was the source you used to gather your data (name and link of the website you used.