The new CFO e-mails you, asking for your help this week analyzing some competitor's financial statements. Knowing that there are over 20 different ratios that can be used to monitor and assess the financial health of a company, he wants to know which 5 ratios you would start with, why, what they mean, and to whom. Reply to him in an e-mail that includes the following:
Which 5 ratios do you feel are the best monitors of the health of a company, and why? For each of the 5 ratios you chose, in layman's terms:
Explain the meaning of each ratio. (What information does it provide?)
Do companies want the ratio to be a higher or a lower figure? Why? Which stakeholder(s) will be more interested in the ratios?
The next day, the CFO asks you, your new financial analyst, and the firm's marketing manager to come to his office. He hands you a file of financial statements from the company's two competitors in the computer hardware industry. He says that the CEO has requested a report analyzing the company's two main competitor's financial statements and predicting their next big moves. In turn, this will provide him with some guidance on how to prepare a counter strategy in the coming year for your company. He requests that the team do the following:
Decide on the 5 ratios that you will use to monitor the health of your 2 competitor companies. Find the most recent financial statements for both computer hardware industry competitors. The easiest Web site to use is www.msn.com. Type in the company symbol and go to "financial results" on the left side of the screen. Calculate (or find already calculated for you) the same 5 ratios you decided on for each of the 2 computer hardware industry competitor companies.
Write a report of 600-750 words to your CEO (with charts and/or tables) including the following: the results of the 2 competitor company's ratios an interpretation of the health of each company based on the ratios for each company Use the ratio results to make predictions about what each competitor company will do to improve each of those 5 ratios in the coming year. List and explain at least 2 specific challenges that the competitor company's managers may face when trying to improve these ratios. Completely and solely based on the team's research, ratio calculations, and predictions, explain which company the team believes is the stronger competitor your company faces, and why