Smart investors also execute due diligence by performing a bit of financial statement analysis (also known as ratio analysis), where financial statement numbers are used to evaluate three characteristics of an organization’s performance: (1) liquidity, (2) profitability, and (3) solvency.
By successfully completing this assignment , you will demonstrate your proficiency in the following course competencies and assignment criteria:
This assessment includes two parts. Use the templates provided as you complete each part. Both of the templates are linked in the Resources under the Required Resources heading. Note that for Part 2 you will use the template for data but will create your own document to submit.
Making sense of accounting data on financial statements can be difficult. Thankfully, combining numbers from income statements, balance sheets, and other data provides a starting point to analyze a company’s financial results. You now have the opportunity to demonstrate your prowess by identifying and computing financial ratios.
Using the Assessment 5, Part 1 Template, analyze and compute the necessary financial ratios. The Financial Statements worksheet in the template contains the income statement, balance sheets, and additional information needed. The Ratio Analysis worksheet contains space for your calculations and answers.
What does the calculation of a financial statement ratio represent? How does one year compare to another? Is there a trend to the ratio data? Is the trend positive or negative? What can be done to change the trend? These are some of the questions that can be answered when the ratio data is interpreted. For this part of the assessment, demonstrate your ability to interpret the results of a multi-year financial ratio analysis.
On the Assessment 5, Part 2 Template you will find selected ratios for a company over a two-year period. Compare the ratios, and in a separate document (Word or Excel), submit your answers to the following questions:
Submit the completed template for Part 1 and the document you created with answers to the questions for Part 2 for this assignment .
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