Excel portion of the assignment:
1.
Conduct a Financial assessment on a typical
organization of your choice.
2.
Attempt to obtain a copy of their balance sheet, income statement, and any other pertinent information you can obtain.
3.
Use the
attached
form
and fill in representative, best-guess numerical values for each line item.
Written portion of the assignment:
1.
The paper should identify at least six issues on to base your assessment
2.
Use
the attached powerpoint of chapter 4
for the elements of your assessment.
3.
put together an APA paper assessing the organization's financial health. Conform to APA standards.
v Please use in text citation with each reference for each issue of the 6 issues.
v Please follow APA 7th
edition guidelines firmly.
v
Course Materials: Keown, A.J., Martin, J.D., Petty, J.W., & Scott, D.F. (2020). Foundations of finance (10th ed.). Upper Saddle River, NJ: Pearson Prentice Hall. ISBN: 0132339226
XYZ Balance sheet https://formswift.com/sem/static-non-state/balance-sheet?utm_source=google&utm_medium=cpc&utm_campaign=static__balance_sheet__search&u_adgroup=balance_sheet__b&u_device=c&u_country=us&u_producttype=formswiftdotcom&u_product=balance_sheet&u_landingpage=2019aa9&headline=Create%20A%20Free%20Balance%20Sheet%20Online&u_sitelinkid=53908&gclid=CjwKCAiA6seQBhAfEiwAvPqu1_O0V5Bqq1LaSdiEDNly0A1-TCu5KAGyXcThOUkccE2vSJrdXu46fhoCCJUQAvD_BwEFormSwift Balance Sheet for Assets Current Assets Cash Accounts Receivable Inventory Prepaid expenses Notes receivable Other current assets Total current assets Fixed assets Long-term investments Land Building Machinery and fixtures Other fixed assets Net fixed assets Other assets Goodwill Total assets Liabilities and equity Current liabilities Accounts payable Accrued wages Accrued payroll taxes Accrued employee benefits Interest payable Short-term notes Current portion of long-term debt Total current liabilities Long term liability Mortgage Other long-term liabilities Total long-term liabilities Owners equity Paid in capital Net income Total equity Total liabilities and equity Please make sure that total assets equals total liabilities and equity in your balance sheet. If the difference. The two size of the balance sheet is greater than zero, please review the values entered. https://formswift.com/sem/static-non-state/balance-sheet?utm_source=google&utm_medium=cpc&utm_campaign=static__balance_sheet__search&u_adgroup=balance_sheet__b&u_device=c&u_country=us&u_producttype=formswiftdotcom&u_product=balance_sheet&u_landingpage=2019aa9&headline=Create%20A%20Free%20Balance%20Sheet%20Online&u_sitelinkid=53908&gclid=CjwKCAiA6seQBhAfEiwAvPqu1_O0V5Bqq1LaSdiEDNly0A1-TCu5KAGyXcThOUkccE2vSJrdXu46fhoCCJUQAvD_BwE XYZ Income https://formswift.com/builder.php?documentType=income-statement&ses=02e40e6f0896d5eee72a23f4035164fb&key=267998070&utm_source=google&utm_medium=cpc&utm_campaign=static__income_statement__b&u_adgroup=income_statement&u_device=c&u_country=us&u_producttype=formfindrdotcom&u_product=income_statement&u_landingpage=2018aa2&headline=Create+A+Free+Income+Statement+Online&u_sitelinkid=88292&gclid=CjwKCAiA6seQBhAfEiwAvPqu12OkzuJGHgFIr0e0p1k4QSP7P48IxMk7ZbGKkIoxS78FimeAIbqC6xoCyvYQAvD_BwE#0FormSwift Income statement For the periodEnded Revenues Products Less returns and allowances Services Other Total revenue Costs Products Services Other Total cost Gross profit Operating expenses Gen. and administrative Insurance Non-recurring Payroll taxes Rent Research and development Salaries and wages Sales and marketing Utilities Other Total operating expenses Operating income Not operating, or other Interest revenue Interest expenses Gain on sale of assets Loss on sales of assets Gain from legal action Loss from legal action Depreciation and amortization Other game Other loss Total not operating other Pretax income Taxes Income tax expense Net income Sheet3 Sheet4 Sheet5 Sheet6 Sheet7 Sheet8 Sheet1 TABLE 21-1 Financial Ratio Analysis RatioValue Less Than 1Value = 1Value More Than 1 Current ratio = current assets/current liabilitiesDebts greater than assets; potentially major problemsDebts and assets are equalAssets greater than debts; current ratio of 2 is desirable Acid-test ratio = quick current assets / current liabilitiesCash flow could be a problemBusiness is in satisfactory conditionBusiness is in good financial condition Operating ratio = (COGS+OPERATING EXPENSES)/NET SALESDesirableMarginalUndesirable Gross profit margin ratio = (Gross profit from sales)/net sales0.25 to 0.40 is industry averageUncommon except for businesses with low turnover and high investmentUndesirable Asset turnover ratio = net sales / average total assets0.40 to 1.0 is industry averageUncommonUncommon Total debt to total assets ratio = total liabilities / total assets0.05 to 0.75 is industry averageDebt ratio is too highDebt ratio is dangerously high Foundations of Finance, Tenth Edition Foundations of Finance Tenth Edition Chapter 4 Evaluating a Firm’s Financial Performance Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved If this PowerPoint presentation contains mathematical equations, you may need to check that your computer has the following installed: 1) Math Type Plugin 2) Math Player (free versions available) 3) NVDA Reader (free versions available) 1 Learning Objectives 4.1 Explain the purpose and importance of financial analysis. 4.2 Calculate and use a comprehensive set of measurements to evaluate a company’s performance. 4.3 Describe the limitations of financial ratio analysis. Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved 2 The Purpose of Financial Analysis Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved The Purpose of Financial Analysis Financial analysis using ratios A popular way to analyze the financial statements is by computing ratios. A ratio is a relationship between two numbers, e.g., a given ratio of A:B = 30:10 means A is 3 times B. A ratio by itself may have no meaning. Hence, a given ratio is compared to ratios from previous years ratios of other firms or leaders in the same industry See Figure 4.1 for a financial analysis example. Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Figure 4.1 Financial Statement Data by Industry Norms for Software Publishers Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Uses of Financial Ratios: Within the Firm (1 of 3) Identify deficiencies in a firm’s performance and take corrective action. Evaluate employee performance and determine incentive compensation. Compare the financial performance of the firm’s different divisions. Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Uses of Financial Ratios: Within the Firm (2 of 3) Prepare, at both firm and division levels, financial projections. Understand the financial performance of the firm’s competitors. Evaluate the financial condition of a major supplier. Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Uses of Financial Ratios: Within the Firm (3 of 3) Financial ratios are used by Lenders in deciding whether or not to lend to a company. Credit-rating agencies in determining a firm’s credit worthiness. Investors (shareholders and bondholders) in deciding whether or not to invest in a company. Major suppliers in deciding to whether or not to extend credit to a company or in designing the specific credit terms. Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Measuring Key Financial Relationships Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Question 1: How Liquid Is the Firm? Can It Pay Its Bills? A liquid asset is one that can be converted quickly and routinely into cash at the current market price. Liquidity measures the firm’s ability to pay its bills on time. It indicates the ease with which noncash assets can be converted to cash to meet the financial obligations. Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved How Liquid Is the Firm? Liquidity is measured by two approaches: Comparing the firm’s current assets and current liabilities Examining the firm’s ability to convert accounts receivables and inventory into cash on a timely basis Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Measuring Liquidity: Perspective 1 Compare a firm’s current assets with current liabilities using: Current Ratio Acid Test or Quick Ratio Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Table 4.1 Walmart Income Statement for the Year Ending January 31, 2018 (expressed in millions, except per share data) (1 of 2) Sales$ 500,343 Cost of goods sold (373,396) Gross profit$ 126,947 Operating expenses:Blank Selling, general and administrative expenses$ (95,981) Depreciation expenses (10,529) Total operating expenses$(106,510) Operating income (earning before interest and taxes) $ 20,437 Interest expense (2,178) Non-operating losses (3,136) Earnings before taxes (taxable income) $ 15,123 Income taxes (5,261) Net income (earnings available to common shareholders) $ 9,862 Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Table 4.1 Walmart Income Statement for the Year Ending January 31, 2018 (expressed in millions, except per share data) (2 of 2) Additional information:Blank Number of shares outstanding (millions)3,007 Earnings per share$ 3.28 Dividends paid to stockholders$ 6,124 Dividends per share$ 2.04 Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Table 4.2 Walmart’s Balance Sheet for the Year Ending January 31, 2018 (expressed in millions) (1 of 2) Cash and cash equivalents$ 6,756 Accounts receivable 5,614 Inventories43,783 Prepaid expenses and other current assets3,511 Total current assets$ 59,664 Gross plant and equipment$202,298 Less accumulated depreciation(87,480) Net plant and equipment$114,818 Goodwill and other intangible assets 30,040 Total assets$ 204,522 Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Table 4.2 Walmart’s Balance Sheet for the Year Ending January 31, 2018 (expressed in millions) (2 of 2) Liabilities and EquityBlank Accounts payable $ 46,510 Accrued liabilities 24,031 Short-term notes 9,662 Total current liabilities$ 80,203 Long-term debt 45,179 Total debt$125,382 Stockholders' equityBlank Common stock (par value) $ 295 Paid-in capital 2,648 Retained earnings 76,197 Total equity$ 79,140 Total liabilities and equity$ 204,522 Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Current Ratio Current ratio compares a firm’s current assets to its current liabilities. Walmart has $0.74 in current assets for every $1 in current liabilities. Walmart’s liquidity is slightly less than that of Target, which has a current ratio of 0.95. Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved 17 Acid Test or Quick Ratio Quick ratio compares cash and current assets (minus inventory) that can be converted into cash during the year with the liabilities that should be paid within the year. Walmart has 15 cents in quick assets for every $1 in current debt. Walmart is slightly less liquid than Target, which has 20 cents for every $1 in current debt. Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved 18 Measuring Liquidity: Perspective 2 Measures a firm’s ability to convert accounts receivable and inventory into cash: Days in Receivables or Average Collection Period Inventory Turnover Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Days in Receivables (Average Collection Period) How long does it take to collect the firm’s receivables? Walmart (at 10.24 days) is slightly slower than Target (at 9.56 days) in collecting accounts receivable. Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved 20 Accounts Receivable Turnover How many times are the accounts receivable “rolled-over” each year? The conclusion is the same — Walmart (35.65X) is slightly slower than Target (38X) in collecting accounts receivable. Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved 21 Days in Inventory How long is the inventory held before being sold? Walmart carries inventory for a shorter time (42.80 days) than Target (61.81 days). Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved 22 Inventory Turnover How many times are the firm’s inventories sold and replaced during the year? The conclusion is the same—Walmart moves inventory much quicker (8.53X) than Target (5.91X). Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved 23 Question 2: Are the Firm’s Managers Generating Adequate Operating Profits from the Company’s Assets? This question focuses on the profitability of the assets in which the firm has invested. We consider the following ratios to answer the question: Operating Return on Assets Operating Profit Margin Total Asset Turnover Fixed Assets Turnover Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Figure 4.2 Walmart Operating Profits Resulting from Asset Investments Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved Operating Return on Assets (ORA) O R A indicates the level of operating profits relative to the firm’s total assets. Thus Walmart managers are generating 10 cents of operating profit for every $1 of assets, which is less than Target (11.1%). Copyright © 2020, 2017, 2014 Pearson