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https://www.purdueglobal.edu/ This is the login page Username: GabrealWhitten Password :: Bonner1350 1) Then go to, Financial Statement Analysis and click on content then you will see a digital book 2) Examine the Financial Performance of a Company(book) 3) Locate the “Case 1-3: Comparative Analysis, Credit and Equity” on page 61 of your text. Be sure to submit thoughtful and substantial answers to the questions following the case regarding the two companies analyzed. Provide the following information in a PowerPoint presentation to the management team deciding on which bank stock to select: Compute the current ratio, acid test ratio, accounts receivable turnover, inventory turnover, days’ sales in inventory, and days’ sales in receivables ratios for both companies. Identify by this analysis the company that you consider the better short-term credit risk and explain why. Compute the net profit margin, total asset turnover, return on total assets, and return on common stockholders’ equity for both companies. Assume each company paid a cash dividend of $1.50 per share and that each company’s stock can be purchased at $25 a share. Compute each company’s price earnings ratio and dividend yield. Identify which company’s stock you would recommend as the better investment and explain why. Assessment Instructions This project is to be submitted using Microsoft PowerPoint slideshow. It should include a title slide with your name, course number, your instructor’s name, date, and the subject of the presentation. Follow this with a brief statement that you (and you alone) produced the project. The project should include the following elements: Introduction bullet point slide summarizing the project and the companies. A slide summarizing the ratio analysis of the two companies A slide summarizing the credit risk analysis and decision A slide summarizing the asset and equity performance of both companies A slide summarizing stock performance and your investment advice A slide if needed for in-text citations and reference Each slide should include your speaker notes or audio note https://www.purdueglobal.edu/ This is the login page Username: GabrealWhitten1 Password: Bonner1350 you will go to Financial Statement Analysis Then go to, Financial Statement Analysis and click on content then you will see a digital book Locate the “Case 1-3: Comparative Analysis, Credit and Equity” on page 61 of your text. Be sure to submit thoughtful and substantial answers to the questions following the case regarding the two companies analyzed. Provide the following information in a PowerPoint presentation to the management team deciding on which bank stock to select: Compute the current ratio, acid test ratio, accounts receivable turnover, inventory turnover, days’ sales in inventory, and days’ sales in receivables ratios for both companies. Identify by this analysis the company that you consider the better short-term credit risk and explain why. Compute the net profit margin, total asset turnover, return on total assets, and return on common stockholders’ equity for both companies. Assume each company paid a cash dividend of $1.50 per share and that each company’s stock can be purchased at $25 a share. Compute each company’s price earnings ratio and dividend yield. Identify which company’s stock you would recommend as the better investment and explain why. Assessment Instructions This project is to be submitted using Microsoft PowerPoint slideshow. It should include a title slide with your name, course number, your instructor’s name, date, and the subject of the presentation. Follow this with a brief statement that you (and you alone) produced the project. The project should include the following elements: Introduction bullet point slide summarizing the project and the companies. A slide summarizing the ratio analysis of the two companies A slide summarizing the credit risk analysis and decision A slide summarizing the asset and equity performance of both companies A slide summarizing stock performance and your investment advice A slide if needed for in-text citations and reference Each slide should include your speaker notes or audio note MT480M1 Financial Statement Analysis These are the questions that have to be anwered Examine the Financial Performance of a Company MT482M1-01 | 2103C July 2021 Term Compute the current ratio, acid test ratio, accounts receivable turnover, inventory turnover, days’ sales in inventory, and days’ sales in receivables ratios for both companies. Identify by this analysis the company that you consider the better short-term credit risk and explain why. Compute the net profit margin, total asset turnover, return on total assets, and return on common stockholders’ equity for both companies. Assume each company paid a cash dividend of $1.50 per share and that each company’s stock can be purchased at $25 a share. Compute each company’s price earnings ratio and dividend yield. Identify which company’s stock you would recommend as the better investment and explain why. These are the questions that have to be anwered
Answered 6 days AfterJul 13, 2021

Answer To: https://www.purdueglobal.edu/ This is the login page Username: GabrealWhitten Password :: Bonner1350...

Ca answered on Jul 17 2021
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Slide 1
MT482M1-01 | 2103C July 2021 Term
In the given project two companies Datatech and Sigma are evaluated on the following basis.
Liquidity
Profitability
Efficiency
Credit Risk
Stock Performance
Summarizing the project and the companies
Liquidity Analysis
A good current ratio is between 1.2 to 2, which means that the business has 2 times more current assets than liabilities to covers its debts.
Quick Ratio of 1: 1  is considered to be appropriate. 
Sigma Limited has a higher current ratio when compared to Datatech limited it means its total assets would pay off its liabilities 2.5 times., although Quick Acid Ratio of both companies remains same and is appropriate
Ratio analysis of the two companies
Turnover Ratio
Datatech has lower days sale in account receivable which tell that it collect its amount from debtors in 18 days as compared to Sigma which takes 25days.
Debtor Turnover Ratio tells how many times a company's receivables are converted to cash in a period. Datatech is able to convert company's receivables to cash 20 times in a year.
An inventory turnover ratio between 5 and 10 is usually a good indicator that restock rate and sales are balanced, although every business is different.
    Datatech has higher inventory turnover ratio than Sigma, it tells how fast a company sells inventory, A low turnover implies weak sales and possibly excess inventory, also known as overstocking
. ... A high ratio, on the other hand, implies either strong sales or insufficient inventory.
The days sales of inventory (DSI) indicates the average time in days that a company takes to turn its inventory, including goods that are a work in progress, into sales. Datatech takes 63 days to convert its inventory, including goods that are a work in progress, into sales which is better than 90 days as of Sigma.
Conclusion- Datatech has lesser short-term credit risk as compared to Sigma as it has lower day sale in account receivable , better Debtor Turnover Ratio , better inventory turnover and lesser days sales of inventory.
a) Credit risk analysis and decision
Profitability Analysis
Sigma has higher Net Margin than Datatech. A high net profit margin means that a company is able to effectively control its costs and/or provide goods or services at a price significantly higher than its costs. Therefore, a high ratio can result from: Efficient management. Low costs (expenses)
Sigma has better ROA. Higher ROA than competitors indicates the company is doing a good job of increasing its profits with each investment dollar it spends. A falling ROA indicates the company might have over-invested in assets that have failed to produce revenue growth, a sign the company may be in some trouble.
Sigma has better ROE. The return on equity, or ROE, is defined as the amount of profit or net income a company earns per investment dollar. It reveals how much profit a company earns with the money shareholders have invested.
Conclusion- Sigma has outperformed Datatech in terms of higher Net margin, higher ROA and higher ROE.
Asset And Equity Performance
As an investor I will more likely invest in Datatech as it has lower credit risk, better price earning Ratio, even though the profit margin are lower than Sigma.
b) Stock performance and investment Advice
https://strategiccfo.com/net-profit-margin-analysis/#:~:text=Net%20Profit%20Margin%20Definition,converting%20sales%20into%20actual%20profit.&text=Under%20gross%20profit%2C%20fixed%20costs%20are%20excluded%20from%20calculation.
References
Ratio
DatatechSigma
Current Ratio = Current Assets / Current Liabilities
2.492.52
CA 150440.00233050.00
CL
60340.0092300.00
Current Ratio 2.49
2.52
Quick Ratio = (Cash & Cash Equivalents + Accounts Receivables) / Current Liabilities
QA
63000.0095600.00
CL
60340.0092300.00
Quick Ratio 1.04
1.04
LIQUIDITY
Example #1
    Let us take the example of Apple Inc.’s annual report for 2019 to illustrate the calculation of different ratios used in ratio analysis.
    As per the latest annual report, the following information is available. Based on the given information, calculate the liquidity,
    solvency, efficiency and profitability ratios of Apple Inc. for the year 2019.
    Particulars    Amount (in millions)
    Sales    $260,174
    COGS    $161,782
    EBIT    $63,930
    EBITDA    $76,477
    Interest Expense    $3,576
    Net Income    $55,256
    Total Debt    $108,047
    Total Assets    $338,516
    Net Fixed Assets    $37,378
    Total Equity    $90,488
    Current Assets    $162,819
    Current Liabilities    $105,718
    Cash & Cash Equivalents    $48,844
    Accounts Receivables    $22,926
    Inventories    $4,106
    Accounts Payable    $46,236
    Debt to Equity Ratio is calculated using the formula given below
    Net Fixed Asset Turnover Ratio is calculated using the formula given below
    Net Fixed Asset Turnover Ratio = Sales / Net Fixed Assets
    Sales    660000    780200
    Net Fixed Asset
    Net Fixed Asset Turnover Ratio    ERROR:#REF!
    Receivables Turnover Ratio is calculated using the formula given below
    Receivables Turnover Ratio     =     Sales / Accounts Receivable
    PE Ratio    P/E ratio is usually used to value mature and stable companies that earn profits. A high PE indicates that the stock is either overvalued (with respect to history and/or peers) or the company's earnings are expected to grow at a fast pace. But one must keep in mind that companies can boost their P/E ratio by adding debt (thereby constricting equity capital). Also, as future earnings estimates are subjective, it's better to use past earnings for calculating P/E ratios," says Vikas Gupta, executive vice president, Arthaveda Fund Management.
    PRICE-TO-BOOK VALUE    A P/BV ratio of less than one shows the stock is undervalued (value of assets on the company's books is more than the value the market is assigning to the company). It indicates a company's inherent value and is useful in valuing companies whose assets are mostly liquid, for instance, banks and financial institutions.
    DEBT-TO-EQUITY RATIO    Also, a company with low debt-to-equity ratio can be assumed to have a lot of scope for expansion due to more fund-raising options," he says.
        But it is not that simple. "It is industry-specific with capital intensive industries such as automobiles and manufacturing showing a higher figure than others. A high debt-to-equity ratio may indicate unusual leverage and, hence, higher risk of credit default, though it could also signal to the market that the company has invested in many high-NPV projects," says Vikas Gupta of Arthaveda Fund Management. NPV, or net present value, is the present value of future cash flow.
    OPERATING PROFIT MARGIN (OPM)    Higher OPM shows efficiency in procuring raw materials and converting them into finished products."
        It measures the proportion of revenue that is left after meeting variable costs such as raw materials and wages. The higher the margin, the better it is for investors.
    EV/EBITDA    A lower ratio indicates that a company is undervalued. It is important to note that the ratio is high for fast-growing industries and low for industries that are growing slowly," says Mukherjee of IIFL.
    PRICE/EARNINGS GROWTH RATIO    Generally, a company that is growing fast has a higher P/E ratio. This may give an impression that is overvalued. Thus, P/E ratio divided by the estimated growth rate shows if the high P/E ratio is justified by the expected future growth rate. The result can be compared with that of peers with different growth rates.
        A PEG ratio of one signals that the stock is valued reasonably. A figure of less than one indicates that the stock may be undervalued.
    RETURN ON EQUITY    ROE is net income divided by shareholder equity.
        "ROE of 15-20% is generally considered good, though high-growth companies should have a higher ROE. The main benefit comes when earnings are reinvested to generate a still higher ROE, which in turn produces a higher growth rate. However, a rise in debt will also reflect in a higher ROE, which should be carefully noted," says Mukherjee of IIFL.
        "One would expect leveraged companies (such as those in capital intensive businesses) to exhibit inflated ROEs as a major part of capital on which they generate returns is accounted for by debt," says Gupta of Arthaveda Fund Management.
    INTEREST COVERAGE RATIO    It is earnings before interest and tax, or EBIT, divided by interest expense. It indicates how solvent a business is and gives an idea about the number of interest payments the business can service solely from operations.
        One can also use EBITDA in place of EBIT to compare companies in sectors whose depreciation and amortisation expenses differ a lot. Or, one can use earnings before interest but after tax if one wants a more accurate idea about a company's solvency.
    CURRENT RATIO    This shows the liquidity position, that is, how equipped is the company in meeting its short-term obligations with short-term assets. A higher figure signals that the company's day-to-day operations will not get affected by working capital issues. A current ratio of less than one is a matter of concern.
        The ratio can be calculated by dividing current assets with current liabilities. Current assets include inventories and receivables.Sometimes companies find it difficult to convert inventory into sales or receivables into cash. This may hit its ability to meet obligations. In such a case, the investor may calculate the acid-test ratio, which is similar to the current ratio but with the exception that it does not include inventory and
    ASSET TURNOVER RATIO    It shows how efficiently the management is using assets to generate revenue. The higher the ratio, the better it is, as it indicates that the company is generating more revenue per rupee spent on the asset. Experts say the comparison should be made between companies in the same industry. This is because the ratio may vary from industry to industry. In sectors such as power and telecommunication , which are more asset-heavy, the asset turnover ratio is low, while in sectors such as retail, it is high (as the asset base is small).
    DIVIDEND YIELD    t is dividend per share divided by the share price. A higher figure signals that the company is doing well. But one must be wary of penny stocks (that lack quality but have high dividend yields) and companies benefiting from one-time gains or excess unused cash which they may use to declare special dividends. Similarly, a low dividend yield may not always imply a bad investment as companies (particularly at nascent or growth stages) may choose to reinvest all their earnings so that shareholders earn good returns in the long term.
        "A high dividend yield, however, could signify a good long-term investment as companies' dividend policies are generally fixed in the long run," says Gupta.
        While financial ratio analysis helps in assessing factors such as profitability, efficiency and risk, added factors such as macro-economic situation, management quality and industry outlook should also be studied in detail while investing in a stock.
https://www.businesstoday.in/story/new-call-indian-telcos-uk-nigel-eastwood/1/209380.html
Sheet1
        Ratio    Datatech    Sigma             Accounts receivable turnover, Sigma, 13.5 times    Required:
    LIQUIDITY    Current Ratio = Current Assets / Current Liabilities    2.49    2.52                        0
        CA    150440.00    233050.00             Identify the company that you consider to be the better short-term credit risk and explain why.
        CL    60340.00    92300.00            b    .  Assuming that each company paid cash dividends of $1.50 per share and each company’s stock can be purchased at $25 per share, compute their price-earnings ratios and dividend yields. Identify which company’s stock you would recommend as the better investment and explain why.
        Current Ratio    2.49    2.52            CASE 1–4
        Quick Ratio = (Cash & Cash Equivalents + Accounts Receivables) / Current Liabilities
        QA     63000.00    95600.00
        CL    60340.00    92300.00
        Quick Ratio    1.04    1.04
    Effeciency Ratio
        Days    '     Sales     in Accounts     Receivable=the number of days in the year (use 360 or 365) divided by the accounts receivable turnover
            18.03    25.64
        Receivables Turnover Ratio is calculated using the formula given below
        Receivables Turnover Ratio     =     Sales / Accounts Receivable
        Sales    660000.00    780200.00
        Opening Debtors     28800.00    53200.00
        Closing Debtors     36400.00    56400.00
        Average Debtors     32600.00    54800.00
        Receivables Turnover Ratio    20.25    14.24
        Inventory Turnover Ratio is calculated using the formula given below
        Inventory Turnover Ratio = COGS / Inventories
        COGS    485100.00    532500.00
        Opening Inventory     54600.00    106400.00
        Closing Inventory     83440.00    131500.00
        Average Inventory     69020.00    118950.00
        Inventory Turnover Ratio    7.03    4.48
        Days Sales in Inventory
        Closing Inventory     83440.00    131500.00
        COGS    485100.00    532500.00
        Days Sales in Inventory     62.78    90.14
        Asset Turnover Ratio is calculated using the formula given below
        Asset Turnover Ratio = Sales / Total Assets
        Sales    660000.00    780200.00
        Total Assets     434440.00    536450.00
        Asset Turnover Ratio    1.52    1.45
        Net Margin is calculated using the formula given below
        Net Margin = Net Income / Sales
        Net Income     67770.00    105000.00
        Sales    660000.00    780200.00
    PROFITABILITY RATIOS
        Net Margin    0.10    0.13
        Return on Total Asset (ROA) is calculated using the formula given below
        Return on Total Asset (ROA) = EBIT / Total Assets
        EBIT    174900.00    247700.00
        Total Assets    434440.00    536450.00
        Return on Total Asset    0.40    0.46
        Return on Total Equity (ROE) is calculated using the formula given below
        Return on Total Equity (ROE) = Net Income / Total Equity
        Net Income     67770.00    105000.00
        Total Equity    294300.00    344150.00
        Return on Total Equity    0.23    0.31
        The Price To Earnings Ratio is calculated by dividing current stock price by the earnings per share (EPS).
        Market value per share    ​    25    25
        EPS     1.94    2.56
    RATIO FOR INVESTOR EARNING    PRICE/EARNINGS RATIO    12.89    9.77
        DIVIDEND YIELD
        The dividend yield–displayed as a percentage–is the amount of money a company pays shareholders for owning a share of its stock divided by its current stock price.
        Dividend Paid     1.5    1.5
        Market value per share    ​    25    25
        PRICE/EARNINGS ...
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