project1 guidance - MGT 326/526 Project 1 Ratio Analysis...

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MGT 326/526 Project 1: Ratio Analysis Purpose: 1. To attain further understanding of concepts and processes learned in class (primarily Ch 2) through practical application. 2. To increase skill with MS Excel ® . 3. To gain familiarity with print and online financial data sources. Requirements: Choose two companies from the same industry 1 . Find the balance sheet and income statement for each firm for the last five years 2 . Compute the following ratios: Current, Quick, Inventory T/O, Fixed Asset T/O; Total Asset T/O, DSO, Debt Ratio, TIE, Profit Margin, BEP, ROE, ROA, P/E Ratio and Mkt/Book Ratio. Conduct ratio analysis with respect to corresponding industry averages to assess the financial health of the two companies. Specific Tasks: 1. Write a brief synopsis of each firm. 2. Write the equation for each of the ratios listed above and state its intent (i.e. what it tells the analyst). 3. For the most recent annual accounting period (i.e. 2010 or 2009 if 2010 data is not available), compute each of the above listed ratios for both companies. 4. Find or compute the industry average for each of the above listed ratios. 3 5. Assess both firms with respect to each other and the industry averages. Explain what each ratio indicates for the companies you are assessing. 6. Identify and comment on any ratios that you feel may be suspicious or questionable. Explain why you think them to be questionable and describe what additional information you would need for clarification and suggest where you would look for it. Do this for at least one ratio but try to do as many ratios as possible. 7. Choose one ratio and conduct a trend analysis of that same ratio for both companies. This analysis should cover at least five years. Produce a chart that shows the trend for each company.
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