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TERM PROJECT-Ratio Analysis

TERM PROJECT-Ratio Analysis - the effect of managerial...

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Ratio Analysis Project 1) Compare the ratios for 3 consecutive years for the same company. Evaluate the trend in the ratios and consider the effect of a change in the general business/economic conditions during these 3 years. 2) Compare a company’s ratios with industry averages over 2 years. Also discuss if comparison with industry averages makes sense for that industry. Find the industry averages for the ratios by doing a search on the internet. 3) Compare two companies in the same industry for the same year. Discuss how differences in accounting methods (FIFO vs. LIFO, St. line vs. accelerated depreciation, showing marketable securities at cost or market value, write-down of marketable securities or other assets when their market values decline vs. no write-downs and continuing to show them at cost, and any other accounting differences between the 2 firms). Look at the footnotes for the accounting methods used. 4) Compare two companies in the same industry for the same year as in 3) above. Consider
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Unformatted text preview: the effect of managerial strategies (for example, using liberal credit terms or holding huge amounts of inventory to increase sales vs. no credit or very low inventories to reduce costs; investing in marketable securities vs. expanding the business with your excess cash; borrowing a lot versus issuing shares when funds are needed; paying out dividends to make certain shareholders happy vs. using excess cash for growth). Look at the footnotes and management’s discussion of operations and president’s letter to shareholders at the beginning of the annual reports for clues). 5) Compare 2 companies in different industries for the same year. See how industry differences (for ex. a capital industry vs. non-capital intensive industry; retail firm vs. manufacturing firm etc. lead to differences in the ratios and explain why. At least 2 groups should choose each topic. Step by step instructions will be under assignments related to this project. Have fun...
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