Project

Company Name: Alphabet
Symbol: GOOG

Please answer Part A, Part B and Part C

I have attached the PPT for ratios calculation please use that PPT for calculating the ratios

Part A: Compute the following ratios for two years. You may use Excel to compute your ratios.

1.     Debt ratio

2.     Gross profit margin

3.     Free cash flow

4.     Times interest earned

5.     Accounts receivable turnover

6.     Inventory turnover

Part B: Prepare a DuPont Analysis of ROE for two years, including computations of

1.     Return on Sales

2.     Asset Turnover

3.     Return on Assets

4.     Financial Leverage

5.     Return on Equity

Evaluate the ratio trends. Your evaluation should be consistent with your calculations for the two (2) years.

Part C:

Write a 5-6 page report evaluating trends in all of the above ratios. Discuss whether your company’s profitability, efficiency, liquidity, and solvency are improving or deteriorating. Suggest ways the company can improve the ratios that show problems. The report should be well written with a cover page, introduction, the body of the paper (with appropriate subheadings), conclusion, and reference page. References must be appropriately cited. Use APA throughout.

Format: Double-spaced, one-inch margins, using a 12-point Times New Roman font.

The BA 620 Financial Management

Group Project Part 2/Financial Analysis

 

The purpose of the second part of the comprehensive project is to compute financial statement ratios. Based on the company you selected in Part I, complete the following:

 

A.    Compute the following ratios for two years. You may use Excel to compute your ratios.

1.     Debt ratio

2.     Gross profit margin

3.     Free cash flow

4.     Times interest earned

5.     Accounts receivable turnover

6.     Inventory turnover

 

The BA 620 Financial Management

Group Project Part 2/Financial Analysis

 

The purpose of the second part of the comprehensive project is to compute financial statement ratios. Based on the company you selected in Part I, complete the following:

 

B.    Prepare a DuPont Analysis of ROE for two years, including computations of

1.     Return on Sales

2.     Asset Turnover

3.     Return on Assets

4.     Financial Leverage

5.     Return on Equity

 

C.    Evaluate the ratio trends. Your evaluation should be consistent with your calculations for the two (2) years.

 

The BA 620 Financial Management

Group Project Part 2/Financial Analysis

 

Write a 3-6 page report evaluating trends in all of the above ratios. Discuss whether your company’s profitability, efficiency, liquidity, and solvency are improving or deteriorating. Suggest ways the company can improve the ratios that show problems.

The report should be well written with a cover page, introduction, the body of the paper (with appropriate subheadings), conclusion, and reference page.

References must be appropriately cited.

Use APA throughout.

Format: Double-spaced, one-inch margins, using a 12-point Times New Roman font.

 

Financial Analysis: Group Project, Part 2

Based on your company’s financial statements, calculate and comment on each of the ratios identified listed in your Group Project, Part 2 Guidelines.

 

There are several sources you can use to find the financial statements of the company assigned to your group including:

 

https://finance.yahoo.com/ If you use this link, search for your company. This site the very user friendly and easier to understand. However, you are encouraged to use other sources.

 

 

Financial Analysis: Group Project, Part 2

Inventory turnover measures the activity, or liquidity, of a firm’s inventory.

 

Inventory turnover = Cost of goods sold ÷ Inventory

 

The average age of inventory is the average number of days’ sales in inventory.

 

Average Age of Inventory = 365 ÷ Inventory turnover

Financial Analysis: Group Project, Part 2

The Accounts Receivable Turnover: This ratio gives the business a solid idea of how efficiently it collects on debts owed toward credit it extended, with a lower number showing higher efficiency. The ratio can be calculated in the following ways:

Beginning accounts receivable + Ending accounts receivable)/2 = Average Accounts Receivable

1. Sales/Average Accounts Receivable = Accounts Receivable Turnover

OR

2. Sales/Ending Accounts Receivable

 

Either method is acceptable.

 

 

Financial Analysis: Group Project, Part 2

Total asset turnover indicates the efficiency with which the firm uses its assets to generate sales.

 

Total asset turnover = Sales ÷ Total assets

The debt ratio measures the proportion of total assets financed by the firm’s creditors.

 

Debt ratio = Total liabilities ÷ Total assets

Financial Analysis: Group Project, Part 2

Free Cash Flow: This is the cash a firm earns after taking into consideration cash outflows (payments) that support its operations and maintain its capital assets. It is the cash that remains after all expenses including capital investment are made. See the following site for additional information on how to calculate free cash flow:

https://corporatefinanceinstitute.com/resources/knowledge/valuation/fcf-formula-free-cash-flow/

 

Financial Analysis: Group Project, Part 2

The debt-to-equity ratio (same as Financial Leverage ratio) measures the relative proportion of total liabilities and common stock equity used to finance the firm’s total assets.

 

Debt to equity = Total liabilities ÷ Common stock equity

The times interest earned ratio measures the firm’s ability to make contractual interest payments; sometimes called the interest coverage ratio.

Times interest earned ratio = EBIT ÷ Interest The figure for earnings before interest and taxes (EBIT) is the same as that for operating profits shown in the income statement.

Financial Analysis: Group Project, Part 2

Gross profit margin measures the percentage of each sales dollar remaining after the firm has paid for its goods.

 

Financial Analysis: Group Project, Part 2

Return on Sales measures the percentage of each sales dollar remaining after all costs and expenses, including interest, taxes, and preferred stock dividends, have been deducted.

Return on Sales = Earnings available for common stockholders ÷ Sales

Return on Sales may also be computed as follows: Net Income/Sales

Financial Analysis: Group Project, Part 2

The return on total assets measures the overall effectiveness of management in generating profits with its available assets.

Return on total assets (ROA) = Earnings available for common stockholders ÷ Total assets

Return on Total Assets may also be computed as follows: Net Income/Total Assets

The return on equity measures the return earned on common stockholders’ investment in the firm.

Return on Equity (ROE) = Earnings available for common stockholders ÷ Common stockholder’s equity

 

Return on Equity may also be computed as follows: Net Income/Common Stockholders’ equity

 

Financial Analysis: Group Project, Part 2

The DuPont system first brings together the net profit margin, which measures the firm’s profitability on sales, with its total asset turnover, which indicates how efficiently the firm has used its assets to generate sales.

ROA = Net profit margin  Total asset turnover

 

Net Profit Margin = Net Income/Sales

 

Financial Analysis: Group Project, Part 2

The DuPont system first brings together the net profit margin, which measures the firm’s profitability on sales, with its total asset turnover, which indicates how efficiently the firm has used its assets to generate sales.

ROA = Net profit margin  Total asset turnover

 

 

 

Financial Analysis: Group Project, Part 2

The modified DuPont Formula relates the firm’s return on total assets to its return on common equity. The latter is calculated by multiplying the return on total assets (ROA) by the financial leverage multiplier (FLM), which is the ratio of total assets to common stock equity:

ROE = ROA  FLM

 

 

Financial Analysis: Group Project, Part 2

Your Paper Should Include:

 

Introduction: Provide a general introduction to your paper. (0.5-1 page)

Calculation of Ratios: In this section, provide complete calculation of each ratio. Show the formulas and numbers you used. You may use excel. If you use excel, please attach your excel worksheet. You will lose points if your paper does not have the required calculationsin good form. Your calculations should be for 2 years.

 

Financial Analysis: Group Project, Part 2

Your Paper Should Include:

 

Analysis: In this section, provide an analytical comments on the ratios. Ratios themselves do not tell us anything unless they are explained. Discuss the ratios in this section and comments on the trends of each ratio for the 2 years.

Financial Analysis: Group Project, Part 2

Your Paper Should Include:

 

Conclusion: In this section, provide an analytical summary of Group Project, Part 2. Suggest ways the company can improve the ratios that show problems.

Financial Analysis: Group Project, Part 2

Your Paper Should Include:

 

Reference: Provide a separate reference page. All work in your reference should be cited within the body of your work.

Financial Analysis: Group Project, Part 2

Key Points to Earning Good Grade on Your Group Project

Organize your work: You will lose points if your paper is not organized as outline in this PPT

Provide Cover Page to include the class information, professor, group members who participated, and date. Include only the group members who participated.

Organize your work: Label each section/problem clearly.

Use APA throughout. Include appropriate in-text citations and references as needed.

Avoid copy-and-paste. High Turnitin score (greater than 25%) will be investigated and may result to zero grade.

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