Using the financial statements of your selected company, give a brief explanation of each ratio, how it is
used in business performance evaluation. Compute each of following ratios for the most recent year and
the previous year. Assume all sales are credit sales. Round all ratios to two decimal places.
Current ratio
Cash ratio
Inventory turnover
Accounts receivable turnover
Gross profit percentage
Debt ratio
Debt to equity ratio
Profit margin ratio
Asset turnover ratio
Rate of return on common stockholders' equity
Earnings per share
Price/earnings ratio
Dividend yield
Dividend payout
Compare the company's performance for the two most recent years. What do you see? Draw conclusions.
Base your answer on the company's ability to pay current liabilities, ability to sell merchandise and collect
receivables, ability to pay long-term debt, profitability, and attractiveness as an investment.
After reviewing all your answers for all essays in this course write your summary answering these
questions from both perspectives below:
Think as you are the portfolio manager at large corporation–Do you consider this an optimal analysis for
determining whether to invest in your selected corporation? Why or why not?
Think as you are the CFO of the selected company - How is your company performing? What areas need
attention/improvements? What would be your recommendation/plan of action?
Sample Solution