Fin 571 Week 3 Assignment

Ratio Analysis Problems

Ratio Analysis

(Individual Assignment)

 You may use excel or word.doc format for this assignment.
Please post your homework as a word.doc or excel file in the class discussion section below by the due date.

1.  Analysis of cost of goods sold problem.

                                                                                     1992       1993    1994

      Gross Profit Margin                                                      60%     55%     51% 

What is happening to cost of goods sold?  As was done in the week 2 online lecture on ratio analysis, please assume sales of 1 dollar each year as you do your analysis.  This problem follows the process shown in the Week 2 Ratio Analysis online lecture section titled: "Another Income Statement Analytical Approach: Percent of Sales"

  (5 points)

2.  Overhead (or Sales, General and Administrative Expense) problem. 

                                                                                 1992       1993    1994

   Gross Profit Margin                                                   40%        39%    41%

   Operating Margin (NOI/Sales)                                     15%        10%      5% 

What is happening to S,G and A (or overhead expenses)?  Please set up an illustration assuming sales of 1.00 dollar each year just as you did in problem number one. 

(5 points)

3. Balance Sheet Problem 

                                                                               1992       1993    1994

   Annual Sales Growth (over prior yr)                         + 1%         0%     +1%

   Current Ratio                                                          3.5X        2X      1.2X

   Average Collection Period                                    25 days   30 days  55 days 

What is happening to liquidity?  Why? What are some follow-up questions your would ask?  (5 points) 

4.  Using the data provided below, which is the better managed company?  Why?  Please support your answers by calculating appropriate ratios. (5 points) 

                              Company A                      Company B 

Sales              10 million dollars                    20 million dollars

Net Income       1 million dollars                      2 million dollars

Total Assets     10 million dollars                   15 million dollars 

Click the Assignment Files tab to submit your assignment.

Running head: FINANCIAL RATIO ANALYSISFinancial Ratio AnalysisFIN/571The University of PhoenixMr. Joey PorterDecember 11, 2016\Financial Ratio AnalysisThe purpose of week one’s assignment is to help us gain a better understanding of the financial statements used for corporate financial reporting and the key ratios used to make business decisions. The Fortune 500 Company that I have chosen to evaluate is Costco, which falls within the retail industry. Then I individually must review Costco’s balance sheet and income statement from their 2015 Annual Report, and then I have to calculate the following ratios using Microsoft Excel: Current Ratio, Quick Ratio, Debt Equity Ratio, Inventory TurnoverRatio, Receivables Turnover Ratio, Total Assets Turnover Ratio, Profit Margin (Net Margin) Ratio, and Return on Assets Ratio. As reported in Costco’s December 21, 2015 Annual Report (2016), they operated a total of 698 warehouse stores throughout the United States of America, Canada, as well as locations in Australia, Japan, Korea, Mexico, Spain, Taiwan, and the United Kingdom. During fiscal year

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