{"id":21215,"date":"2023-05-31T15:12:29","date_gmt":"2023-05-31T15:12:29","guid":{"rendered":"https:\/\/www.goodacademic.com\/blog\/questions\/mt217m2-2-analyze-financial-statements-ratios-used-to-measure-the-financial-performance-of-a-business-entity\/"},"modified":"2023-05-31T15:12:29","modified_gmt":"2023-05-31T15:12:29","slug":"mt217m2-2-analyze-financial-statements-ratios-used-to-measure-the-financial-performance-of-a-business-entity","status":"publish","type":"questions","link":"https:\/\/www.goodacademic.com\/blog\/questions\/mt217m2-2-analyze-financial-statements-ratios-used-to-measure-the-financial-performance-of-a-business-entity\/","title":{"rendered":"MT217M2-2: Analyze financial statements ratios used to measure the financial performance of a business entity."},"content":{"rendered":"

*** PLEASE READ EVERY DETAIL WITH INSTRUCTIONS ***<\/h2>\n

There will be some calculations this is 3 Parts !!!!!!!!!!!!<\/span><\/h2>\n


<\/span><\/h2>\n


<\/span><\/h2>\n


<\/span><\/h2>\n

Learn: Reading
\nand Research <\/span><\/span><\/h2>\n

Read
\nthe following chapter from your textbook:<\/span><\/strong><\/span><\/p>\n

\u25cf      
\n<\/span><\/span><\/span>Chapter 3:<\/span><\/b> <\/span>\u201cUnderstanding
\nFinancial Statements<\/span>\u201d<\/span><\/span><\/p>\n

\u25cf      
\n<\/span><\/span><\/span>Chapter 4:<\/span><\/b> \u201cFinancial Analysis: Sizing Up Firm Performance\u201d<\/span><\/span><\/p>\n

Chapter
\nSummaries<\/span><\/b><\/p>\n

Chapter 3 introduces the use of financial
\nstatements, how they are made, and how managers interpret the information. This
\nchapter will also cover the federal income tax system and how it relates to
\ncorporate taxation and personal taxation.<\/span><\/p>\n

Chapter 4 explains how to evaluate future cash
\nflows for a company. It explains how financial statements help with financial
\nratios to determine a company\u2019s financial health and value. It will discuss the
\nincentives for managers to make decisions that will increase shareholder value.<\/span><\/p>\n

Competency Assessment<\/span><\/h2>\n

 <\/span><\/p>\n

This
\ncompetency assessment assesses the following Outcome(s):<\/span><\/span><\/p>\n

 <\/span><\/b><\/p>\n

MT217M2-2:<\/span><\/b> Analyze
\nfinancial statements ratios used to measure the financial performance of a
\nbusiness entity.<\/span><\/p>\n

PC-1.1: <\/span><\/b>Engage in a team setting with
\nprofessional integrity and respect.<\/span><\/span><\/b><\/p>\n

 <\/span><\/p>\n

Financial
\nstatement analysis is the process of analyzing a company’s financial statements
\nto make better economic decisions. The process for financial statement analysis
\nincludes specific techniques for evaluating risks, performance, and future
\nprospects of an organization.<\/span><\/p>\n

 <\/span><\/p>\n

This
\nassessment is separated into three parts and based on a fictitious company. In
\nPart 1, you will use the Balance Sheet and Income Statement to calculate the
\nfive categories of ratios. You will calculate and explain the significance of
\nliquidity, activity, financing, profitability, and market value, and provide a
\nyear-to-year comparison of assessed financial trends. In Part 2, you will
\ncompose an analytical study to assist the CEO of your company to determine if
\nABC Company, a technology company dealing with software and hardware, would be
\na good investment as an acquisition.<\/span><\/p>\n

 <\/span><\/b><\/p>\n

Part 1<\/span><\/h1>\n

You
\nwill use this<\/span> <\/span><\/a>Excel<\/span><\/a>\u00ae<\/span><\/sup><\/a> workbook<\/span><\/a> with two worksheets to assist
\nyou in completing this part of the assessment. The first worksheet is the
\nBalance Sheet and Income Statement for ABC Company. The second worksheet
\ncontains a breakdown of categories of ratios where you will complete the
\ncalculations for each ratio. You will also enter the formula written out as to
\nwhat information you have used to do the calculations.<\/span><\/p>\n

 <\/span><\/p>\n

You are
\ngoing to use the five classifications of financial ratios to assess the
\nfinancial performance of ABC Company.<\/span><\/p>\n

 <\/span><\/p>\n

Instructions<\/span><\/b><\/p>\n

You will
\npresent a definition of the classification by citing the course text and other
\nscholarly sources.<\/span><\/p>\n

 <\/span><\/p>\n

Your
\npaper should include a measure of, and analysis of, financial outcomes based on
\nthe ratios for each financial ratio classification (i.e., the liquidity
\nclassifications of ratios are based upon the quick and current ratio outcomes).<\/span><\/p>\n

 <\/span><\/p>\n

You
\nwill calculate ratios for each classification for the 3 years of data (i.e.,
\nthe current ratio may have been 1.5 the first year, 1.35 the second year, and
\n.75 in the most recent year). It is based on these results that you will
\nmeasure financial performance, or trends, from one year to the next. It is
\nimperative that the ratios numbers, and quantitative outcomes, support your
\nanalysis.<\/span><\/p>\n

 <\/span><\/p>\n

1. <\/b>Using the data from the Income
\nStatement and Balance Sheet, provide the correct calculation of the liquidity
\nratios and an assessment of the company\u2019s ability to maintain liquidity and the
\nmanagement of current assets and current liabilities. Include the proper
\nassessment of outcomes as positive or negative trends when all ratio outcomes
\nare factored as a group.<\/span><\/p>\n

 <\/span><\/b><\/p>\n

Liquidity Ratios<\/span><\/b><\/p>\n

\u25cf       <\/span><\/span><\/span>Current Ratio<\/span><\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Quick Ratio<\/span><\/span><\/p>\n

 <\/span><\/p>\n

2. <\/b>Using the data from the Income
\nStatement and Balance Sheet, provide the correct calculation of the activity
\nratios and an assessment of the company\u2019s ability to maintain liquidity.
\nInclude the proper assessment of outcomes as positive or negative trends when
\nall four ratio outcomes are factored in as a group.<\/span><\/p>\n

 <\/span><\/p>\n

Activity Ratios<\/span><\/b><\/p>\n

\u25cf       <\/span><\/span><\/span>Inventory Turnover<\/span><\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Accounts Receivables Turnover<\/span><\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Total Asset Turnover<\/span><\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Average Collection Period<\/span><\/span><\/p>\n

 <\/span><\/p>\n

3. Using
\nthe data from the Income Statement and Balance Sheet, provide the correct
\ncalculation of the financing ratios. Include the proper assessment of outcomes
\nas positive or negative trends when all three ratio outcomes are factored as a
\ngroup.<\/span><\/p>\n

 <\/span><\/p>\n

Financing Ratios<\/span><\/b><\/p>\n

\u25cf       <\/span><\/span><\/span>Debt Ratio<\/span><\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Debt-to-Equity Ratio<\/span><\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Times Interest Earned Ratio<\/span><\/span><\/p>\n

 <\/span><\/b><\/p>\n

4. Using
\nthe data from the price per share data, the Income Statement, and the Balance
\nSheet, provide the correct calculation for the market value ratios below.<\/span><\/p>\n

 <\/span><\/p>\n

Market Value Ratios<\/span><\/b><\/p>\n

\u25cf       <\/span><\/span><\/span>Earnings per Share (EPS)<\/span><\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Price Earnings (PE)<\/span><\/span><\/p>\n

 <\/span><\/b><\/p>\n

5. Using
\nthe data from the Income Statement and Balance Sheet, provide the correct
\ncalculation of these four profitability ratios and an assessment of the
\ncompany\u2019s ability to maintain, if not improve, profitability based on the
\namounts of equity, assets, and levels of profits from sales. Include the proper
\nassessment of outcomes as positive or negative trends when all four ratio
\noutcomes are factored as a group.<\/span><\/p>\n

 <\/span><\/p>\n

Profitability Ratios<\/span><\/b><\/p>\n

\u25cf       <\/span><\/span><\/span>Return on Equity (ROE)<\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Return on Assets (ROA)<\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Net Profit Margin<\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Operating Profit Margin<\/span><\/p>\n

 <\/span><\/p>\n

Part 2<\/span><\/h1>\n

 <\/span><\/b><\/p>\n

In this
\npart of your assessment, you will compose an analytical study reporting your
\nresults from Part 1. The CEO of your company is forming a task force to review
\nthe financials and present a review for the acquisition of ABC Company. Based
\non ABC\u2019s previous 3 years of financials, determine if this would be a good
\nacquisition. You must form a task force to complete the task.<\/span><\/p>\n

 <\/span><\/p>\n

The
\nCEO would like most of the departments to participate in the process. Using
\neach department\u2019s area of expertise, what information would each of the
\nfollowing departments contribute to the final decision? Provide a minimum
\none-paragraph response for each department.<\/span><\/b><\/p>\n

 <\/span><\/b><\/p>\n

\u25cf      
\n<\/span><\/span><\/span>Finance Department<\/span><\/b><\/p>\n

\u25cf      
\n<\/span><\/span><\/span>Sales Department<\/span><\/b><\/p>\n

\u25cf      
\n<\/span><\/span><\/span>Marketing Department<\/span><\/b><\/p>\n

\u25cf      
\n<\/span><\/span><\/span>Human Resources<\/span><\/b><\/p>\n

\u25cf      
\n<\/span><\/span><\/span>Legal Department<\/span><\/b><\/p>\n

 <\/span><\/p>\n

Part 3<\/span><\/h1>\n

 <\/span><\/p>\n

After
\nyou have provided their input on the effect the acquisition will have on their
\ndepartment, perform an overall analysis to explain your recommendation to the
\nCEO. Your analysis should include the following:<\/span><\/p>\n

 <\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Explain how the company is trending
\nbased on the year-over-year ratios.<\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Compare the company to the industry
\naverage in Appendix A in the Excel workbook in areas of profitability,
\nmanagement effectiveness, and efficiency.<\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Based on the above, summarize the
\npros and cons of ABC Company using both the year-over-year ratio analysis from
\nPart 1 and the industry average comparisons from Part 3.<\/span><\/p>\n

\u25cf       <\/span><\/span><\/span>Provide your final recommendation
\nas to whether or not the CEO should invest in ABC Company.<\/span><\/p>\n

 <\/span><\/p>\n

Your paper should follow this
\nformat:<\/span><\/b><\/p>\n

 <\/span><\/b><\/p>\n

\u25cf      
\n<\/span><\/span><\/span>Title page<\/span><\/b><\/p>\n

\u25cf      
\n<\/span><\/span><\/span>Introduction: the purpose of the analysis<\/span><\/b><\/p>\n

\u25cf      
\n<\/span><\/span><\/span>Analysis with subheadings of Part 1, Part 2, and Part 3<\/span><\/b><\/p>\n

\u25cf      
\n<\/span><\/span><\/span>Recommendation (overall conclusion)<\/span><\/b><\/p>\n

\u25cf      
\n<\/span><\/span><\/span>Reference page<\/span><\/b><\/p>\n","protected":false},"excerpt":{"rendered":"

*** PLEASE READ EVERY DETAIL WITH INSTRUCTIONS *** There will be some calculations this is 3 Parts !!!!!!!!!!!! Learn: Reading and Research Read the following chapter from your textbook: \u25cf       Chapter 3: \u201cUnderstanding Financial Statements\u201d \u25cf       Chapter 4: \u201cFinancial Analysis: Sizing Up Firm Performance\u201d Chapter Summaries Chapter 3 introduces the use of financial statements, how […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","meta":[],"disciplines":[676],"paper_types":[],"tagged":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.goodacademic.com\/blog\/wp-json\/wp\/v2\/questions\/21215"}],"collection":[{"href":"https:\/\/www.goodacademic.com\/blog\/wp-json\/wp\/v2\/questions"}],"about":[{"href":"https:\/\/www.goodacademic.com\/blog\/wp-json\/wp\/v2\/types\/questions"}],"author":[{"embeddable":true,"href":"https:\/\/www.goodacademic.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.goodacademic.com\/blog\/wp-json\/wp\/v2\/comments?post=21215"}],"version-history":[{"count":0,"href":"https:\/\/www.goodacademic.com\/blog\/wp-json\/wp\/v2\/questions\/21215\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.goodacademic.com\/blog\/wp-json\/wp\/v2\/media?parent=21215"}],"wp:term":[{"taxonomy":"disciplines","embeddable":true,"href":"https:\/\/www.goodacademic.com\/blog\/wp-json\/wp\/v2\/disciplines?post=21215"},{"taxonomy":"paper_types","embeddable":true,"href":"https:\/\/www.goodacademic.com\/blog\/wp-json\/wp\/v2\/paper_types?post=21215"},{"taxonomy":"tagged","embeddable":true,"href":"https:\/\/www.goodacademic.com\/blog\/wp-json\/wp\/v2\/tagged?post=21215"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}