Financial Statement Analysis and EPS Forecasting Report (Financial Ratios solved)

Financial Statement Analysis and EPS Forecasting Report

Select a firm of your choice and carry out analysis of the following financial statements:

• Balance sheet
• Income statement
•  Cash flow statement

Calculate the ratios for the organization:

1. Short-term solvency, or liquidity, ratios

• Current ratio = (Total assets-Total equity)/(Total assets)
• Quick ratio = (Current assets-Inventory)/(Current liabilities)
• Cash ratio = (Cash)/(Current liabilities)

   2. Long-term solvency, or financial leverage, ratios

• Total debt ratio =[( (Total assets-Total equity)]/(Total assets)
• Debt-equity ratio = (Total debt)/(Total equity)
• Equity multiplier = Total assets/Total equity
• Times interest earned ratio = (EBIT)/(Interest)
• Cash coverage ratio = [(EBIT+Depreciation)]/(Interest)

 3. Asset utilization, or turnover, ratios

• Inventory turnover = (Cost of goods sold)/(Inventory)
• Days sales in inventory = (365 days)/(Inventory turnover)
• Receivables turnover = (Sales)/(Accounts receivables)
• Days sales in receivables = (365 days)/(Receivables turnover)
• Total asset turnover = (Sales)/(Total assets)
• Capital intensity = (Total assets)/(Sales)

  4. Profitability ratios

• Profit margin = (Net income)/(Sales)
• Return on assets (ROA) = (Net income)/(Total assets)
• Return on equity (ROE) = (Net income)/(Total equity)
• ROE = (Net income)/(Sales) x (Sales)/(Assets) x (Assets)/(Equity).

   5. Market value ratios

• Price-earnings ratio = (Price per share)/(Earnings per share)
• Market-to-book ratio = (Market value per share)/(Book value per share)