ADM 1340 Lecture : Chapter 14 Lecture Notes
Get access
Related Documents
Related Questions
Analysis and Use of Financial StatementsProject
NIKE Inc.
https://www.sec.gov/Archives/edgar/data/320187/000032018715000113/nke-5312015x10k.htm
This assignment requires financial ratio analysis on Nike Inc.company. You will be required to examine Nike's companyâs annualreport and calculate the ratios listed below. You will calculatethe ratios for the two most recent years fromavailable annual reports.
Once you have performed an analysis of the financial statements,you will write up a report summarizing thefindings. The report will include a brief introduction,synopsis of the companyâs business and current business situation,a summary of the studentâs interpretation of teamâs analysis, and aconclusion.
Written proof of how the ratios were calculated MUST beattached to the report. You must calculate the ratiosyourself.
Use the attached work page below to show proof of yourcalculations of the ratios (show all numbers in the calculations ânot just the end result). The paper should be six (4) typedpages (not including the ratios and the ratiocalculations). Roughly, the paper should have one page ofintroduction, four pages of analysis and interpretation, and onepage of conclusion. The focus should be on the analysis and yourinterpretation.
The analysis of the financial ratios should include insightsinto the meanings behind the ratios. The ratios should tell a storyabout how the company is doing and its prospects for the future.You need to tell that story. In order to make the ratios moremeaningful, a benchmark company or industry average for each ratioshould also be included. You must calculate the benchmark companyâsratios as well. I do not need these calculations attached. Theconclusion should provide insight into the financial future of thecompany. An investment recommendation should also be made in theconclusion.
Required ratios:
Liquidity Ratios and Asset Utilizationratios:
Current Ratio
Quick Ratio
Accounts receivable turnover
Inventory turnover
Average collection period
Total assets turnover
Fixed Asset turnover
Solvency & Leverage Ratios
Times interest earned
Debt-to-equity ratio
Debt to total assets
Fixed charge coverage
Profitability Ratios:
Profit margin ratio
Gross Margin ratio
Return on total assets
Return on common stockholdersâ equity
Evidence of Ratio Calculations
Please show your calculations of the financial rations of thecompany in the column labeled âYour Company.â You can calculate theratios by hand or attached a sheet that clearly demonstrates howyou calculated the ratio (i.e. X/Y = Z). The ratios you provide foryour competitor or industry average do not need to be calculated(you can find these on various finance websites â though you willmost likely have to calculate some yourself). Pleaseattached this sheet to the back of your writtenproject.
Ratio | Your Company | Competitor/Industry Avg. |
Current Ratio | ||
Quick Ratio | ||
A/R Turnover | ||
Inventory Turnover | ||
Average collection period | ||
Total Assets Turnover | ||
Fixed Asset turnover | ||
Times-interest Earned Ratio | ||
Debt-to-Equity Ratio | ||
Fixed charge coverage | ||
Profit Margin Ratio | ||
Gross Margin Ratio | ||
Return-on-Total Assets Ratio | ||
Return-on-Common Stockholdersâ Equity Ratio |
Problem 4-23 Data for Barry Computer Co. and its industry averages follow.
Construct the Du Pont equation for both Barry and the industry. Round your answers to two decimal places.
a)The firm's days sales outstanding is more than the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well above the industry average so sales should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity and assets. However, the company seems to be in an above average liquidity position and financial leverage is similar to others in the industry. b)The firm's days sales outstanding is comparable to the industry average, indicating that the firm should neither tighten credit nor enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity and assets. However, the company seems to be in a below average liquidity position and financial leverage is similar to others in the industry. c)The firm's days sales outstanding ratio is more than twice as long as the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity and assets. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry. d)The firm's days sales outstanding is more than twice as long as the industry average, indicating that the firm should loosen credit or apply a less stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity and assets. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry. e)The firm's days sales outstanding is less than the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both. While the company's profit margin is lower than the industry average, its other profitability ratios are high compared to the industry - net income should be higher given the amount of equity and assets. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry. 3) Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2014. How would that information affect the validity of your ratio analysis? (Hint: Think about averages and the effects of rapid growth on ratios if averages are not used. No calculations are needed.) Select true statement a) If 2014 represents a period of supernormal growth for the firm, ratios based on this year will be accurate and a comparison between them and industry averages will have substantial meaning. Potential investors need only look at 2014 ratios to be well informed, and a return to normal conditions in 2013 could help the firm's stock price. b) If 2014 represents a period of normal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have little meaning. Potential investors who look only at 2014 ratios will be misled, and a continuation of normal conditions in 2013 could hurt the firm's stock price. c) If 2014 represents a period of normal growth for the firm, ratios based on this year will be accurate and a comparison between them and industry averages will have substantial meaning. Potential investors who look only at 2014 ratios will be misled, and a return to supernormal conditions in 2013 could hurt the firm's stock price. d) If 2014 represents a period of supernormal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have substantial meaning. Potential investors who look only at 2014 ratios will be well informed, and a return to normal conditions in 2013 could hurt the firm's stock price. e) If 2014 represents a period of supernormal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have little meaning. Potential investors who look only at 2014 ratios will be misled, and a return to normal conditions in 2013 could hurt the firm's stock price. |