Expert answer:Financial Statement Analysis
Expert answer:Use the attached work sheet to solve the questions.
mba520_module_2_financial_statement_analysis.docx
mba520_module_2_financial_statement_analysis.docx
mba520_module_2_financial_statements_analysis_data.pdf
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MBA 520 Module Two Financial Statement Analysis Worksheet
The main goal of financial statement analysis is to use past and current performance to identify changes
and trends that will affect a company. Financial ratios are a widely used form of financial analysis in
which the relationship between two or more line items is analyzed to evaluate a company’s
performance. The calculations you practice in this assignment will be applicable in completing Milestone
One, specifically determining recent financial performance and current financial health.
Prompt
Reference the information found in the Module TwoFinancial Statements Analysis Data PDF located in
the Assignment Guidelines and Rubrics folder to complete the following.Once you have calculated the
ratios asked for using the data in the PDF, provide a brief summary of how the ratios are used and why
they are important.Once you have completed the calculations, provide a brief, two- to four-sentence
rationale for how these calculations can be used in analyzing the financial position of a company and
why they are important. Your rationale should explain what information the ratio provides to the reader
and how the reader may use that information.Use the Shapiro Library, your text, and the non-graded
discussion forum in this module to ask questions of your peers to inform your responses to the
questions below.
Before beginning this assignment, you will need to download and/or print the Module TwoFinancial
Statements Analysis Data PDF in order to complete the assignment.
1. (12.5 points) Calculate XYZ’s 2013 current and quick ratios based on the projected balance sheet and
income statement data.
2. (12.5 points) Calculate the 2013 inventory turnover, days sales outstanding (DSO), fixed assets
turnover, and total assets turnover.
3. (12.5 points) Calculate the 2013 debt-to-assets and times-interest-earned ratios.
4. (12.5 points) Calculate the 2013 operating margin, profit margin, basic earning power (BEP), return on
assets (ROA), and return on equity (ROE).
5. (12.5 points) Calculate the 2013 price/earnings ratio, and market/book ratio.
Worksheet adapted from Brigham, E., & Houston, J. F. (2016). Fundamentals of financial management (14th ed.).
Boston, MA: Cengage Learning.
6. (12.5 points) Use the extended DuPont equation to provide a summary and overview ofXYZ’s financial
condition as projected for 2013.
7. (12.5 points)Use the following simplified 2013 balance sheet to show, in general terms, how an
improvement in the DSO would tend to affect the stock price.For example, if the company could
improve its collection procedures and thereby lower its DSO from 45.6 days to the 32-day industry
average without affecting sales, how would that change “ripple through” the financial statements
(shown in thousands below) and influence the stock price?
Accounts receivable
Other current assets
Net fixed assets
Total assets
$878
1,802
817
$3,497
Debt
$1,545
Equity
Liabilities plus equity
1,952
$3,497
First, we need to calculate XYZ’s daily sales.
Daily sales=
Daily sales=
Daily sales=
Sales
$7,035,600
$19,275.62
/
/
365
365
Target A/R =
Target A/R =
Target A/R =
Daily sales
$19,276
$616,820
×
×
Target DSO
32
–
–
new A/R
$616,820
Freed-up cash = old A/R
Freed-up cash = $878,000
Freed-up cash = $261,180
8. (12.5 points) Provide a brief summary or rationale of how these ratios are used, and why they are
important.
Worksheet adapted from Brigham, E., & Houston, J. F. (2016). Fundamentals of financial management (14th ed.).
Boston, MA: Cengage Learning.
MBA 520 Module Two Financial Statement Analysis Worksheet
The main goal of financial statement analysis is to use past and current performance to identify changes
and trends that will affect a company. Financial ratios are a widely used form of financial analysis in
which the relationship between two or more line items is analyzed to evaluate a company’s
performance. The calculations you practice in this assignment will be applicable in completing Milestone
One, specifically determining recent financial performance and current financial health.
Prompt
Reference the information found in the Module TwoFinancial Statements Analysis Data PDF located in
the Assignment Guidelines and Rubrics folder to complete the following.Once you have calculated the
ratios asked for using the data in the PDF, provide a brief summary of how the ratios are used and why
they are important.Once you have completed the calculations, provide a brief, two- to four-sentence
rationale for how these calculations can be used in analyzing the financial position of a company and
why they are important. Your rationale should explain what information the ratio provides to the reader
and how the reader may use that information.Use the Shapiro Library, your text, and the non-graded
discussion forum in this module to ask questions of your peers to inform your responses to the
questions below.
Before beginning this assignment, you will need to download and/or print the Module TwoFinancial
Statements Analysis Data PDF in order to complete the assignment.
1. (12.5 points) Calculate XYZ’s 2013 current and quick ratios based on the projected balance sheet and
income statement data.
2. (12.5 points) Calculate the 2013 inventory turnover, days sales outstanding (DSO), fixed assets
turnover, and total assets turnover.
3. (12.5 points) Calculate the 2013 debt-to-assets and times-interest-earned ratios.
4. (12.5 points) Calculate the 2013 operating margin, profit margin, basic earning power (BEP), return on
assets (ROA), and return on equity (ROE).
5. (12.5 points) Calculate the 2013 price/earnings ratio, and market/book ratio.
Worksheet adapted from Brigham, E., & Houston, J. F. (2016). Fundamentals of financial management (14th ed.).
Boston, MA: Cengage Learning.
6. (12.5 points) Use the extended DuPont equation to provide a summary and overview ofXYZ’s financial
condition as projected for 2013.
7. (12.5 points)Use the following simplified 2013 balance sheet to show, in general terms, how an
improvement in the DSO would tend to affect the stock price.For example, if the company could
improve its collection procedures and thereby lower its DSO from 45.6 days to the 32-day industry
average without affecting sales, how would that change “ripple through” the financial statements
(shown in thousands below) and influence the stock price?
Accounts receivable
Other current assets
Net fixed assets
Total assets
$878
1,802
817
$3,497
Debt
$1,545
Equity
Liabilities plus equity
1,952
$3,497
First, we need to calculate XYZ’s daily sales.
Daily sales=
Daily sales=
Daily sales=
Sales
$7,035,600
$19,275.62
/
/
365
365
Target A/R =
Target A/R =
Target A/R =
Daily sales
$19,276
$616,820
×
×
Target DSO
32
–
–
new A/R
$616,820
Freed-up cash = old A/R
Freed-up cash = $878,000
Freed-up cash = $261,180
8. (12.5 points) Provide a brief summary or rationale of how these ratios are used, and why they are
important.
Worksheet adapted from Brigham, E., & Houston, J. F. (2016). Fundamentals of financial management (14th ed.).
Boston, MA: Cengage Learning.
Analysis of Financial Statements
Balance Sheets
EXHIBITS: INPUT DATA (XYZ)
Table 1 Balance Sheets
2013E
2012
2011
Assets
Cash
Accounts receivable
Inventories
Total current assets
Gross fixed assets
Less: accumulated depreciation
Net fixed assets
Total assets
$
85,632
878,000
1,716,480
$2,680,112
1,197,160
380,120
$ 817,040
$3,497,152
$
7,282
632,160
1,287,360
$1,926,802
1,202,950
263,160
$ 939,790
$2,866,592
$
Liabilities and equity
Accounts payable
Notes payable
Accruals
Total current liabilities
Long-term bonds
Total debt
Common stock (100,000 shares)
Retained earnings
Total common equity
Total liabilities and equity
$ 436,800
300,000
408,000
$1,144,800
400,000
$1,544,800
1,721,176
231,176
$1,952,352
$3,497,152
$ 524,160
636,808
489,600
$1,650,568
723,432
$2,374,000
460,000
32,592
$ 492,592
$2,866,592
$
57,600
351,200
715,200
$ 1,124,000
491,000
146,200
$ 344,800
$ 1,468,800
$
$
$
$
145,600
200,000
136,000
481,600
323,432
805,032
460,000
203,768
663,768
1,468,800
Analysis of Financial Statements
Income Statements
2013E
2012
2011
$7,035,600
$6,034,000
$ 3,432,000
5,875,992
5,528,000
2,864,000
550,000
$6,425,992
$ 609,608
116,960
$ 492,648
70,008
$ 422,640
169,056
$ 253,584
519,988
$6,047,988
$ (13,988)
116,960
$ (130,948)
136,012
$ (266,960)
(106,784)
$ (160,176)
358,672
$ 3,222,672
$ 209,328
18,900
$ 190,428
43,828
$ 146,600
58,640
$
87,960
$
$
$
$
$ (1.602)
$
0.110
$
4.926
$
2.25
100,000
40.00%
$ 40,000
0
$
$
$
$
Table 2 Income Statements
Sales
Cost of goods sold
Other expenses
Total operating exp. excl. depreciation and amortization
EBITDA
Depreciation and amortization
Earnings before interest and taxes (EBIT)
Interest expense
Earnings before taxes (EBT)
Taxes (40%)
Net Income
Earnings per share (EPS)
Dividends per share (DPS)
Book value per share (BVPS)
Stock price
Shares outstanding
Tax rate
Lease payments
Sinking fund payments
1.014
0.220
7.809
12.17
250,000
40.00%
$ 40,000
0
$
0.880
0.220
6.638
8.50
100,000
40.00%
40,000
0
Analysis of Financial Statements
Ratio Analysis
Current ratio
Quick ratio
Inventory turnover
Days sales outstanding (DSO)
Fixed assets turnover
Total assets turnover
Debt-to-assets ratio
Times interest earned (TIE)
Operating margin
Profit margin
Basic earning power (BEP)
Return on assets (ROA)
Return on equity (ROE)
Price/earnings (P/E)
Market/book (M/B)
Book value per share (BVPS)
2013E
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
2012
1.2
0.4
4.7
38.2
6.4
2.1
82.8%
-1.0
-2.2%
-2.7%
-4.6%
-5.6%
-32.5%
-1.4
0.5
$4.93
2011
2.3
0.8
4.8
37.4
10.0
2.3
54.8%
4.3
5.6%
2.6%
13.0%
6.0%
13.3%
9.7
1.3
$6.64
Industry
Average
2.7
1.0
6.1
32.0
7.0
2.6
50.0%
6.2
7.3%
3.5%
19.1%
9.1%
18.2%
14.2
2.4
n.a.
*The calculations from your module 2 assignment would complete column 2013E. You are not required to complete the ratio analysis chart as
part of your assignment, you will submit the calculations with rationale in a word document.
…
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