Step 6 Strategic Financial Analysis for the Last Reported Fiscal Year
Use the company’s income statement and balance sheet to calculate four (4) keys. financial ratios. One key ratio must come from each of the four key categories: leverage, liquidity, profitability, and efficiency. The four specific ratios selection must come from the following categories Leverage Ratios (Long-term debt ratio, Total debt ratio, Debt-to-equity ratio, Times interest earned ratio, and Cash coverage ratio). Liquidity Ratios (Net working capital to total assets ratio, current ratio, quick ratio, and cash ratio). Efficiency Ratios (Asset turnover ratio, average collection period, inventory turnover ratio, and Days sales outstanding)
Profitability Ratios (Net Profit Margin, Return on Assets, and Return on Equity)
Strategic Financial Analysis for the Last Reported Fiscal Year
All the data for this study is collected from the annual report of Q2, 2021, and the UNITED STATES SECURITIES AND EXCHANGE COMMISSION report at the end of September 30, 2021.
At the end of September 2021, balance sheet information is as follows (in millions, except per share data)
Assets
Cash and cash equivalents – $ 16065; Inventory – $ 5199; Total current assets – $ 25002; Total assets – $ 57834
Liabilities
Accounts payable – $ 8,260; Total current liabilities – $ 18,051; Total liabilities – $ 29,340
Equity
Total stockholders’ equity – $ 27,053; Total liabilities and equity – $ 57,834
UNITED STATES SECURITIES AND EXCHANGE COMMISSION report information at the end of September 30, 2021. Information is as follows. (in millions, except per share data)
Total revenues – $ 13,757; Total gross profit – $ 3,660
- Leverage ratios
Debt ratio formula = total debt / total asset
Debt ratio = 6438 / 57834 = 0.1113
Debt to equity ratio = total debt / total equity
Debt to equity ratio = 6438 / 27053 = 0.2379
- Liquidity ratio
Current ratio = Current asset / current liabilities
Current ratio = 25002 / 18051 = 1.3850
Quick ratio = ( cash and cash equivalents + accounts receivables ) / current liabilities
Quick ratio = ( 16065 + 1962 ) / 18051 = 0.9986
Cash ratio = ( cash + cash equivalents ) / total current liabilities
Cash ratio = 16065 / 18051 = 0.8899
- Efficiency ratio
Asset turnover ratio = net sale / average total asset
Asset turn over ratio = 13757 / [ ( 57834 + 52148 ) / 2 ] = 13757 / 54991= 0.2502
Inventory turnover ratio = cost of goods sold / average inventory
= 1656 / [ ( 5199 + 4101 ) / 2 ] = 1656 / [ 9300 / 2 ]
Inventory turnover ratio = 1656 / 4650 = 0.3561
- Profitability ratio
Net profit margin = ( net income/sales income/asset) * 100
Net profit margin = ( 3660 / 13757 ) * 100 = 0.2660 * 100 = 26.6 %
Return on asset = ( net income / asset ) * 100
Return on asset = ( 3660 / 57834 ) * 100 = 0.0633 * 100 = 6.33 %
Return on equity = ( net income/shareholder’s equity )
Return on equity = ( 13757 / 27053 ) = 0.5085
Reference list
Q2 FINANCIAL SUMMARY report.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION report.
