Week3 Assignment FINAL

Using material from Weeks 3 and 4, you and your colleagues will prepare a report that presents the calculated financial ratios and an explanation of what the calculated ratios mean. This is where meaning is found in financial statements.

The Final Presentation:

• Should be at least six to eight pages long (excluding cover page and references page) and must be compliant with APA style as outlined by the Writing Center (Links to an external site.)’s APA Style (Links to an external site.)
• Your report must include the following:
  • You must offer an introduction and a strong thesis statement. Tell your reader what you intend to accomplish. You should also identify the limitations that prevent a time-series or cross-sectional analysis of the derived ratios.
  • Present your ratio analysis and demonstrate your ability to derive meaning from financial statement. Be sure to present ration calculations and interpretations grouped under designated section headings (see example below).
  • Summarize your findings and identify takeaways for your reader.

The text is a primary reference source and should be used in addition to at least one additional reference.

The following ratios were defined, computed, and reviewed in prior weeks. The computations are the basis for extracting meaning from the financial statements provided.

Each category heading should appear as a section heading in your final report. An adequate description of a ratios meaning can be accomplished in two to four sentences. For example, Total Asset Turnover is a general efficiency ratio that measures management’s efficient or inefficient use of short-term and long-term assets. The ratio is calculated as follows:

Total Asset Turnover = Sales/Total Assets. Assume sales of $8,000,000 and total assets of

$4,000,000. Total Asset Turnover in this example – $8,000,000/$4.000.000 = 2.

We might describe the calculation as follows:

Total Asset Turnover is a general measure of management’s use of total assets to generate sales.

The larger the number, the better the use of assets. In this case, sales revenue of $2.00 per asset dollar indicates management is using assets reasonable well. A negative ratio would be a concern.

Also note that you are approaching this assignment as an entrepreneur with access to limited information. You have no historical data: the financial statements you are using are your pro forma statements. You also lack access to competitor financials. As such, time-series and cross-sectional benchmarking cannot be accomplished. As such, use your judgment and generally accepted standards about financial ratios to develop meaning as was done in the Total Asset Turnover example above.

Required Ratios

Liquidity Ratios

• Current Ratio
• Quick Ratio

Leverage Ratios

• Debt to Equity
• Debt to Total Assets
• Interest Coverage

Management Efficiency Ratios

• Accounts Receivable Turnover
• Days Sales Outstanding
• Days of Inventory
• Accounts Payable Turnover

Profitability Ratios

• Gross Margin
• Operating Margin
• Return on Assets
• Return on Equity

In your presentation,

• Create an introduction and a strong thesis statement. Identify the limitations that prevent a time-series or cross-sectional analysis of the derived ratios.
• Create a ratio analysis that derives meaning from financial statements by grouping derived ratios under designated four section headings (Liquidity Ratios, etc).
• Create a summary that includes three findings the team feels are significant.

The Extracting Meaning from Financial Statements presentation

• Must be four to six double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the Writing Center (Links to an external site.)’s APA Style (Links to an external site.) resource.
• Must include a separate title page with the following:
  • Title of paper
  • Student’s name
  • Course name and number
  • Instructor’s name
  • Date submitted

For further assistance with the formatting and the title page, refer to APA Formatting for Microsoft Word (Links to an external site.).

• Must utilize academic voice. See the Academic Voice (Links to an external site.) resource for additional guidance.
• Must include an introduction and conclusion paragraph. Your introduction paragraph needs to end with a clear thesis statement that indicates the purpose of your paper.
  • For assistance on writing Introductions & Conclusions (Links to an external site.) as well as Writing a Thesis Statement (Links to an external site.), refer to the Writing Center resources.