One basic method that an accountant can use to analyze the financial situation of
a business is ratio analysis. This can be a useful tool no matter the type of legal
structure of the business and regardless of whether ownership is public or private. To
help assure the availability of the necessary data, though, this assignment will be
focused solely on a publicly traded company.
As an overview, you will choose a publicly traded company from a list provided at
the end of this assignment. Locate the company’s website, retrieve the latest
company’s annual report from that site, calculate specific ratios for the latest two fiscal
years, and respond to a limited number of analysis questions.
Please note that this entails far more than finding precalculated ratios from a
website such as Yahoo! Finance or Google Finance. If you desire, you can use such a
site for a reasonableness check on the results of your calculations, but any such
comparisons should not be part of your resulting paper. Also, you might not match
exactly to their figures anyway because those may include quarterly updates.
The paper should be three to four double-spaced pages (not counting the cover
page and bibliography).
The font size should be 12-point and the type can be Times New Roman,
Verdana, or Arial.
Your paper should be properly cited using APA referencing style. This means that
citations should be in a bibliography and in the body of the paper wherever you refer to
or directly quote any information or terms from other sources.
Please submit your paper no later than midnight Sunday at the end of Week 6.
For the section showing the ratio calculations, provide appropriate details
regarding the formula used, the source of the data, and the resulting calculations.
Although you are certainly welcome and encouraged to use Excel to complete these
tasks, copying and pasting from Excel into the Word document is discouraged unless it
can be done in a manner that is cosmetically appropriate.
The requirements for the ratio analysis section are as follows.
- Compute the following for each of the two most recent years.
Return on shareholders’ equity
Interest coverage ratio
- Document your work by properly citing items such as the following.
The website for the company
The web page link for the annual report
The page number of the annual report
Appropriate details of the calculations
The questions that should be addressed in the second section of the paper are as
- If you were an accountant for a potential vendor for this company, explain which
of these ratios would be of the most interest to you. Would there also be a second ratio
of interest to you?
- If you were an accountant for a potential investor in this company, explain which
of these ratios would be of the most interest to you. In your opinion, what other ratio or
ratios beyond the ones listed above should also be considered in an investment
- What is your overall opinion of this company based on the limited analysis
completed via the four ratios? Feel free to mention any questions that you feel should
still be considered in view of the ratios or the changes from one year to the next.
Please also consider these suggestions for your success on this assignment.
If you choose a company from the list and have any trouble finding its website,
the annual reports, or specific information, consider selecting a different company from
the list instead.
If the company has subsidiaries, be sure to use the consolidated financial
Be sure to use the financial statements rather than summaries elsewhere in the
List of companies (choose one):
Barnes & Noble, Inc.
The Kroger Co.
Family Dollar Stores Inc.
- Kodiak Oil & Gas Corp.
- Tractor Supply Company
- Verizon Communications Inc.