Special Project: 1.obtain the financail statement(Annual report) of a company of
ID: 2414921 • Letter: S
Question
Special Project:
1.obtain the financail statement(Annual report) of a company of your choosing. the financial statements should include the following:
A. the balance sheet
B. the income statement
C. Statement of retained earning
D Statement of cash flow
2. Compute the financial ratios for:
A. liquidity
B. Solvency
C. Profitability
3. Analyze the ratios computed above as for the strengths and weaknesses of the company.
4. Compare the ratios you computed in #2 to the industry standards
5. Expres your opinion about the company, and if you would invest your own money in the company.
Need 4 page word decoments and need genuine dates and calculation
Explanation / Answer
1. Wallmart Company financial reports for 2015:
(Amounts in millions)
2. A. liquidity ratios:
Company’s financial health can be measured using liquidity ratios which are listed and calculated for Wall-mart company as follows
Current Ratio = (Current Assets) / Current Liabilities
= $63,278 / $65,272
= 0.970
Quick Ratio = (Cash + Accounts Receivable + Short-Term or Marketable Securities) / (Current Liabilities)
= ($9135 +$6778) / $65,272
= 0.244
Cash Ratio = (Cash + Short-Term or Marketable Securities) / (Current Liabilities)
= ($9135) /$65,272
= 0.139
B. Solvency Ratios:
Solvency ratios are also called as leverage ratios which indicate the strength of the company to sustain its operations indefinitely.
Debt/Equity = (Short-Term Debt + Long-Term Debt) / Total Equity
= ($1592+$4,810+$41,086+$2606) / $85,937
= 0.583
Interest Coverage = (Operating Income) / (Interest Expense)
= $27,147 /$2,348
Debt ratio = Total debt / Total assets
= ($1592+$4,810+$41,086+$2606) /$203,706
= 0.246
C. Profitability Ratios:
How well a company running with generating profits would be measured by profitability ratios and these ratios compared with its compotators. Few profitability ratios are calculated as follows.
Gross Margin = (Gross Profit) / (Sales)
= $117,182/$482,229
= 24.3%
Operating Margin = (Operating Income or Loss) / Sales
= $27,147 /$482,229
= 5.63%
Net Margin = (Net Income or Loss) / Sales
= $17,099 /$482,229
= 3.55%
3 & 4 Determine the strengths and weaknesses of the company and compare the ratios to the industry standards:
Details
Wall-mart
Industry
Result
Current ratio
0.97
2
Weak
Quick Ratio
0.244
0.5
Weak
Cash Ratio
0.139
0.4
Weak
Debt/Equity
0.0583
0.1
Strong
Interest Coverage
11.56
2
Strong
Debt ratio
0.0246
0.5
Strong
Gross Margin
0.243
0.4
Weak
Operating Margin
0.0563
0.2
Weak
Net Margin
0.0355
0.35
Weak
5. It is better for investing company debt rather than equity because interest coverage ratio shows its ability to pay interest an 11 times. However, gross margin, operating margin, and net margin are lesser than industrial standards. Therefore, investing in equity is not advisable but investing debt is better.
Details
Wall-mart
Industry
Result
Current ratio
0.97
2
Weak
Quick Ratio
0.244
0.5
Weak
Cash Ratio
0.139
0.4
Weak
Debt/Equity
0.0583
0.1
Strong
Interest Coverage
11.56
2
Strong
Debt ratio
0.0246
0.5
Strong
Gross Margin
0.243
0.4
Weak
Operating Margin
0.0563
0.2
Weak
Net Margin
0.0355
0.35
Weak
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