Take a piece of paper and set up a simple five-column chart. (Or use a spreadshe

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Take a piece of paper and set up a simple five-column chart. (Or use a spreadsheet.) Write the following ratios in the left-most column: PFM Ratio Name Thomson ONE Ratio Name Current Ratio Current Ratio ACP Receivables Days Sales Total Asset Turnover Sales/Total Assets Return on Sales Net Income/Sales Return on Assets Net Income/Total Assets Return on Equity Net Income/Equity Times Interest Earned Times Interest Earned P/E Ratio P/E Now at the top, label the other four columns for the four companies we looked at in chapter 1: Ford, Harley-Davidson, Starbucks, and Microsoft. For each company, go to the overview page and select Financials from the top row of tabs. Then select Fundamental Ratios from the second row of tabs. A drop down menu will appear, select SEC Database Ratios. Another drop down menu will appear. Select Annual Ratios. You should see several years of history for a great many ratios. Examine the trend in each of the ratios we've listed and note its performance on your chart. That is, is performance improving, declining, stable, or is something strange going on? Make another chart and write down the most recent ratios for each company and compare them between companies. Typically, ratios within industries or types of industries are similar if companies are performing similarly. For example companies in heavy manufacturing tend to have high levels of fixed assets (also called property, plant and equipment) while companies producing services or intellectual products and retailers tend to have fewer fixed assets. That generally makes the total asset turnover figure lower for manufacturers like Ford and Harley than for firms like Starbucks or Microsoft. Do your ratios show the similarities we've just described? If not, go to the financial statements themselves and look at dollar line items to see if you can find an explanation. Analyze each ratio. To see the dollar financial statements select Financial Statements on the second row of tabs, then select SEC Financials on the first drop down menu and Complete Financial Statements on the second. How would you rank the four firms in terms of financial performance? Look at ROS, ROA, ROE, and P/E. What economic or market factors might account for big differences in P/E? Compare Ford and Harley. They both make motor vehicles. Why is their financial performance so different? (Hint: Think in terms of market and economic factors that make the numbers what they are.)

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