ADMAS UNIVERSITY

School of Postgraduate Studies

Advanced Financial Management
Group Assignment-I
General Instructions
1. Group Assignment
2. Form a group which contains 4 or 5 members
3. Read the given questions, discuss, analyze and prepare a report
4. Get printed and submit it on or before the deadline.
5. Respect for deadline is a must.

ANNUAL REPORT RATIO ANALYSIS ASSIGNMENT

Due date: May 18, 2019

1. Please choose any company that you are interested in learning more about. Find that
company’s most recent Annual Report on the Internet, at the library, or from the
company itself etc….IF THE COMPANY YOU CHOOSE DOES NOT PRESENT
COMPARATIVE FINANCIAL STATEMENTS, (i.e. two or more years shown in
columns), PLEASE CHOOSE ANOTHER COMPANY THAT DOES!

2. Calculate the ratios listed at the end of this document from the financial statements of
your company for both the most recent year and the year before. To do this, you will
need to make a spreadsheet, (on Excel or other), that essentially copies certain lines of
your various financial statements onto the spreadsheet. Then, make spreadsheet
formulas to calculate each financial ratio that is required.

4. Write a summary of the most interesting and relevant changes from one year to the
next from the calculations you made in step two. After reading the and doing so you
could have a good idea of why certain ratios and figures changed from one year to the
next. If certain changes are not explained, try to think of reasons why the figures might
have changed. For example, did one part of an equation change in greater proportion
than another part? (i.e. did a numerator grow much faster than a denominator?) Why
might that have occurred?

The goal with this project is to not only give you a chance to calculate the ratios that
accountants and analysts frequently use when evaluating a company, but to also make
you look for reasons, (i.e. “drivers”), for those changes and to think of your own reasons if
none are given. If you only do the calculations but do not discuss why certain changes
took place, then you haven’t achieved the goal of the assignment. Therefore, do your
best to go past the numbers!

In the end, you will hand in: (1) your page with cogs, assets, sales etc.,. that you copied
from your financial statements, (2) a sheet of your calculations, labeled so that I know
which calculation is which, (3) a print out of your formulas, and (4) your 10-15 page
report on those calculations.

1
Required ratio calculations, (in their simplest form), are listed below:

A. Profitability Ratios:
1. Return on Assets= (net income/total assets)
2. Asset Turnover=(Net sales/total assets)
3. Return on Sales, (aka profit margin percent)= (net income/sales)
4. Assets-to-Equity= (total assets/stockholder’s equity)
5. Basic Earning Power (BEP) =EBIT/Total Asset
6. Return on Equity= (net income/stockholder’s equity)
7. Earnings Per Share (EPS)= Net income
8. No. of C/stock shares outstanding
Or
Return on common Equity= Net Income Available to Common Equity
common stock holders equity
B. Efficiency/Activity Ratios:
1. A/R Turnover Rate= (Credit sales or total sales/accounts receivable)
2. Average Collection Period= (360 days/A/R Turnover)
3. Inventory Turnover Rate= (COGS/average inventory)
4. Inventory Holding Period= (360 Days/Inventory Turnover Ratio)
5. Fixed Asset Turnover (Net sales/Net fixed assets)
6. Total Asset Turnover Ratio = Net Sales/Total asset
7. Accounts Payable Turn Over = Credit Purchase/Average Accounts Payable
8. Average Payment Period = 360 days/A/P turnover
9. Operating Cycle= Accounts Receivable Days on Hand (ARDOH) +
Inventory Days on Hand (INVDOH)
10. Cash Conversion Cycle =Accounts Receivable Days on Hand (ARDOH)
+ Inventory Days on Hand (INVDOH) – Accounts Payable Days on
Hand (APDOH)
11.
C. Leverage Ratios:
1. Debt Ratio (total liabilities/total assets)
2. Debt-to-Equity Ratio (total liabilities/stockholder’s equity)
3. Times Interest Earned (earnings before interest and taxes/interest expense)
D. Liquidity Ratios:
1. Current Ratio (current assets/current liabilities)
2. Quick Ratio (Current Assets-Supplies-Inventory)/Current Liabilities
3. Net Working Capital (current assets – current liabilities)

These ratios are explained in different textbook, so if you don’t understand why a
particular calculation is important or relevant, you can look up more information there.