Ratio Analysis

CASE 1 – RATIO ANALYSIS

A. 1. Select two companies in the same or similar industries: Apple & Samsung

2. Go to SEC Edgar and find their most recent 10K (or the company’s website under “Investor Relations”, SEC Filings and search “annual” filings

3. Download an Excel version of the 10K (if available) (see instructions for SEC on page 2)

4. Find the financial statements and address the following questions:

a. What standards do the companies follow

b. Date of the statements and who are the auditors

c. Prepare “common sized” income and balance sheets

d. What are the trends in each companies’ financial statements

e. Compare the common sized financial statements – which company do you believe is performing better and why

B. Go to the end of chapter 4 in the text. For the financial statements downloaded in part A:

1. Compute the ROE for the latest year presented for each company.

2. Compute the ROA and RNOA. Compute the profit margin and asset turnover ratio; as well as the net operating profit margin and net operating asset turnover ratio, all for thelatest year.

3. Review the results and compare the two companies.

a. Which company is performing better (and why)?

b. Which company is trending more favorably?

4. Review the balance sheet and calculate the quick ratio, current ratio, debt ratio and debt to equity ratio.

a. Discuss the trends in liquidity and solvency for the two companies

b. Which company is most liquid?

c. Which company is most solvent?

Instructions for down-loading information into Excel

A.Check the company’s website, some have an excel version available

B.If not, go to SEC Edgar website.

1.Look up your filing through the SEC filing search or the list of filings on each company page, be sure to select the filing (not the longer link).

2.Find the report (10K) you’d like to use.

3.Select “interactive data”. You can “view excel document”, which will create an excel version that you can save.