Discussion 1: Analysis of Financial Statements.A. This discussion assignment will allow for the completion of a ratio analysis. It will also provide information that will be useful as you prepare the written report for Assignment 1: Financial Research Report, which is due at the end of Week 9. Step 1: Select a publicly-traded company that you will (or might) use for Assignment 1: Financial Research Report, which is due at the end of Week 9. Step 2: Locate financial ratio data from Mergent Online. Financial statements, ratios, and other useful information are available from the Mergent Online database that is available through the Strayer University Learning Resource Center (online). Please notice that financial ratios are grouped into appropriate categories (Profitability Ratios, Liquidity Ratios, Debt Management Ratios, and Asset Management Ratios), which makes it easy to set up the ratios and use them in the analysis. Accessing the Mergent Online Database Financial Statements for companies, financial ratios, and Form 10K annual reports can be obtained from the Strayer University Learning Resource Center, which is accessible from the Online Classroom (see tab at the top of the screen). Select Learning Resource CenterSelect DatabasesSelect Mergent Online Then, in the block titled Company Search Enter Symbol or Company Name enter the companys name or its Stock Ticker Symbol (e.g., for McCormick & Company, enter MKC). Next, select the company from the drop-down menu. For Financial Statements Select Company Financials tabFor Financial Ratios Select Company Financials tab and Ratios sub-tabFor Form 10K Annual Reports Select Filings tab (and then select the most recent Annual Form 10K report) Step 3: Enter the financial ratio data into the Financial Ratio Analysis Model (the attached Excel spreadsheet). The data need to be entered into the yellow-coded cells (column is titled Oldest Year) progressing to the most recent year on the left (column is titled Most Recent Year). The model presently contains financial information for McCormick & Company (Stock Ticker MKC). You will note that the Excel spreadsheet model is programmed to identify if each ratio improved or deteriorated over the time period. And, the spreadsheet is programmed to calculate the percentage change in each of the ratios during the same period. This information should be helpful as you prepare your analysis. (Note: This spreadsheet could be imported into the Assignment 1: Financial Research Report due at the end of Week 10.) Step 4: Prepare an analysis and discussion of the financial ratio data that are examined in the Financial Ratio Analysis Model. It is always appropriate to include the actual ratio data in the written analysis in addition to its presentation in a table, chart or graph. (Note: In addition to Mergent, another good source of financial data and company information is: http://www.advfn.com .) B. From the scenario, determine two (2) financing strategies that TFC could utilize to accomplish its expansion goals. You may, for example, consider your analysis of TFCs financial statements, as well as your knowledge of TFCs excessive cash position. What is the rationale for your response? NOTE: THE TFC FINANCIAL STATEMENTS ARE PROVIDED AS AN ANNOUNCEMENT IN THE ONLINE CLASSROOM. Financial Ratio Analysis Model 123014.xls (26 KB) student post:This discussion assignment will allow for the completion of a ratio analysis. It will also provide information that will be useful as you prepare the written report for Assignment 1: Financial Research Report, which is due at the end of Week 9.For this discussion, I decided to complete a financial ratio analysis model for General Dynamics for the years 2014 thru 2010. A financial ratio analysis consists of profitability, liquidity, debt management, asset management, and per share ratios. These ratios tell stakeholders if a companys performance has deteriorated or improve from one year to the next. This information is important to stakeholders for several different reasons. A person who is interested in investing in General Dynamics can review the companys performance ratios to make a better-informed decision. Management at a company can also use this information when deciding how they should further invest capital into their organization. So lets assume that we are thinking about investing in General Dynamics. We should begin by reviewing the financial ratio analysis that I created below to aid us in our decision. General Dynamics Corp. (NYS: GD) Most Recent Year Oldest YearPerformance From First to Recent Year;Profitability Ratios12/31/1412/31/1312/31/1212/31/1112/31/10Shows Percentage Change in RatiosROA % (Net)7.166.76-0.967.498.25Performance Deteriorated-13.21%ROE % (Net)19.2418.21-2.6919.0320.39Performance Deteriorated-5.64%ROI % (Operating)22.7821.865.1222.7224.05Performance Deteriorated-5.28%EBITDA Margin %14.2113.614.1813.6213.91Performance Improved2.16%Calculated Tax Rate %29.6931.08161.3731.3630.66Performance Improved-3.16%Revenue per Employee310,070325,188340,856343,607360,733Performance Deteriorated-14.04% Liquidity Ratios12/31/1412/31/1312/31/1212/31/1112/31/10 Quick Ratio0.951.191.071.11.01Performance Deteriorated-5.94%Current Ratio1.271.471.351.381.27Performance Deteriorated0.00%Net Current Assets % TA10.3416.0612.0212.119.25Performance Improved11.78% Debt Management12/31/1412/31/1312/31/1212/31/1112/31/10 LT Debt to Equity0.290.270.340.30.18Performance Deteriorated61.11%Total Debt to Equity0.330.270.340.30.24Performance Deteriorated37.50%Interest Coverage45.2242.855.3427.1325.13Performance Improved79.94% Asset Management12/31/1412/31/1312/31/1212/31/1112/31/10 Total Asset Turnover0.870.90.910.971.02Performance Deteriorated-14.71%Receivables Turnover3.463.43.353.563.85Performance Deteriorated-10.13%Inventory Turnover8.079.8610.3912.0112.4Performance Deteriorated-34.92%Accounts Payable Turnover14.3313.2411.7211.6112.73Performance Deteriorated12.57%Accrued Expenses Turnover20.218.718.3520.0520.76Performance Deteriorated-2.70%Property Plant & Equip Turnover9.159.169.410.4511.04Performance Deteriorated-17.12%Cash & Equivalents Turnover6.377.2610.5712.4213.32Performance Deteriorated-52.18% Per Share12/31/201412/31/201312/31/201212/31/201112/31/2010 Cash Flow per Share11.128.867.588.897.83Performance Improved42.02%Book Value per Share35.6141.0332.237.1235.79Performance Deteriorated-0.50% As of December 31, 2014, GDs return on assets (ROA) deteriorated 13.21% from 2010. GDs ROA deteriorated by 5.9% from 2013 to 2014 to 7.16. However, GDs ROA improved 604% from 2012 to 2013. The ROA industry average in 2014 was 7.18%, which suggests that GD was efficiently using its assets showing a difference of 0.16%. GDs return on equity (ROE) deteriorated by 5.64% from December 31, 2010, to December 31, 2014, but steadily improved from 2012 to 2014 showing a 616% positive move. GDs improvement may indicate that other companies in the defense/aerospace industry did not land as many contracts or generate as many sales as GD did from 2012 to 2014. The ROE industry average in 2014 was 27.5%, and GDs ROE was 19.24%. GDs quick ratio decreased 5.94% from 2010 to 2014 and 20.2% from 2013 to 2014. The industry quick ratio average in 2014 was 0.31%, so GDs quick ratio of 0.95 for 2014 suggests that GD probably had a difficult time turning its inventory into cash in 2014. The current ratio increased 0% from 2010 to 2014 but showed a decreased of 13.6% from 2013 to 2014. GDs 2014 current ratio in 2014 was 1.27%. GDs total debt to equity has increased 37.5% from 2010 to 2014 and 22.2% from 2013 to 2014. GDs total debt to equity ratio was 0.33 in 2014, and the industrys average total debt to equity ratio was 0.63%. GDs interest coverage has increased 79.9% from 2010 to 2014 and increased 5.53% from 2013 to 2014. The industry average interest coverage ratio in 2014 was 18.42%, which was much lower than GDs interest coverage ratio of 45.22.From the scenario, determine two (2) financing strategies that TFC could utilize to accomplish its expansion goals. You may, for example, consider your analysis of TFCs financial statements, as well as your knowledge of TFCs excessive cash position. What is the rationale for your response?One financing strategy that TFC could utilize to accomplish its expansion goals would be to apply the rules of depreciation when purchasing long term assets that they intend to use over a number of years. Depreciation is a method of allocating the cost of a tangible asset over its useful life for both tax and accounting purposes (Depreciation, 2016). Depreciating assets would help during the expansion because it would give TFC more income on its profit and loss statement and increase assets on its balance sheet (Murray, 2015). A second strategy that TFC could utilize would be to do a year over year comparisons to get an idea of the direction of the company. This strategy would allow the company to address any concerns that could cause problems during this expansion.ReferencesDepreciation. (2016). Investopedia. Retrieved January 13, 2016, from http://www.investopedia.com/terms/d/depreciation.aspFinancial Strength Information & Trends. (2016). CSI Market. Retrieved January 13, 2016, from http://csimarket.com/Industry/industry_Financial_Strength_Ratios.php?ind=201Management Effectiveness Information & Trends. (2016). CSI Market. Retrieved January 13,2016, from http://csimarket.com/Industry/industry_ManagementEffectiveness.php?ind=201Murray, J. (2015). 5 Ways Depreciation Benefits Your Business. About Money. RetrievedJanuary 13, 2016, from http://biztaxlaw.about.com/od/depreciation101/f/grosenondeprec.htm Reply Quote
