Financial ratios and company health scorecard

This assignment will help you interpret and evaluate the financial performance of your selected company by organizing your findings into a comprehensive Financial Health Scorecard. You will use the ratios you’ve calculated to assess the company’s liquidity, efficiency, leverage, profitability, and market performance, then synthesize your analysis into no more than a 2-page report.

Instructions:

Part 1: MS Excel Sheet (for Ratio Calculations)

You will calculate the following ratios for your company for the past two years and group them into the following categories:

1. Liquidity

• Current Ratio
• Quick Ratio

1. Activity (Efficiency)

• Accounts Receivable Turnover
• Inventory Turnover
• Payables Turnover
• Fixed Asset Turnover
• Total Asset Turnover

1. Leverage (risk)

• Debt-to-Equity Ratio
• Times Interest Earned

1. Profitability

• Gross Profit Margin
• Operating Profit Margin
• Net Profit Margin
• Return on Assets (ROA)
• Return on Equity (ROE)

1. Market Value

• Price-to-Earnings (P/E) Ratio

Part 2: MS Word Document

For each ratio category, assign a performance rating based on the ratio values and industry norms:

• Strong
• Average
• Weak

Use the following table format to design a table in Excel or Word:

CategoryRatios IncludedRatingBrief Notes on PerformanceLiquidityCurrent, QuickStronghealthy coverage of liabilitiesActivityAR Turnover, Inventory, etc.AverageInventory turning slower Y2YLeverage Debt-to-Equity, Times Interest EarnedWeakIncreased debt load observedProfitabilityGPM, OPM, NPM, ROA, ROEStrongMargins are improvingMarket ValueP/E RatioAverageSlightly below industry average

Write a brief analysis, no more than two (2) pages, including the following labeled sections:

1. Introduction

• Briefly introduce the purpose of the report and the company you’ve analyzed. Mention that the scorecard summarizes your evaluation of key financial performance areas.

1. Justification of ratings: For each category, explain the rating you assigned.

• Reference specific
• Reference specific ratio values.
• Comment on year-over-year changes.
• Compare to industry benchmarks if available (you may estimate or research briefly if desired).
• Explain the financial implications of high or low performance in each area.

1. Overall Financial Health Summary: Provide a paragraph that summarizes your general findings:

• What does the scorecard tell you about the companys financial condition?
• Is the company financially stable, struggling, or improving?
• Are they in a position to grow, or should they be focused on restructuring or cutting costs?

Note: Be thoughtful and analytical in your responses. This written analysis will help build your understanding and contribute to your final presentation to the Board of Directors regarding investment decisions.