For this Performance Task Assessment, you will examine various financial reports of a publicly traded company and conduct a financial ratio analysis to understand a company’s financial position as compared to industry averages to demonstrate your ability to understand a company’s financial health and analyze ways to improve in areas revealed as being below industry average.
Assessment Submission Length: 4- to 6-page financial health assessment report (excluding title page and references) and financial ratio calculations in Excel
Instructions
To complete this Assessment, do the following:
- Ensure that all necessary information has been entered into the MF002_Assessment_Template_Part1 file. (As a reminder, refer to problem 4-23 on pages 143–144 of Fundamentals of Financial Management [Brigham & Houston, 2022]. Note that you will utilize the numbers provided in the problem but will not be answering any of the questions in this Assessment. All formulas are included in the MF002_Assessment_Template_Part1 file.)
- In the MF002_Assessment_Template_Part2 file, complete your work on the Assessment, using your Pre-Assessment submission as a starting point and incorporating any feedback, as appropriate.
- Be sure to adhere to the indicated assignment length.
Before submitting your Assessment, carefully review the rubric. This is the same rubric the assessor will use to evaluate your submission and it provides detailed criteria describing how to achieve or master the Competency. Many students find that understanding the requirements of the Assessment and the rubric criteria help them direct their focus and use their time most productively.
Financial Health Assessment: Barry Computer Company
For this Performance Task Assessment, you will act as a consultant hired by the operations director of the Barry Computer Company to do a financial analysis and comparison to the industry. You will conduct a financial ratio analysis to gain a good understanding of the company’s financial performance and will then write up an evaluation of the organization’s financial health, as well as your recommendations for how specific ratios can be improved within the next 3–5 years. In your report, be sure to address the following two sections, including relevant citations
PART ONE: FINANCIAL INFORMATION (2-3 PAGES + EXCEL SPREADSHEET)
- Calculate the following ratios for the Barry Computer Company using the Excel spreadsheet provided.
|
Ratio |
Calculation |
|
Current |
Current Assets/Current Liabilities |
|
Quick |
Current Assets – Inventories/Current Liabilities |
|
Days Sales Outstanding |
Receivables/(Annual Sales/365) |
|
Inventory Turnover |
Sales/Inventories |
|
Total Assets Turnover |
Sales/Total Assets |
|
Profit Margin |
Net Income/Sales |
|
ROA |
Net Income/Total Assets |
|
ROE |
Net Income/Common Equity |
|
ROIC |
EBIT(1 – T)/Total Invested Capital |
|
TIE |
EBIT/Interest Charges |
|
Debt/Total Capital |
Total Debt/(Total Debt + Equity) |
|
M/B |
Market Price/Book Value |
|
P/E |
Price per Share/Earnings per Share |
|
EV/EBITDA |
(Market Value of Equity + Market Value of Total Debt + Market Value of Other Financial Claims – Cash and Equivalents)/EBITDA |
- Analyze computations to determine which ratios are above and below their industry averages, and for each, provide a brief explanation as to why that might be the case.
- Evaluate the financial health of the organization, including in what areas the organization could improve.
- For each ratio that negatively falls outside the industry standards, develop at least one appropriate recommendation for the Barry Computer Company to improve financial performance over time (over the next 3–5 years to meet industry standards).
- Assess limitations of the exclusive use of ratio analysis for evaluating financial performance. In your assessment, describe any qualitative factors that could also complement the ratio analysis and play an important role in improving financial performance.