Calculating Financial Ratios
Vital to any ratio analysis are the steps of gathering financial data and selecting and calculating relevant ratios. This assignment provides you with an opportunity to do just that.
- Download a company’s balance sheet and income statement from one of the many sites where financials are available, such as Zacks Investment Research or MarketWatch.
- Choose five financial ratios, one from each of the five categories described in Chapter 3 of Brigham and Ehrhardt (i.e., liquidity, asset management, financial leverage, profitability, and market value) and look at them over a three-year period. Put your findings in a table with the years across the top (horizontal axis) and the ratios along the side (vertical axis). What do the findings tell you about the financial health of the company? How does your selected company compare to the industry?
- Calculate each ratio using the information from the balance sheet and income statement.