Financial Statement Review
Download the annual reports for the last two fiscal years of the publicly-traded company you selected in week one. Review this week’s readings on financial statement analysis in the text, and substitute the financial statements of your company and address the following:
- Use the last two fiscal years financial statements of the publicly-traded company you selected and calculate the following financial ratios:
- Calculate the profit margin (net income/net sales) and asset turnover (net sales/total assets) to compute the return on assets (ROA). Now introduce the equity multiplier (total assets/total equity) to find the return on equity (ROE).
- On the basis of your calculations, describe how each of the three components (profit margin, asset turnover, and leverage) contributed to the change in your company’s ROA and ROE. Which component(s) contributed the most to the change in ROA? Which contributed the most to the change in ROE?
- Explain if these changes are fundamentally healthy for the company.
Your paper should be three- to five- pages in length (excluding the title and reference pages) and formatted according to APA style