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Financial Statement Analysis Executive Summary: Select two competing companies from the same industry (e.g., McDonalds vs....

Financial Statement Analysis Executive Summary:

  • Select two competing companies from the same industry (e.g., McDonalds vs. Burger King; Target vs. Walmart; etc.), and calculate the following financial ratios for them based on their most recent financial statements:
    1. Return on Equity
    2. Return on Assets
    3. Financial leverage
    4. Profit Margin Ratio
    5. Assets Turnover Ratio
    6. Current Ratio
    7. Quick (Acid-Test) Ratio
    8. Debt-to-Equity Ratio
    9. Cash Flow from Operations to Total Liabilities Ratio

  • Discuss from an investor’s point-of-view which of the two companies you would rather invest. Please refer to the ratios/measures that you calculated. You may also include information and opinions about other factors (e.g., non-financial factors, market information) that influence your decision.

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Homework Answers

Answer #1

McDonalds vs. Burger King

McDonalds

Return on Equity: NET INCOME / SHARE HOLDERS EQUITY = $6,025/8,210=0.73386

Return on Assets: NET INCOME / AVERAGE TOTAL ASSET=$6,025/47,511=0.12681

Financial leverage:TOTAL COMPANY DEBT / SHAREHOLDERS EQIUITY =32900/8210=4.0073

Profit Margin Ratio:NET PROFT / NET SALES * 100

Assets Turnover Ratio: NET SALES / AVERAGE TOTAL ASSET

Current Ratio: CURRENT ASSET / CURRENT LIABILITY

Quick (Acid-Test) Ratio: CURRENT ASSET-INVENTORY/ CURRENT LIABILITY

Debt-to-Equity Ratio: TOTAL LIABITY /TOTAL EQUITY

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