Please inform me on how many pages will be needed for this assignment.(Continued on next page) ...

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Please inform me on how many pages will be needed for this assignment.

(Continued on next page) Financial Statement Analysis and EPS Forecasting Report Assignment First, choose a publicly traded company to analyze this semester. Choosing a US company which has been trading for more than 3 years will alleviate many issues (i.e. translating currencies). Next, gather historic data on key financial statements of the firm from either SEC filings (http://www.sec.gov/edgar/searchedgar/webusers.htm), Yahoo Finance (http://finance.yahoo.com/) or the firm’s own investor relations website. These include:  Balance Sheet  Income Statement  Cash Flow Statement Also collect necessary information like stock price, shares outstanding, dividends paid, etc. Then prepare a professional report to answer the following questions: 1. Compute the following ratios for the firm that you are analyzing, for the most recent period: 2. Comment on the financial condition of the firm in each of the above 5 categories in 2 or 3 sentences each. Use the ratios of your firm as evidence of your assertions by comparing it to some benchmark (historical ratios, competitors, market or industry average, etc.). If certain ratios are not applicable to your firm (if your firm doesn’t have debt or inventory, for example), still write on these ratios and how the absence of these items affects the firm – both the costs and benefits. 3. Decompose the ROE of your firm using the extended Du-Pont Analysis. ROE = http://www.sec.gov/edgar/searchedgar/webusers.htm http://finance.yahoo.com/ 4. Compare these components of ROE for the firm’s current period its past periods to understand the time trends. 5. Compare these components of ROE for the firm’s with its major competitor(s). 6. Now use the trends from questions 4 and 5 along with your own forecast of future macro-economic conditions to forecast the firm’s Earnings per share and cash flow per share. See the Sample Financial statement analysis in the course content for an example. To do this: a. First, make a common sized income statement for the last 3 to 5 years (every number as a percentage of revenue/sales). b. Next, measure the revenue growth for each year in the historical window. c. Forecast future revenue growth both quantitatively (for example, using a linear fit trend line/regression) and qualitatively. d. Produce forecasted income statements for future years using your revenue growth projections and common-sized balance sheets. Adjust items in income statement based on trends you see in past data, competitors, and the economy as a whole. Your grade will be based on the following rubric: Item Weight Question 1 18 Question 2 18 Question 3 9 Question 4 14 Question 5 13 Question 6 18 Overall Quality 10 Total 100

financial-ratio-assignment-oi2bwhyc.pdf

Narasimhaswamy · Accepted Answer

Amazon inc Financial Ratio Analysis
At December 2019 & 2020
The following financial ratio analysis has been completed based on Amazon Inc fiscal years 2018 & 2019 financial statements (year ending December 31, 2019 & 2020). This analysis is broken into short-term solvency ratios, long-term solvency ratios, turnover ratios, profitability ratios and market value ratios. Each set of ratios is used to analyze different aspects of the firm’s performance and predict its position for future performance. The report culminates in forecasted revenue based on this analysis.
1. Short-term Solvency, or Liquidity, Ratios
	Liquidity Ratio
	Ratio Formula
	December 31, 2019
	December 31, 2020
	Current Ratio
	Current Assets Current Liabilities
	1.10
	
1.05
	Quick Ratio
	(Current Assets - Inventory) Current Liabilities
	0.86
	0.88
	Cash Ratio
	Cash Current Liabilities
	0.41
	0.33
Short-term Solvency, or Liquidity, Ratios. Liquidity ratios focus on current assets and current liabilities to indicate the firm’s ability to fulfill its short-term obligations. Amazon’s current ratio of 1.05 displays the firm’s strong position to pay off current liabilities. However, the fact that the current ratio lower than 2 is the first indicator that the company might be using its short-term financing facilities efficiently. While the company’s quick ratio of 0.88 confirms its ability to pay back its current liabilities, its cash ratio continues to reflect the impact of debt on the balance sheet. At 0.41 Amazon has a cash ratio significantly lower than Microsoft (0.96) and eBay (1.89). Amazon’s 2020 cash ratio reflects a Decrease in cash ratio from 2019 when the cash ratio for Amazon was (0.41).
2. Long-Term Solvency, or Financial Leverage, Ratios
	Financial Leverage Ratios
	Ratio Formula
	December 31, 2019
	December 31, 2020
	Total Debt Ratio
	(Total Assets - Total Equity) Total Assets
	1.11
	1.10
	Debt/Equity Ratio
	Total Debt Total Equity
	4.04
	3.79
	Equity Multiplier
	Total Assets
Total Equity
	3.63
	3.44
	Time Interest Earned Ratio
	EBIT
Interest
	9.09
	13.09
	Cash Coverage Ratio
	(EBIT + Depreciation)
Interest
	25.64
	30.69
Long-Term Solvency, or Financial Leverage, Ratios. Total debt ratio from 2019 to 2020, there was a small drop in the debt ratio in 2020. A total debt ratio under 0.5 reflects company assets being financed through equity. A ratio higher than 0.5, however, indicates the use of debt to finance the company’s assets. This is what we are witnessing with Amazon’s – a ratio of 1.10 is evidence of high dependency on debt.
The debt to equity ratio reveals financial leverage or the lack thereof. Amazons’ high ratio of 3.79 indicates that the company is heavily reliant on creditors to finance its business. this is concerning as they are less protected financially in the event of a decline in business. The decision to increase their debt also led to a reduction in credit score. 
The equity multiplier of 3.44 which shows that the company is less dependent on debt to finance its business.
The times interest earned ratio and cash coverage ratio are better values indicating that its debt obligations can be met easily with cash earned. Both ratios indicate a low risk for bankruptcy or default and therefore, financial stability is good.
3. Asset Utilization, or Turnover, Ratios
	Turnover Ratios
	Ratio Formula
	December 31, 2019
	December 31, 2020
	Inventory Turnover
	Cost of Goods Sold Inventory
	8.79
	10.53
	Days Sales in Inventory
	365
Inventory Turnover
	41.53
	34.65
	Receivable Turnover
	Sales Account Receivable
	14.96
	17.02
	Days Sales in Receivable
	365
Receivable Turnover
	24.39
	21.44
	Total Assets Turnover
	Sales TotalAssets
	1.45
	1.41
	Capital Intensity
	TotalAssets Sales
	0.80
	0.

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(Continued on next page) Financial Statement Analysis and EPS Forecasting Report Assignment First, choose a publicly traded company to analyze this semester. Choosing a US company which has been...

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