Usain Bolt, an experienced financial analyst at Speedster Athletics Company, has been charged with...

Question

Usain Bolt, an experienced financial analyst at Speedster Athletics Company, has been charged with assessing the firm's financial performance in 2015 and specifically its financial position at year-end 2015. To complete this assignment, he gathered the firm's 2015 financial statement 1. Calculate the following three ratios for 2015 – using the financial data provided. Please show your work on an excel spreadsheet. Return on equity (ROE)  Earnings per share (EPS) – Assume a share price of $10/share at year end, Dec. 31.  Debt to owners’ equity ratio (debt-equity ratio – D/E) 2. For the three ratios listed above, explain what it could mean to the company if the calculated number went up? What if it went down? What story does each tell about the Speedster Athletics Company? Be company specific in your responses (don’t make generalizations). Limit your response to 4 sentences per ratio.

. Write a 2-page business memo to the CEO of Speedster Athletics Company, outlining the current financial position of the organization (both strengths and weaknesses). Maximum length 400 words.  To justify your response, you must include 4 supporting arguments/examples from the financial information provided in the financial statements (2 for the strengths and 2 for the weaknesses).  Your last paragraph should be a recommendation to the organization for the direction you suggest they take in the next several years.

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Khushboo · Accepted Answer

RATIO ANALYSIS
RATIO ANALYSIS		3
FROM: KHUSHBOO MURARKA
DATE: 18/03/2019
SUBJECT: RATIO ANALYSIS
Memorandum:
To: Chief Executive Officer
From: Usain Bolt
Date: March 18, 2019
Sub: Financial position of the company
As a financial analyst, we have made detailed analysis of financial statements and ratios of the company for the year 2015. The company gross margin capacity is 27.01% in year 2015 which shows that the company is adequate gross margin to meet its operating and non-operating expenses. The EBIT of the company is $142,000 and net income after taxes is $30,000. The brief summary of detailed ratio analysis of financial statement is as below:
a. Return on equity:
Return on equity measures that how effectively management of the company is using shareholder’s funds to generate revenue. The return on equity of the company is 2.2% in year 2015 which has been decreased in comparison to year 2014. The ROE of the company is below industry average which is not a healthy sign for the company. If the ROE goes up, then it is beneficial for the company and will show that the company is effectively utilizing shareholder’s resources. If the ROE goes down, then it is negative sign for the company.
b. Earnings per share:
Earning per share is the portion of a company’s earnings allocated to each shareholders of the company.

Usain Bolt, an experienced financial analyst at Speedster Athletics Company, has been charged with assessing the firm's financial performance in 2015 and specifically its financial position at...

Answer To: Usain Bolt, an experienced financial analyst at Speedster Athletics Company, has been charged with...

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