Financial statement analysis is the process of analyzing a company’s financial statements to make better economic decisions. The process for financial statement analysis includes specific techniques for evaluating risks, performance, and future prospects of an organization.
This assignment is separated into three parts and based on a fictitious company. In Part 1, you will use the Balance Sheet and Income Statement to calculate the five categories of ratios. In Part 2, you will calculate and explain the significance of the liquidity, activity, financing, profitability, and market value ratios, and provide a year-to-year comparison of assessed financial trends. In Part 3, you will compose an analytical study to assist the CEO of your company to determine if ABC Company, a technical company dealing with software and hardware, would be a good investment as an acquisition.
Part 1
You will use this Excel® workbook with two worksheets to assist you in completing this part of the assignment. This Excel workbook is to be submitted with your paper. The first worksheet is the Balance Sheet and Income Statement for ABC Company. You will use the information to complete the assignment. The second worksheet contains a breakdown of categories of ratios where you will complete the calculations for each ratio. You will also enter the formula written out as to what information you have used to do the calculations.
You are going to use the five classifications of financial ratios to assess the financial performance of ABC Company.
Team Responsibilities
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You will calculate ratios for each classification for the 3 years of data (i.e., the current ratio may have been 1.5 the first year, 1.35 the second year, and .75 in the most recent year). It is based on these results that you will measure financial performance, or trends, from one year to the next. It is imperative that the ratios-numbers, and quantitative outcomes, support your analysis.
Part 2
In this part of your assignment, you will compose an analytical study reporting your results from Part 1. The CEO of your company is forming a task force to review the financials and present a review for acquisition of ABC Company. Based on ABC’s previous 3 years of financials, determine if this would be a good acquisition. You must form the task force to complete the task.
The CEO would like most of the departments to participate in the process. Using each department’s area of expertise, what information would each of the following departments contribute to the final decision? Provide a minimum one-paragraph response for each department.
- Human Resources
