Financial Statement Review. Download the annual reports for the 2011 & 2012 fiscal years of the publically traded company in the portfolio you created in the Week One “Portfolio Construction” Assignment.
Review problems 7.17 and 7.18 in Chapter 7 of your text. Instead of using the financial statements in the text, substitute the financial statements of your company and address the following questions:
1. Review the 2011 and 2012 financial statements of the company you selected.
7.17 a. On the basis of the information provided, calculate the following financial ratios for 2011 and
7.17 b. Considering the financial ratios you computed, along with the industry averages, how would
you characterize the financial condition of your selected company? Explain.
a. 7.18 a. Use the profit margin and asset turnover to compute the 2011 ROA. Now introduce the equity
the 2011 summary financial statistics on the annual report of the company you selected.
multiplier to find ROE.
7.18 b. Use the summary financial information from the 2012 financial statements (see problem 7.17
above) to compute the 2012 ROA and ROE. Use the same procedures to calculate these measures as
you did in part a.
7.18 c. 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 between 2011 and 2012. Which component(s) contributed the most to the change in ROA? Which contributed the most to the change in ROE?
7.18 d. Generally speaking, do you think that these changes are fundamentally healthy for the company?
Your paper should be three- to five- pages in length, excluding the title and reference pages. Be sure to show your work for full credit. Your paper must be formatted according to APA style, as outlined in the Ashford Writing Center, and must include at least two scholarly sources (in addition to the text).
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