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Prepare vertical common-size balance sheets

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Reference no: EM13794946

(1) Prepare vertical (as well as horizontal) common-size balance sheets and income statements for both companies. Note: Compute for the most recent THREE years.

(2) Prepare comparative analysis (i.e., change of percentage analysis) on income statement and balance sheet for both companies. You should compute for the most recent THREE years.

(3) Prepare ratio analyses (for the same THREE year time period) for both companies. At least, you should include the following ratios in your computations: (1) current ratio, (2) acid-test ratio, (3) receivables turnover, (4) inventory turnover, (5) asset turnover, (6) profit margin on sales, (7) rate of return on assets, (8) rate of return on common stock equity, (9) earnings per share, (10) payout ratio, (11) debt to total assets ratio, (12) times interest earned, (13) cash debt coverage ratio, and (14) book value per share.

(4) Comment on the analytical results of the two companies. Your comments should concentrate on the trends across the companies. In addition to contrasting the ratios between the companies, you should interpret the numbers and make suggestions as to why the ratio of one company might be higher/lower than the other.

(5) Write a conclusive summary on the firms you have studied. Based upon your conclusions, recommend the better performing firm for potential investment. Your conclusions should be based upon, and specifically reference, the analyses prepared in this report.

Reference no: EM13794946

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