Ratio Analysis Memo
Select a well-known organization as the basis for this assignment. It would be good if it was an organization you may have had some experience with – be sure it is an organization that sells inventory rather than one that just provides a service.
Access the organization’s annual report (Google the organization like this: Best Buy Annual Report) and find in the report the organization’s balance sheet and income statement. Most of the time annual reports are located in the organization’s “Investor Relations” section of their website. Use these statements to calculate the following:
I. Liquidity ratios
•Acid-test, or quick, ratio
II. Profitability ratios
•Return on assets
•Return on common stockholders’ equity
III. Solvency ratios
•Debt to total assets
•Times interest earned
Show your calculations for each ratio.
Create a horizontal and vertical analysis for the balance sheet and the income statement.
Write a 350- to 700-word memo to the CEO of your selected organization in which you discuss your findings from your ratio calculations and your horizontal and vertical analysis. In your memo, address the following questions:
· What do the liquidity, profitability, and solvency ratios reveal about the financial position of the company?
· Which users may be interested in each type of ratio?
· What does the collected data reveal about the performance and position of the company?
Format your memo consistent with APA guidelines.