Week 3 Provide Two Key Financial Ratios Used by the Company Management Selected for the Project and Component Six Inputs PLEASE READ THE 2 ATTACHMENTS ABOUT MY COMPANY FIS 1. You CAN NOT use the text book ratios for this discussion post (this will be related to another ratio category called practical application versus four main categories used in the text book). This is supposed to be critical thinking exercise so please investigate the most used operational and financial ratios by management to monitor and run the company. You will need to read the most recent SEC.gov 10K Notes to Financials and Management Comments section in the Annual Report. Please use the two ratios investigated for this topic in your final project Excel spreadsheet. 2. If possible, please speak with a member of management and find out what operational or financial ratios used on a day-to-day basis. While you might find the numerator or denominator in the balance sheet or income statement the other component of the equation will likely come from the Notes to Financials or the Management Discussions. If you aren’t using your employer, you will need to think about the primary company selected for the project and the key operational activities that take place on a day-to-day basis. What are the major income or expense line items impacting your primary company and what ratios you would rely upon on a consistent basis to manage your company? This will likely be the right time to start emailing me with your questions. 3. Provide an explanation on why and how the unique and practical ratios are used by management.
Explain the components used and why they are important. 4. Please provide the amounts (numerator and denominator) and calculation results for the most recent FYE financial statements. Also provide the industry averages if available. Don’t forget the possible use of EBITDA if your company doesn’t make a profit but has good cash flow. https://www.knowledgiate.com/advantages-and-disadvantages-of-using-ebitda/ 5. Let us know the business investment purpose for project component six. Also,
explain how you decided on the the initial project cost, method used to determine expected yearly revenue growth rate, and yearly expense inflation rate. Revenue growth can be calculated by using the three most recent years of revenue growth from the 10K Income Statements. Yearly expense increases can be found by using the most recent Consumer Price Index (CPI). Further clarification from my professor: If you were an executive with the company, you need to go to the income statement to see the two largest items (one income and one expense). Once you have determined the greatest impacts driving the company you need to think of financial or operational ratios that are important to monitor. If inventory or is one of the largest, then find inventory related ratios. If employee expenses are the largest, then find out the number of employees and calculate income and/or expense per employee ratios. If accounts payable is significant, consider using that ratio for one of your two industry specific. Focus on the greatest income producer and expense factor. Have you typed your primary company’s name or industry “important financial operation ratios” in a search engine? Weeks two, three and four discussions require critical thinking and out of the box research. Make sure you can find the amounts nece
