Financial Analysis – Ratio Analysis

Essay Instructions:

Organizational leaders must regularly complete financial and ratio analyses. Comparing ratios from year to year and determining the level of change allows important insight into an entity’s financial position. In this assignment, you will analyze and evaluate the financial statements of two entities in the same industry and prepare a 3 page summary of your findings. Step 1 Identify two organizations from the same sector and locate their most current financial statements. (These may be found on the company’s website on the investor page. Look for fourth-quarter earnings presentations or annual reports.) You can pick companies in the retail, financial, energy, information technology, education, or other sectors. Step 2 Download the Sample Formulas Template with example calculations and notes. You may use this template or your own Excel spreadsheet to calculate the financial ratios of the two entities. If you use the template, remove the notes and insert your own data for each of your selected entities. Use the following formulas: Change in Financial Position = [Net Assets(e) – Net Assets(b)]/Total Revenues(e) b = beginning of time period e = end of time period *Ratio shows change in financial position over period of time. Current Ratio = Current Assets/Current Liabilities *Ratio shows ability to cover obligations with existing resources. Quick Ratio = (Cash + Current Investments)/Current Liabilities *Ratio shows ability to cover obligations with most liquid assets. Debt-to-Assets Ratio = Total Liabilities/Total Assets *Ratio shows degree of resources to repay debt. Debt-to-Net Assets Ratio = Total Liabilities/Net Assets *Ratio shows degree of available resources to repay debt. Step 3 For each entity, compare each ratio from the year to the prior year and determine the level of change. Has the entity’s financial position improved? Explain your answer by using the ratio analyses. Compare the current year ratios of one company to the ratios of the other entity. Which entity has a stronger financial position? Explain your answer by using the ratio analyses. Step 4 Prepare a 3 page summary of your findings. Include the following: Write an introduction explaining the entities you selected and the industry sector they represent. For each ratio, state your findings, comparing the ratio change from one year to the next for each entity and the difference in ratios between the two entities. Write a conclusion describing the condition of each entity and comparing one entity to the other. Copy and paste or screenshot the Excel spreadsheet with the ratio calculations as an appendix to your summary. Step 5 Submit your APA-formatted title page, 3 page summary, reference page, and appendix as one document. To complete this assignment I would like to use Achievement First schools.

Essay Sample Content Preview:

Title Your Name Subject and Section Professor’s name Date Step 1 The two financial statements that will be compared with their latest published statements are Achievement First Brooklyn Charter Schools (AFBCS) and The Academy of Charter Schools for 2022-2023. Step 2 Achievement First Brooklyn Charter Schools (AFBCS) The following data used for the calculations were derived from CohnReznick (2023): 1 Change in Financial Position * Net Assets (beginning) (June 30, 2022): $58,428,995 * Net Assets (end) (June 30, 2023): $70,214,452 * Total Revenues (2023): $177,605,657 Change in Financial Position[Net Assets e-Net Assets b]Total Revenues Where: e= end of time b= beginning of time Change in Financial Position=70,214,452-58,428,995177, 605, 657 Change in Financial Position= 0.0664 or 6.64% 2 Current Ratio * Current Assets: $64,919,241 * Current Liabilities: $9,783,741 Current Ratio=Current AssetsCurrent Liabilities Current Ratio64,919,2419,783,741 Current Ratio=6.63 3 Quick Ratio * Cash: $46,790,717 * Current Investments: $295,983 * Current Liabilities: $9,783,741 Quick Ratio=(Cash+Current Investments)Current Liabilities Quick Ratio=46,790,717+ 295,9839,783,741 Quick Ratio=4.81 4 Debt-to-Assets Ratio * Total Liabilities: $12,088,652 * Total Assets: $82,303,104 Debt-to-Assets Ratio=12,088,65282,303,104 Debt-to-Assets Ratio=0.147 or 14.7% 5 Debt-to-Net Assets Ratio * Total Liabilities: $12,088,652 * Net Assets: $70,214,452 Debt-to-Assets Ratio=12,088,65270,214,452 Debt-to-Assets Ratio=0.172 or 17.2% The Academy of Charter School Financial Statements as of June 30, 2023 The following data are derived from the Academy of Charter Schools (2023): 1 Change in Financial Position * Net Assets (beginning) (2022): -$17, 273, 860 * Net Assets (end) (2023): -$13, 339, 872 * Total Revenues (2023): $24, 516, 703 Change in Financial Position=-13,339,872+17,273,86024, 516, 703 Change in Financial Position=0.1605 or 16.05% 2 Current Ratio * Current Assets: $11,732,572 * Current Liabilities: $1,942,297 Current Ratio=11,732,5721,942,297 Current Ratio=6.04 3 Quick Ratio * Cash: $10,976,402 * Current Investments: $5,343,597 * Current Liabilities: $1,942,297 Quick Ratio=10,976,402+5, 343, 5971,942,297 Quick Ratio=8.40 4 Debt-to-Assets Ratio * Total Liabilities: $52,285,060 * Total Assets: $37,192,710 Debt-to-Assets Ratio=52,285,06037,192,710 Debt-to-Assets Ratio=1.4058 or 140.58% 5 Debt-to-Net Assets Ratio * Total Liabilities: $52,285,060 * Net assets (2023): -$13, 339, 872 Debt-to-Net Assets Ratio=52,285,060-13, 339, 872 Debt-to-Net Assets Ratio=-3.92 Step 3 1 Has the entity's financial position improved? Explain your answer using ratio analyses. Yes. Regarding consolidation, both entities have vastly improved their positions on financial statements. According to the latest AFBCS financial statements, the organization's net assets rose from 2022 to 2023 by 6.64%. On the contrary, Gross was not wholly striking, whereas The Academy of Charter Schools recorded a higher raise of 16.05% on the net assets. Nevertheless, The Academy still has negative net assets, meaning it is less financially secure than before despite improvement. 2 Compare the current year’s ratios of one company to those of the other entity. Strictly based on the current ratio, the AFBCS group scored a slightly better score of 6.63 than The Academy's score of 6.04. The liquidity position is also suitable for both entities, but The Academy is superior to AFBCS in terms of the quick ratio of 8.40 compared to AFBCS's 4.81. This indicates that The Academy has better immediate liquidation sources to meet its current liabilities. However, AFBCS has a lower debt-to-assets ratio of 14.7% compared to The A...

Updated on January 2, 2025

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