CLC - The Financial Statement Analysis Report: Liquidity and Solvency Analysis
This is a Collaborative Learning Community (CLC) assignment.
Complete this assignment in the Bongo environment by clicking on the attachment link, which will launch a new browser window.
Refer to the Course Materials for additional guidance on completing assignments using Bongo.
The purpose of this assignment is to measure a company’s financial health by analyzing liquidity and solvency ratios.
Liquidity and solvency ratios serve as important references for a company’s capacity to meet both short-term and long-term financial obligations, and is generally indicative of a company’s ability to quickly generate cash.
Utilizing the company's annual report, refer to the Notes to the Financial Statements and analyze the company’s financial statements for the last 3 years.
In the Ratios tab of the FSAR Excel Spreadsheet, complete the Short-Term Debt Paying Ratios, Asset Utilization or Turnover Ratios, and the Long-Term Solvency or Financial Leverage sections.
1. Calculate of the short-term debt paying ratios.
2. Calculate the long-term debt paying or financial leverage ratios.
3. Calculate the five significant asset utilization or turnover ratios.
Address the following analysis questions in the Comments section of each ratio:
1. What accounts changed for the period and how did this affect the financial analysis calculation?
2. Why did the account change during the period? Explain what business decisions may have caused the change.
3. How does this change influence the company’s performance?
The CLC group will submit the FSAR Excel Spreadsheet with the analyzed data for the selected company. To earn full credit on this assignment, the group must show detailed work in Excel, which includes providing the formulas and comments in the cells, not just the summary value.
APA style is not required, but solid academic writing is expected.
You are not required to submit this part of the assignment to LopesWrite.
After completing the calculations and comments in the FSAR Excel Spreadsheet, create a 250-500 word document analyzing the liquidity and solvency ratios from Part 1 of this assignment. Address the following in your response:
1. Analyze the significant trends for the 3 years for the company’s liquidity. Include the inventory valuation method the company uses, as well as the policy for credit and collection and the effect these have on liquidity ratios.
2. Analyze significant trends you see for the company’s debt over the last 3 years. Include how the company uses debt or equity to raise capital, any significant debt the company may be carrying, and any leases the company has that may affect debt.
Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success Center. An abstract is not required.
You are required to submit both the FSAR Excel Spreadsheet and the analysis paper in the appropriate dropbox.
This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
The instructor will provide feedback on this assignment. Evidence of revision will be assessed on the final report.