BA 620 Managerial Finance Group Company Project Guidelines Group/Company Project. One of the goals BA 620 Managerial Finance is to introduce you to various concepts, theories, and methods of evaluating the financial strength of a company. This paper is opportunities to put into practice these concepts, theories, etc. that apply to a company. Select a publicly traded company and record your selection with me. During the course, it will be your responsibility to use the class concepts to research the company and apply the class learning to the information obtained about the company. Important: The professor will assign you to groups at the beginning of this class. Each group will be assigned one or more companies to analyze. Please note that the professor reserves the right to modify the requirements of the group project. Guide to Group Company Analysis Part I (40 points) A. Research and then describe your company's primary business activities. Include: 1. A brief historical summary, 2. A list of competitors, 3. The company's position within the industry, 4. Recent developments within the company/industry, 5. Future direction, and 6. Other items of significance to your corporation. B. Include information from a variety of resources. For example: 1. Consult the Form 10-K filed with the SEC. 2. Review the Annual Report and especially the Letter to Shareholders 3. Explore the corporate website. 4. Select at least two significant news items from recent business periodicals C. Submit a written report that is 5-7 pages long. The report should be well written with cover page, introduction, body of paper (with appropriate subheadings), conclusion, and reference page. References must be appropriately cited. Be sure to address all of the points in Section A above, using all of the resources listed in Section B. Format: Double- spaced, one-inch margins, using a 12-point Times New Roman font. D. Due Date: Last day of Week/Module 2 Part II (60 points): The purpose of the second part of the comprehensive project is to compute financial statement ratios. Based on the company you selected in Part I, complete the following: A. Compute the following ratios for two years. You may use Excel to compute your ratios. 1. Debt ratio 2. Gross profit margin 3. Free cash flow 4. Times interest earned 5. Accounts receivable turnover 6. Inventory turnover B. Prepare a DuPont Analysis of ROE for two years, including computations of 1. Return on Sales 2. Asset Turnover 3. Return on Assets 4. Financial Leverage 5. Return on Equity C. Briefly evaluate the ratio trends. Indicate on your worksheet whether each ratio is: 1. stronger / weaker 2. quicker /slower 3. more / less liquid 4. more / less risk D. Write a 3-6 page report evaluating trends in all of the above ratios. Discuss whether your company's profitability, efficiency, liquidity, and solvency are improving or d.

1. BA 620 Managerial Finance
Group Company Project Guidelines
Group/Company Project. One of the goals BA 620 Managerial
Finance is to introduce you to
various concepts, theories, and methods of evaluating the
financial strength of a company. This
paper is opportunities to put into practice these concepts,
theories, etc. that apply to a company.
Select a publicly traded company and record your selection with
me. During the course, it will be
your responsibility to use the class concepts to research the
company and apply the class learning
to the information obtained about the company.
Important:
The professor will assign you to groups at the beginning of this
class.
Each group will be assigned one or more companies to analyze.
Please note that the professor reserves the right to modify the
requirements of the group project.
Guide to Group Company Analysis
Part I (40 points)
A. Research and then describe your company's primary business
activities. Include:

2. 1. A brief historical summary,
2. A list of competitors,
3. The company's position within the industry,
4. Recent developments within the company/industry,
5. Future direction, and
6. Other items of significance to your corporation.
B. Include information from a variety of resources. For
example:
1. Consult the Form 10-K filed with the SEC.
2. Review the Annual Report and especially the Letter to
Shareholders
3. Explore the corporate website.
4. Select at least two significant news items from recent
business periodicals
C. Submit a written report that is 5-7 pages long. The report
should be well written with cover
page, introduction, body of paper (with appropriate
subheadings), conclusion, and
reference page. References must be appropriately cited. Be sure
to address all of the
points in Section A above, using all of the resources listed in

3. Section B. Format: Double-
spaced, one-inch margins, using a 12-point Times New Roman
font.
D. Due Date: Last day of Week/Module 2
Part II (60 points):
The purpose of the second part of the comprehensive project is
to compute financial statement
ratios. Based on the company you selected in Part I, complete
the following:
A. Compute the following ratios for two years. You may use
Excel to compute your ratios.
1. Debt ratio
2. Gross profit margin
3. Free cash flow
4. Times interest earned
5. Accounts receivable turnover
6. Inventory turnover

4. B. Prepare a DuPont Analysis of ROE for two years, including
computations of
1. Return on Sales
2. Asset Turnover
3. Return on Assets
4. Financial Leverage
5. Return on Equity
C. Briefly evaluate the ratio trends. Indicate on your worksheet
whether each ratio is:
1. stronger / weaker
2. quicker /slower
3. more / less liquid
4. more / less risk
D. Write a 3-6 page report evaluating trends in all of the above
ratios. Discuss whether your
company's profitability, efficiency, liquidity, and solvency are
improving or deteriorating.
Suggest ways the company can improve the ratios that show
problems. The report should
be well written with cover page, introduction, body of paper
(with appropriate subheadings),

5. conclusion, and reference page. References must be
appropriately cited. Use APA
throughout.
Format: Double-spaced, one-inch margins, using a 12-point
Times New Roman font.
E. Due: Residency activity
Part III (60 points):
The purpose of the third part of the comprehensive project is to
use resources available to
obtain industry averages for commonly used ratios.
Additionally, you will compare company
ratio results to industry averages.
A. Obtain the four-digit primary SIC (Standard Industrial
Classification) Code and industry title
for your company. Record the primary SIC code and industry
title at the top of the Ratio
Analysis Worksheet.
B. Obtain industry averages for commonly used ratios in the
current period. Industry average
information is reported by industry title or SIC code.

6. C. Look up the following industry-average ratios:
1. Current ratio
2. Debt ratio
3. Gross profit margin
4. Times interest earned
5. Accounts receivable turnover
6. Inventory turnover
7. Return on Sales
8. Asset Turnover
9. Return on Assets
10. Financial Leverage
11. Return on Equity
Note that some industry averages may not apply to your
company.
Alternative to Industry Averages:
If you are not able to find the industry average for part 3 of
your project, please consider
the following:
Unfortunately, some of the websites where you can find
industry averages will require

7. you to pay for them. Instead of using industry average, calculate
the same ratios for one
of the competitors to the company you used in your project.
That will give you the
comparative information you need for Part 3 of the project.
D. Write a 4-6 page report comparing the above ratios to
industry averages. Discuss
whether your company's profitability, efficiency, liquidity, and
solvency are better than, or
worse then, its peers. The report should be well written with
cover page, introduction,
body of paper (with appropriate subheadings), conclusion, and
reference page.
References must be appropriately cited. Format: Double-spaced,
one-inch margins,
using a 12-point Times New Roman font. Use APA throughout.
E. Due: Residency activity

8. Part IV: Final Written Paper (40 points)
The final written paper requires you to prepare a well-written
titled "Would You Advise a Friend
to Invest in This Company?" based upon your research and
analysis of this company's financial
information. You should identify at 5-7 significant points that
justify your conclusion. Support
your points with a comprehensive explanation incorporating
sound reasoning. The significant
points you identified should be consistent with what you said in
Parts I, II, and III.
A. Your final written paper should be 4-5 pages long. The
report should be well written with
cover page, introduction, body of paper (with appropriate
subheadings), conclusion, and
reference page. References must be appropriately cited. Format:
Double-spaced, one-
inch margins, using a 12-point Times New Roman font. Use
APA throughout.
B. Due: Residency activity
Running Head: ANALYSIS REPORT 1

9. ANALYSIS REPORT 5
ANALYSIS REPORT
Name
Institution
Instructor
Date
Analysis Report
Introduction
Carnival Corporation boasts as the most successful leisure
travel company in the world. It is a publicly listed company and
accrues the largest profits compared to its peers in the cruise
and vacation industries. This report evaluates the company’s
trends by focusing on profitability, liquidity, efficiency and
solvency ratios across two financial years; 2018 and 2019.
Where there ratios are seen to be deteriorating, plausible
recommendations are provided.
Debt Ratio
This ratio depicts the fraction of a company assets financed by
debts owed to creditors (Liang et al., 2016). As such it shows a
company’s leverage. Carnival Corporation debt ratio increased
from 24.51% in 2018 to 25.95% in 2019. This means that the
proportion of the company assets financed by debt increased

10. which indicates a deterioration. However, this is a favorable
ratio and does not present financial risks for investors (Myšková
& Hájek, 2017).
Gross Profit Margin
This ratio is an indicator of the proportion of revenues realized
by a company that is above the cost incurred for goods sold
(COGS) (Liang et al., 2016). Carnival Corporation’s gross
profit margin decreased from 46.40% in 2018 to 41.79% in
2019. This means that COGS increased in 2019 with revenues
failing to reflect that increase. The company’s management
should consider improving efficiency in the company to reduce
costs of production.
Free Cash Flow
Free cash flow is the amount of money that is left for the
company after paying for its operating expenses as well as
capital expenditure (Liang et al., 2016). Carnival Corporation’s
free cash flow decreased from $3,271 to $3,202 2018 in 2019.
This is another indicator of decreased efficiency. The
management ought to root out inefficiencies in the company’s
operations to raise the free cash flow.
Times Interest Earned
This ratio is an indicator of the number of times that a company
can comfortably pay its debts with its earnings before tax
(Liang et al., 2016). There was a deterioration for Carnival
Corporation from 17.14 in 2018 to 16.38 in 2019. This means
that the company’s ability to pay date decreased. Increasing
efficiency to increase operating income could be an effective
solution for the company.
Accounts Receivable Turnover
This ratio shows a company’s ability to effectively issue credit
to its customers and the ability to collect its dues from them
(Liang et al., 2016). As such it shows the number of times the
company collects debts from its customers. The accounts
receivable turnover for Carnival Corporation increased from
0.28 in 2018 to 0.38 in 2019 showing that the company was
more effective in collecting debt from credit sales in 2019.

11. Inventory Turnover Ratio
These are the number of times that the inventory was
completely sold in a given year (Liang et al., 2016). The
inventory turnover increased from 22.49 in 2018 to 28.39 in
2019 for Carnival Corporation which shows the company was
able to sell off its inventory quicker in 2019 than in 2018 (Tian
& Yu, 2017).
DuPont Analysis
Return on Sales
This ratio is an indicator of how efficiently a company turns its
sales into profits. The ROS for Carnival Corporation decreased
from 0.16 in 2018 to 0.14 in 2019. Increasing efficiency in
operations would be key for the company to improve its ROS
(Liang et al., 2016).
Asset Turnover
ATO measures how efficiently a company uses its assets to
generate income. The ATO for Carnival Corporation increased
from 0.44 in 2018 to 0.46 in 2019 indicating improved
efficiency (Liang et al., 2016).
Return on Assets
ROA measures the profitability of a company relative to its
asset (Liang et al., 2016). The ROA for Carnival Corporation
decreased from 0.074 in 2016 to 0.066 in 2019 showing
deteriorating profitability. Again, more efficient use of
company assets could improve the company’s ROA going
forward (Tian & Yu, 2017).
Financial Leverage
Financial leverage measures the amount of debt that is used by a
company to finance its operations. The financial leverage of the
company increased from 0.25 in 2018 to 0.26 in 2019 showing
an increase in the amount of assets financed through debt
(Liang et al., 2016). As such, this shows an increased risk of
inability to pay debt. The company ought to reduce debt
financing to ensure that its assets are in a strong position to pay
off debts owed to its creditors.
Return on Equity

12. ROE measures the profitability of a company relative to its
equity. Again it indicates how efficiently a company’s
management uses the assets to make profits (Liang et al., 2016).
The ROE of Carnival Corporation decreased from 0.074 in 2016
to 0.066 in 2019 showing deteriorating profitability in the
company’s operations. As such, the company needs to put in
place policies that enhance efficient use of corporate assets.
Conclusion
The analysis shows an overall deteriorating trend for Carnival
Corporation from 2018 to 2019. The root cause of this
deterioration is decreased efficiency. As such, it is up to the
company’s management to improve efficiency in operations to
reduce costs and to ensure better usage of company assets.
References
Liang, D., Lu, C. C., Tsai, C. F., & Shih, G. A. (2016).
Financial ratios and corporate governance indicators in
bankruptcy prediction: A comprehensive study. European
Journal of Operational Research, 252(2), 561-572. Retrieved
from
https://www.sciencedirect.com/science/article/pii/S0377221716
000412
Myšková, R., & Hájek, P. (2017). Comprehensive assessment of
firm financial performance using financial ratios and linguistic
analysis of annual reports. Journal of International Studies,
volume 10, issue: 4. Retrieved from
https://www.ceeol.com/search/article-detail?id=607109
Tian, S., & Yu, Y. (2017). Financial ratios and bankruptcy
predictions: An international evidence. International Review of
Economics & Finance, 51, 510-526. Retrieved from
https://www.sciencedirect.com/science/article/pii/S1059056017
305348
Running Head: BA620 PROBLEM 2
BA620 PROBLEM 2

13. BA620-Problem: Adams Stores Inc
Name
Institution
Date
Part 1: Financial Statements
A. Income Statement for 2016 and 2017
Particulars
2016
Common size
2017
Common size
Revenue
Sales
3432000
100.00%
5834400
100.00%
Total Revenues
3432000
100.00%
5834400
100.00%

14. Expenses
Cost of goods sold
2864000
83.45%
4980000
85.36%
Depreciation
18900
0.55%
116960
2.00%
Interest Expenses
62500
1.82%
176000
3.02%
Other Expenses
340000
9.91%
720000
12.34%
Total Expenses
3285400
95.73%
5992960
102.72%

15. Net Income Before Taxes
146600
4.27%
-158560
-2.72%
Less taxes @40%
58640
1.71%
63424
1.09%
Net Income
87960
2.56%
-95136
-1.63%
Statement of Retained Earnings
Particulars
2016
2017
Beginning
115808
203768
Add: Net Income
87960
-95136
Less: Dividends
0
-11000

16. At the end
203768
97632
B. Balance Sheet for 2016 and 2017
Particulars
2016
Common Size
2017
Common Size
Assets
Current Assets
Cash
9000
0.61%
7282
0.25%
Short term Investments
48600
3.31%
20000
0.69%
Accounts Receivable
351200
23.91%
632160
21.90%
Inventory

17. 715200
48.69%
1287360
44.60%
Total Current Assets
1124000
76.53%
1946802
67.44%
Fixed Assets
491000
33.43%
1202950
41.67%
Less: Accumulated Depreciation
146200
9.95%
263160
9.12%
Total Fixed Assets
344800
23.47%
939790
32.56%
Total Assets
1468800

18. 100.00%
2886592
100.00%
Liabilities and owners Equity
Current liabilities
Accounts Payable
145600
9.91%
324000
11.22%
Accruals
136000
9.26%
284960
9.87%
Total Current liabilities
281600
19.17%
608960
21.10%

19. Long Term liabilities
Long term debt
323432
22.02%
1000000
34.64%
Notes Payable
200000
13.62%
720000
24.94%
Total long-term liabilities
523432
35.64%
1720000
59.59%
Owner’s Equity
Share Capital
460000
31.32%
460000

20. 15.94%
Retained Earnings
203768
13.87%
97632
3.38%
Total Owners Equity
663768
45.19%
557632
19.32%
Total Liabilities
1468800
100.00%
2886592
100.00%
C. Common-Size financial statements of income statement and
Balance sheet.
D. Statement of Cash Flows
Cash Flow Statement
2017
Particulars
Amount
Net Profit After Taxes
-95136
Add: Non Cash Expenditure
Depreciation

21. 116960
Add: Non-Operating Expenditure
Interest
176600
Change in Working Capital
Increase in Accounts Receivable
-280960
Increase in Accounts Payable
178400
Increase in Inventory
-572160
Increase in Accruals
148960
Cash from Operating Activities
-327336
Cash Flow from Investing Activities
Sale of Short Term Investments
28600
Purchase of Fixed Assets
-711950
Total Cash From Investing Activities
-683350
Cash Flow from Financing Activities
Increase in LT Debt
676568
Interest Paid

22. -17660
Dividends Paid
-11000
Notes Issued
520000
Cash flow from financing activities
1008968
Net Cash flow from all activities
-1718
Add: Opening Cash
9000
Closing Cash
7282
Part 2: Financial Statement Analysis
A. Ratios
Ratio
2016
2017
Current Ratio
(Current Assets/Current liabilities)
3.991
3.197
Quick Ratio
{(Current assets-stock)/Current liabilities}
1.452
1.083
Inventory turnover (Times)
(Cost of Goods Sold/ Average Inventory)
4.004
4.974
Average collection period (days)
(365/Debtor’s turnover ratio)
37.351
30.759
Total asset turnover (times)

23. (sales/total assets)
2.337
2.021
Debt Ratio
(Debt/(Debt + Equity))
0.441
0.755
Times interest earned
(Earnings Before Interests and Taxes(EBIT)/Interest)
3.346
0.099
Gross Profit Margin
(Gross Profits/Sales)
0.166
0.146
Net profit margin
(Net Profit/Sales)
0.026
-0.016
Return on Assets
(EBIT/Total Assets)
0.142
0.006
Return on equity
(Net Income/ Owners Equity)
0.133
-0.171
P/E Ratio Return on equity
(Market Price/Earnings per Share
9.663
-6.307
EBIT = Sales- Cost of Goods Sold – Depreciation -Other
Expenses.
For 2016, EBIT is 209100 while that of 2017 is 17440.
Return on Equity using DU Point Analysis
Particulars

24. 2016
2017
Net Profit Margin (NPM)
0.026
-0.016
Asset turnover (AT)
2.337
2.021
Financial Leverage (FL)
2.213
5.177
Return on Equity (NPM*AT*FL)
0.134
-0.167
B. Comment on the ratios
Financial ratios are important in describing the financial health
of an organization at any given time. The ratios are therefore
important for different organizational stakeholders. For
instance, any interested investors and analysts tend to pay much
attention to the price to earnings ratio, and net profit margin.
The two ratios show the return rate of a company and its
profitability. The two ratios were positive in 2016 and were
negative in 2017. This shows that the financial health of the
company deteriorated in the year 2017.
Current ratio is used to understand the liquidity of a company.
The current ratio enables the company to pay the debts at ease,
as compared to when there is a low current ratio. The company
reduced its current ratio for the year 2017 as compared to 2016.
Quick ratio subtracts the inventories from the current assets and
divides the difference with liabilities. The quick ratios for the
company were high in both years. This implies that the company
tend to turn their inventories quite slower, which is a threat to
the company.
Return on equity enables the organizational shareholders to
understand the profitability of their capital as they invest in the
company. A high ROE indicates that the organization is capable

25. of generating high levels of profit. Debt-Equity ratio is another
important ratio that shows the prospective investors how much
the company is likely to borrow. A high debt-equity ratio
reduces the safety margin of the investors and vice versa.
C. Compare 2017 ratios with the industry average.
The ratios in 2017 implies that the financial performance of the
company had deteriorated. This implies that the company
competitors had a higher competitive advantage, which is a
threat to the company. Comparing the ratios with the
performance of the industry at that time, we could conclude that
the financial performance of the company was low.
Part 3: Break even analysis, Financial and Operating Leverages
a. Break-even in dollars and units
Break-even units = fixed cost / contribution per unit
Contribution per unit = Sales per unit - variable cost per unit =
50 - 25 = 25
Break even units = 600000 / 25 = 24000 units
Break even in dollars = 24000 * 50 = 1200000
These numbers mean that the company needs to sell a minimum
of 24000 units so as to earn profits and also prevent losses. As a
manager, I would use the numbers in financial planning to help
in defining minimum sales target of 1200000 and hence
minimize losses.
b. Degree of financial leverage
Degree of financial leverage = EBIT / EBT
EBIT (earnings before interest and tax) = 400000
EBT (earning before tax) = 280000
Degree of financial leverage = 400000/280000 = 1.43
This means that for any 1% variation in EBIT, EBT changes by
1.43%. This is important in financial planning especially for the
reason that it aids in establishing the capital structure. For
instance, the degree of financial leverage more than 1 is good is
the operating profit increases especially for the reason that
interests are fixed expenses and a rise in operating profit
increases the net income and EPS. Hence, financial leverage can
be reduced to 1 through the use of capital investment debt.

26. c. Degree of operating leverage
Degree of operating leverage = Contribution / EBIT
= (2000000-1000000) / 4000000 = 2.5
This means that for every 1% change in sales, there is a 2.5%
change in profit. In financial planning, the number is important
in making decisions regarding the minimum sales and the
amount of sales that ought to be increased without varying the
fixed costs.