Ratio Analysis Of The Balance Sheet And Income Statement - Analytical Projects Case Study - Accounting and Finance Assignment Help

Assignment Task

FINANCE AND ACCOUNTING (MBA) – guidelines for student  analytical projects (case studies)  
Compare the financial results of two companies from the semiconductor industry (that have  been allocated to You), based on their most recent annual reports:  
1) MANDATORY PART: Ratio analysis of the balance sheet and income statement –  compute and compare the following financial statement ratios (for both fiscal years  included in the annual reports):  
a) PROFITABILITY RATIOS (teaching material: webinar L1):  
Gross margin on sales (= Gross profit on sales / Sales revenues),  
Margin on sales (= Profit on sales / Sales revenues),  
Operating profitability (= Operating profit / Sales revenues),  
EBITDA profitability (= EBITDA / Sales revenues),  
Pre-tax profitability (= Pre-tax earnings / Sales revenues),  
Net profitability (= Net earnings / Sales revenues),  
Return on assets (= Net earnings / Total assets),  
Return on equity (= Net earnings / Shareholders’ equity).  
b) FINANCIAL RISK RATIOS (teaching material: webinar L2):  
Total indebtedness (= Total liabilities / Total assets),  
Current ratio (= Current assets / Current liabilities),  
Quick ratio (= Current assets less inventory and pre-paid expenses /  Current liabilities),  
EBITDA to debt (= EBITDA / Total liabilities).  
2) NON-MANDATORY PART: breakdown of ROE (return on equity) into its three  fundamental drivers (teaching material: webinar L3) – for both semiconductor  companies, which You are investigating and comparing, compute return on equity (as  defined above), for the last two fiscal years (covered by the most recent annual  report), as well as ROE’s three fundamental drivers (i.e. net profitability, assets  turnover and financial leverage), and answer the following questions:  
a) Which of the two companies had higher ROE in their last two fiscal years?  b) Which of the two companies improved (and which deteriorated) its ROE in  the last two fiscal years?  
c) Which of the two companies has better (i.e. healthier) structure of ROE  drivers (i.e. higher net profitability and/or asset turnover, and lower financial  leverage than the second company)?  
d) If ROEs of these two firms changed significantly between their last two fiscal  years, were these changes driven mostly by operating factors (i.e. net  profitability and asset turnover) or by a financial leverage?  
e) Does any of these two companies seem to have clearly better (healthier and  less risky) structure of ROE’s drivers than the other one? 

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