An investor has approached you about whether or not purchasing stock in the company would be...
An investor has approached you about whether or not purchasing stock in the company would be a wise investment. Using your financial analysis of the company, you will send a letter to the investor summarizing your findings and explaining whether you recommend a stock purchase at this time.
You will use information in the Form 10-K for Amazon to complete this assignment. Using the correct formulas and a separate tab for each analysis, calculate the following ratios using Excel:
- Three liquidity ratios for the past 3 years
- Three solvency ratios for the past 3 years
- Three profitability ratios for the past 3 years
Conduct research about Walmart. Complete a competitor analysis that includes a minimum of three ratios and compares your company to a competitor company using these ratios to determine financial performance as well as how the company rates compared to overall industry averages. Be prepared to justify your analysis by explaining your findings.
Using your research findings and analysis of company performance in relation to industry competitors, construct a 250-500 word letter making stock purchase recommendations for a potential investor. In the letter, address the following, referencing specific ratios and comparative numbers as appropriate.
- Discuss the overall financial performance of your company in relation to industry averages and a specific competitor. Explain whether the company performed better or worse than the competition using specific numbers and providing an explanation of what the numbers illustrate.
- Recommend whether the potential investor should purchase stock in your company and justify your recommendation based upon your research and analysis of the company ratios and industry competition.
Homework Answers
Ans. 3 liquidity ratios: (i) Current Ratio; (ii) Quick Ratio; and (iii) Basic Defense Ratio
3 solvency ratios: (i) Debt-equity Ratio; (ii) Total Debt to Equity Ratio; and (iii) Propreitary Ratio
3 profitability ratios: (i) Operating Profit Ratio; (ii) Gross Profit Ratio; and (iv) Net Profit ratio
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An investor has approached you about whether or not purchasing
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