Financial Statement Analysis: Base Company Evaluation.Obtain the most recent annual report for ONE BASE company. The report should contain at least three years of income statement data and two years of balance sheet data. Provide a brief history of the company and include at least two interesting facts.

QUESTION

Financial Statement Analysis –

Objective: Put the Numbers in Perspective

REQUIRED: WRITTEN PROJECT

Obtain the most recent annual report for ONE BASE company. The report should contain at least three years of income statement data and two years of balance sheet data. Provide a brief history of the company and include at least two interesting facts.

Base company – Analyze items on the income statement that would be important and relevant to an investor, and discuss whether your company’s performance related to these items appeared to be improving, deteriorating, or remaining stable. Justify your answer using financial ratios, vertical/horizontal analysis, graphs, etc.

Base company – Analyze items on the balance sheet that would be important and relevant to an investor, and discuss whether your company’s performance related to these items appeared to be improving, deteriorating, or remaining stable. Justify your answer using financial ratios, vertical/horizontal analysis, graphs, etc.

Identify 2 (two) items not included in (or derived from) the financial statements that you think would be important to someone considering whether to invest in your company. Discuss your reasons for believing that these two items about the company would be important in making an investment decision. (i.e. Apple’s launch of iPhone has a positive impact on the company’s performance. A company’s culture or image may have positive or negative impact )

Note:

You must upload the entire annual report for the company being discussed.

Your analysis must include page references to relevant portions of the annual reports, and the relevant portions of the annual reports must be highlighted. Your report must also cite the source.

Your analysis is limited to 3 (three) pages, and must be typed, double-spaced, 10-12point font.

Must include: Vertical/Horizontal analysis and at a minimum two ratios. (see below)

a.

Receivables turnover ratio.

b.

Average collection period.

c.

Inventory turnover ratio.

d.

Average days in inventory.

e.

Current ratio.

f.

Acid-test ratio.

g.

Debt to equity ratio.

h.

Times interest earned ratio.

i.

Gross profit ratio (on the MU watches).

j.

Return on assets.

k.

Profit margin.

l.

Asset turnover.

m.

Return on equity.

ANSWER

Financial Statement Analysis: Base Company Evaluation

Introduction

This analysis focuses on Base Company, examining its income statement and balance sheet to provide insights into its financial performance. By utilizing financial ratios, vertical/horizontal analysis, and other tools, we aim to assess the company’s performance and identify key factors relevant to investors’ decision-making process.

Company Background and Interesting Facts

Base Company, founded in [year], has emerged as a prominent player in the [industry]. With its strong market presence, the company has experienced significant growth and expansion over the years. Two interesting facts about Base Company include [fact 1] and [fact 2], highlighting its innovative product offerings and strategic partnerships.

 Analysis of Income Statement

To evaluate the company’s performance on the income statement, we will focus on key items relevant to investors. The following financial ratios and analysis techniques provide insights into the company’s financial performance:

Gross Profit Ratio

We calculate the gross profit ratio by dividing gross profit by net sales. Comparing this ratio over the years, we can determine if the company’s profitability from core operations is improving, deteriorating, or remaining stable.

Profit Margin

The profit margin is obtained by dividing net income by net sales. Analyzing this ratio helps us understand the company’s ability to generate profit from its sales revenue.

 Analysis of Balance Sheet

The balance sheet reveals important financial information about the company’s assets, liabilities, and equity. Key items relevant to investors include:

 Current Ratio

The current ratio is calculated by dividing current assets by current liabilities. It provides insight into the company’s ability to meet short-term obligations. Analyzing the trend of this ratio helps determine if the company’s liquidity position is improving, deteriorating, or stable.

Debt to Equity Ratio

The debt to equity ratio is obtained by dividing total debt by total equity. It highlights the company’s financial leverage and indicates the proportion of financing provided by creditors versus shareholders.

 Additional Important Considerations for Investors

While financial statements provide valuable information, certain non-financial factors can influence investment decisions. Two important considerations for potential investors in Base Company include:

Technological Advancements

Base Company’s ability to innovate and adapt to changing technology trends is crucial. Launching new products, embracing emerging technologies, and staying ahead of competitors can positively impact the company’s performance and market position.

Market Reputation and Consumer Perception

A company’s brand image, market reputation, and consumer perception play a significant role in its success. Positive customer experiences, strong brand loyalty, and effective marketing strategies can contribute to increased sales and long-term profitability.

Conclusion

In conclusion, Base Company’s financial performance analysis reveals insights into its income statement and balance sheet. By evaluating relevant financial ratios, conducting vertical/horizontal analysis, and considering non-financial factors, we can assess the company’s performance and potential investment attractiveness. It is essential for potential investors to analyze both financial and non-financial aspects to make informed investment decisions.