MF002.Final.Assess.Inst.Overview
For this Performance Task Assessment, you will examine various financial reports of a publicly traded company
and conduct a financial ratio analysis to understand a company’s financial position as compared to industry
averages to demonstrate your ability to understand a company’s financial health and analyze ways to improve in
areas revealed as being below industry average.
Assessment Submission Length: 4- to 6-page financial health assessment report (excluding title page and
references) and financial ratio calculations in Excel
To complete this Assessment, do the following:
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Ensure that all necessary information has been entered into the MF002.Assessment.Template_Part1 file. (As
a reminder, refer to problem 4-23 on pages 143–144 of Fundamentals of Financial Management [Brigham &
Houston, 2022]. Note that you will utilize the numbers provided in the problem but will not be answering
any of the questions in this Assessment. All formulas are included in the MF002.Assessment.Template.Part1
file.)
In the MF002.Assessment.Template.Part2 file, complete your work on the Assessment, using your PreAssessment submission as a starting point and incorporating any feedback, as appropriate.
Be sure to adhere to the indicated assignment length.
Before submitting your Assessment, carefully review the rubric. This is the same rubric the assessor will use to
evaluate your submission and it provides detailed criteria describing how to achieve or master the Competency.
Many students find that understanding the requirements of the Assessment and the rubric criteria help them direct
their focus and use their time most productively.
Financial Health Assessment: Barry Computer Company
For this Performance Task Assessment, you will act as a consultant hired by the operations director of the Barry
Computer Company to do a financial analysis and comparison to the industry. You will conduct a financial ratio
analysis to gain a good understanding of the company’s financial performance and will then write up an evaluation
of the organization’s financial health, as well as your recommendations for how specific ratios can be improved
within the next 3–5 years. In your report, be sure to address the following two sections, including relevant citations
from the Learning Activities, and/or other appropriate academic sources to support your work.
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Part 1 – Financial Information (2-3 pages, plus Excel Spreadsheet)
• Calculate the following ratios for the Barry Computer Company using the Excel spreadsheet provided.
Ratio
Current
Quick
Days Sales Outstanding
Inventory Turnover
Total Assets Turnover
Profit Margin
ROA
ROE
ROIC
TIE
Debt/Total Capital
M/B
P/E
EV/EBITDA
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Calculation
Current Assets/Current Liabilities
Current Assets – Inventories/Current Liabilities
Receivables/(Annual Sales/365)
Sales/Inventories
Sales/Total Assets
Net Income/Sales
Net Income/Total Assets
Net Income/Common Equity
EBIT(1 – T)/Total Invested Capital
EBIT/Interest Charges
Total Debt/(Total Debt + Equity)
Market Price/Book Value
Price per Share/Earnings per Share
(Market Value of Equity + Market Value of Total Debt + Market Value of Other Financial Claims –
Cash and Equivalents)/EBITDA
Analyze computations to determine which ratios are above and below their industry averages, and for each,
provide a brief explanation as to why that might be the case.
Evaluate the financial health of the organization, including in what areas the organization could improve.
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Part 2 – Recommendations (2-3 pages)
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For each ratio that negatively falls outside the industry standards, develop at least one appropriate
recommendation for the Barry Computer Company to improve financial performance over time (over the
next 3–5 years to meet industry standards).
Assess limitations of the exclusive use of ratio analysis for evaluating financial performance. In your
assessment, describe any qualitative factors that could also complement the ratio analysis and play an
important role in improving financial performance.
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Additional Notes & References
Learning Activity 1: Financial Appraisals
When managers review financial ratios for an organization, their goal is to assess the financial condition of the
company and identify areas in which it is performing below the industry standards. Then, the managers can take that
information and provide recommendations to improve those measures and better align the organization with industry
averages. In this Learning Activity, you will examine the use of financial ratios to assess an organization’s
performance.
BOOK EXCERPT: ANALYSIS OF FINANCIAL STATEMENTS
Brigham, E. F., & Houston, J. F. (2022). Analysis of financial statements. In Fundamentals of financial
management(16th ed., pp. 128–150). Cengage Learning.
ARTICLE: FINANCIAL RATIOS FOR ASSESSMENT OF OPERATIONS SUCCESS IN ENTERPRISES OF
MACEDONIAN HOSPITALITY INDUSTRY
Petroska-Angelovska, N., & Ackovska, M. (2016). Financial ratios for assessment of operations success in
enterprises of Macedonian hospitality industry. Economic Development / Ekonomiski Razvoj, 18(3), 108–119.
Learning Activity 2: Making Decisions Using Ratio Analysis
In this Learning Activity, you will explore how ratio analysis can be a beneficial tool to you as a manager. Ratio
analysis can help you understand the financial results and trends that occur over time. It can help you identify key
indicators of organizational performance. After uncovering where the strengths and weaknesses are using ratio
analysis, you can develop better strategies and initiatives based on that data.
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The following is a tip on the relationship between decision making and ratio analysis. In the Excel sheet provided in
the Assessment, you will fill in two financial statements: the balance sheet and the income statement. To find out
how a decision may affect the ratios, you can change the figures from the financial statements. For example, if the
inventory turnover ratio (5 times a year), which is calculated by dividing sales into inventories, is slightly below
industry standards (6.7 times per year), how can this ratio be improved? To find out, go to the Excel sheet and change
the price of inventory to be slightly lower (meaning you will have less inventory on hand), and you will find that the
ratio improves. Now, increase the figure of sales slightly, and you will find that the ratio improves as well. The ratio
would worsen if you had made your adjustments in the opposite directions. One strategy you might recommend to
improve the inventory turnover ratio within 3 years would be to increase the numerator (top number: sales), decrease
the denominator (bottom number: amount of inventory), or both. Whatever your recommendations, you will need to
explain in detail why your suggestion is the best course of action.
ARTICLE: 4 WAYS TO STRENGTHEN YOUR BUSINESS USING FINANCIAL RATIOS
Business Development Bank of Canada. (n.d.). 4 ways to strengthen your business using financial ratios.
https://www.bdc.ca/en/articles-tools/money-finance/manage-finances/using-financial-ratios-analyze-business
ARTICLE: RATIO ANALYSIS OF FINANCIAL STATEMENTS: ANALYSE TO DRIVE BETTER
PERFORMANCE
Biedron, R. (2021, July 13). Ratio analysis of financial statements: Analyse to drive better performance. Planergy.
https://planergy.com/blog/ratio-analysis-of-financial-statements/
WEB RESOURCE: USING FINANCIAL RATIOS FOR ANALYSIS
https://courses.lumenlearning.com/boundless-accounting/chapter/using-financial-ratios-for-analysis/
Lumen Learning. (n.d.). Using financial ratios for analysis. In Boundless accounting. https://courses.lumenlearning.com/boundlessaccounting/chapter/using-financial-ratios-for-analysis/
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Learning Activity 3: The Limitations of Ratio Analysis
As with any financial analysis technique, there are several limitations of ratio analysis. It is crucial to know these
limitations to avoid making misleading conclusions. In this Learning Activity, you will consider the limitations of
ratio analysis.
ARTICLE: WHAT ARE THE LIMITATIONS OF RATIO ANALYSIS?
http://www.accountingtools.com/questions-and-answers/what-are-the-limitations-of-ratio-analysis.html
AccountingTools. (2021, April 11). What are the limitations of ratio
analysis?http://www.accountingtools.com/questions-and-answers/what-are-the-limitations-of-ratio-analysis.html
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