Ratio Analysis
Select two non-financial companies from the same industry using Yahoo! Finance to find at least one financial ratio for both companies and the industry (i.e., peer) average from each of the following groups of ratios:
•Liquidity Ratios
•Activity or Asset Utilization Ratios
•Profitability Ratios
•Leverage Ratios (also called Debt Utilization Ratios)
•Coverage Ratios.
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Company |
Industry |
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Ratio |
A |
B |
Average |
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Liquidity Ratio |
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Activity Ratio |
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Profitability Ratio |
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Leverage Ratio |
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Coverage Ratio |
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Enter the ratios in the following table: Make sure to specify which financial ratio is being presented for each category (e.g., current ratio as a measure of liquidity). Include a 2-3 page summary of your findings that answers the following questions:
•What does each of the ratios measure?
•Would an investor or creditor prefer to see a high or low value of the ratio? Why?
•How do the two companies compare to each other and the peer average for each ratio?
•Based on this comparison, which of the companies appears to be a more attractive stock investment and creditworthy borrower? Why?
