Week 2 Discussion 1 - In Financial Statement Analysis

Week 2 Discussion 1 In Financial Statement Analysis?

Prior to beginning work on this discussion forum, read Chapters 3 and 7 in the course textbook Using Financial Accounting, and Chapter 6 in the Warren Buffett Accounting Book: Reading Financial Statements for Value Investing.

Using the same company and annual reports that you chose in your Week 1 discussion forum, Reading and Using the Annual Report Case Study, address the following:

• Calculate the gross profit ratio, operating margin ratio, and net income margin ratio for the latest two years and obtain the industry averages for these ratios and any other pertinent information from the Mergent Online database, available through the UAGC Library, or use another outside resource of your choice, and then analyze the results. Be sure to show your calculations.
  • If needed, review the How to Find Industry Ratios and Averages Using Mergent OnlineLinks to an external site. tutorial on how to use the Mergent Online
• Analyze these ratios and discuss what each of these ratios tells you about the company’s profitability and how it compares to the industry averages. 
• Note any trends in these ratios from year-to-year and discuss your assessment of the company based on these changes. 
• As an investor, explain why you would or would not buy stock in the company.