Financial leverage

 

In preparation for your report in Project Two, you will need to calculate the financial ratios needed to determine
your chosen business’s current financial health. Once you’ve calculated these ratios, the results will be used to
analyze the business’s current financial position and help them make decisions about how to improve or
maintain their financial health. Pay particular attention to working capital management. If liquidity is an issue,
consider how the company will meet its short-term obligations.
Prompt
Using the Project Two Financial Formulas spreadsheet and the balance sheet, income statement, and cash
flow statement from Mergent Online for your chosen company (Tesla), calculate the financial ratios for the most
recent fiscal quarter. Then, compare those ratios with the same ratios for the same fiscal quarter from one year
prior in Mergent Online, and analyze your results.
Specifically, you must address the following rubric criteria:
Financial Calculations: Calculate accurate financial ratios to assess the business’s current financial health.
Specifically, calculate the following ratios:
Working capital
Current ratio
Debt ratio
Earnings per share
Price/earnings ratio
Total asset turnover ratio
Financial leverage
Net profit margin
Return on assets
Return on equity
Fiscal Quarter Comparison: Using Mergent Online, summarize the differences between the results from your
financial calculations of the most recent fiscal quarter and the results of the same financial calculations of the
same fiscal quarter from a year before for your chosen business.
For example, if the most recent fiscal quarter available is the 3rd quarter in 2020, then you will compare those
results to the same financial calculations from the 3rd quarter in 2019.
Comparison Analysis: Explain what the results of your calculations and your comparison indicate about the
business’s current financial health, providing examples to support your explanation. You might consider the
following questions:
Do the results indicate the business is financially healthy or financially unhealthy? Which results indicate this?
What might be the cause(s) of the business’s financial success or failure?
Is more information needed to determine the business’s financial health? If so, which pieces of information
might still be needed?
Short-Term Financing: Explain how potential short-term financing sources could help the business raise
needed funds to improve its financial health. Base your response on the business’s current financial
information.
The following resources can help you complete this milestone:
Video: Mergent Online: Public Company Financials (4:46)
Watch this video from the Shapiro Library to learn more about how to access and use Mergent Online.
Shapiro Library FAQ: How Do I Cite a Company Profile From Mergent Online?
Use this resource to help answer any questions you have about citing from Mergent Online.
Guidelines for Submission
Your submission should be a 2 to 3 page Word document with 12-point Times New Roman font, double
spacing, and one-inch margins. You must also submit the Project Two Financial Formulas spreadsheet (which
you will fill in completely as part of your Project Two submission) and the Excel files for your downloaded
balance sheet, income statement, and cash flow statement from Mergent Online.

 

 

 

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