This section of your AMP includes:
1. Internal Environmental Analysis
a. Financial Analysis of the Organization
b. SWOT Analysis
c. Identification of Central Problem
Directions:
1. Internal Environmental Analysis
a. Financial Analysis of the Organization
b.
i. A key aspect of the analysis of strengths and weaknesses is a financial analysis. Financial analysis includes ratio analysis, trend
analysis, and comparisons with other companies. Good financial analysis goes beyond merely calculating numbers; it includes interpretation of what
the numbers reveal about the organization’s strengths and weaknesses.
ii. The following financial ratios must be researched and discussed:
1. Short-Term Solvency/Liquidity: Current Ratio, Quick Ratio, Cash Ratio
2. Long-Term Solvency/Leverage: Total Debt to Total Assets, Debt to Equity, Times Interest Earned Asset Utilization (Turnover Ratios):
Inventory Turnover, Days’ Sales in Inventory, Receivables Turnover, Days’ Sales in Receivables, Total Asset Turnover (Sales/Total Assets)
3. Profitability Ratios: Profit Margin, Return on Assets, Return on Equity
4. Market Value Ratios: Price-Earnings, Market-to-Book
iii. Use the following format to research and discuss these ratios:
1. Most Recent Fiscal Year
2. Prior Year
3. Ratio Change
4. Industry Average
5. Comments of this Ratio
iv. Ratio formulas:
1. Current: Current Assets/Current Liabilities
2. Quick: (Current Assets – Inventory)/Current Liabilities
3. Cash: Cash/Current Liabilities
4. Total Debt to Total Assets: (Current + Long-Term Liabilities)/Total Assets
5. Debt to Equity: Total Debt/Total Equity
6. Times Interest Earned: EBIT/Interest
7. Inventory Turnover: COGS/Inventory
8. Days’ Sales in Inventory: 365/Inventory Turnover
9. Receivables Turnover: Sales/Accounts Receivable
10. Days’ Sales in Receivables: 365/Receivables Turnover
11. Total Asset Turnover: Sales/Total Assets
12. Profit Margin: Net Income/Sales
13. Return on Assets: Net Income/Total Assets
14. Return on Equity: Net Income/Total Equity
15. Price-Earnings (P/E): Price per Share/Earnings per Share
16. Market-to-Book: Market Value per Share/Book Value per Share
v. Reminder for students who work for private companies: A student who works for a private company is strongly encouraged to obtain permission
to include actual financial information of their company. If requested, an instructor can sign a confidentiality agreement to keep proprietary
information confidential. If a student is unable to obtain their company’s financial information, they are required to select the company’s nearest
competitor which is a publicly traded company and use that competitor’s financial records for their financial ratio analysis. Although the
competitor’s financial records are not a direct substitute for their own company’s information, the student can analyze the competitor to gain
insights about the financial health of their company’s industry.
c. SWOT Analysis: conduct a SWOT analysis identifying Leverages and Problems.
d. Identification of Central Problem (Central Issue to Solve)
i. What is the central problem (central issue to solve) based on the students’ review and SWOT analysis of this organization?
ii. This section will narrow the students’ focus by identifying the key issues, discussing how they specifically relate to the problem and will
guide the student’s selection of the key focus areas to research to arrive at a viable solution.
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