81. Financial Analysis

Be sure to read the information under the Course Home Financial Analysis link, go through the tutorial videos listed on the page, and download the transcripts for each video to use as references when completing the financial analysis assignment. These tutorials and transcripts will give you most, if not all, of the instructions you need to make your analysis. One tip – total assets and current assets are different figures.

To give you a brief recap of this task:

You are using your financial expertise to analyze CanGo’s financial situation. Looking at the first line of the spreadsheet, the first line is “Efficiency Ratio: Receivables Turnover.” The tutorial videos will explain what the Receivables Turnover Efficiency Ratio is and why it is important. This detail is what you will put in the column “Explanation of why ratio is important.”

The tutorial videos will also give you the formula for “Receivables Turnover,” and this is what you will put in the column “Formula (express the ratio in words).”

I recommend that you review the video tutorials and complete the two columns described above first so that you will understand what needs to be done next, which is that you will review the CanGo financial information and calculate the “Receivables Turnover” using CanGo financial information and the formula that you already identified. This information will be placed in the column “Detailed calculation (actual numbers from financial statements used for the calculation).”

The results of your calculation for CanGo will be placed in the column “Final number (final result of the detailed calculation).”

You do not need to put the CanGo financials as a reference, but you do need to list any sources that you used to understand and describe the ratios.

This assignment is worth 96 points, with each box that needs to be completed on the form worth 3 points.

The CanGo financial information can be found on the CanGo Intranet; the link is available at the bottom of the Course Home Report Guide page.

I would like to give you a few tips to hopefully help you avoid mistakes that many students make with this assignment. As I recommended in a previous announcement, your first step should be to complete the formula column for the specific ratio. You can find the formulas in the videos or transcripts under Financial Analysis link. I recommend looking there first. If it still seems confusing, I am listing some websites below that some students have found helpful.

After you have the formula, look for the matching figure on the CanGo financial statement. Don’t make this harder than it has to be! Some of the formula components are line items on the financial statement and some of the exact figures you need are on the financial statement, without requiring that you perform calculations. You will need to calculate some of the amounts, but not all of them. For example, the Cost of Goods Sold is a line on the Income Statement. Cost of Goods Sold is not any type of income, however, this figure is used in an area of the Income Statement for calculating Gross Profit. Net Income is also a line on the Income Statement, and the figure is there for you. My recommendation is that after entering your formula in words in the Formula column, look for the matching line item in the financial statement to get the figure that you need to use in the Detailed Calculation column. If you do not find a matching line item, then you will need to determine which figures you need to make the appropriate calculation.Another tip, “Current” assets and “Current” liabilities are different from “Total” assets and “total” liabilities or total debt. Keep in mind that “current” is not the same as “total.” Total Assets is not the same as Total Equity.

I hope this information helps. The following websites might help in addition to the tutorial videos and transcripts available in the course under the Financial Analysis link information.

http://accountingexplained.com/financial/ratios/

http://www.netmba.com/finance/financial/ratios/

http://beginnersinvest.about.com/od/financialratio/Financial_Ratios.htm

http://www.accountingcoach.com/online-accounting-course/03Xpg01.html