Project #38757 - financial ratios 484-350-7501     Please Read Carefully




  1. Choose an airline which is a public held firm and two of its major competitor in the industry and obtain the previous three years of financial statements.  These include the Income Statement (Statement of Operations), Balance Sheet, and Statement of Cash Flows.  For each of the three years compute the following ratios for the airline and two competitors by using the below manual formula. You may compute one year each (most recent) for the two competitors.




    1. Gross Margin=Revenue-COGS*100/Revenue  


    2. Operating Margin=Revenue-COGS-other expenses, up to but not including, interest expense*100/Revenue

    3. Net Margin=Net Income/Revenue*100


    4. Return on Equity=Net Income/Shareholder equity*100


    5. Return on Assets=Net Income *(1 + tax rate)*interest Expense/total assets


    6. DuPont Analysis—show each of the three components separately as seen below:


Return on equity= (Net income/Revenue)*(Revenue/Total assets)*(Total Assets/Shareholder equity)




    1. Cash Conversion Cycle—show each of the three components separately, plus do the summation to get the overall cycle as seen below:

             Days in Acct Receivable= Acct Receivable/sales*360

             Days in Inventory=Inventory/COGS*360

             Days in Acct Payable=Acct payable/COGS*360

             Cash conversion cycle=Days in Acct Rec + Days in inv-Days in Acct pay


    2. Quality of Income Ratio=Operating Cash flow/Net Income

    3. Free Cash Flow=Cash from operation-Cash for capital expenditure



Please show all these raw data and calculations so that I would understand these calculations very well. Simplify it to the fullest because my concentration is HR.




  1. Performance statistics are very important.  Key ratios are the following.




    1. Operating expense per employee

    2. Revenue per employee

    3. Net Property Plant and Equipment per employee

    4. Average age of Net Property Plant and Equipment (you can compute this by looking at the Notes to Financial Statements and locating accumulated depreciation.  Average age of plant=Accumulated depreciation/Depreciation Expense (current year). Hint: located in the cash flow statement

  1. Discuss in paragraph form what you found for each of the ratios and performance statistics.  Why did the ratio behave as it did over the years?  Compare the performance of your firm with each of the competitors on each of the 6 ratios.  Who has the best performance over the average of the three years on each of the 6?   I’m looking for at least 2 pages of writing. 




Put the written documentation of your findings first in the report.  Place the tabular materials from parts 1 to 3 behind the written material.  You should refer explicitly in the written documentation to the specific tables and items in the tables that you have computed.




Put your results in tabular form.  Finally, use EXCEL to automate the entire process.




Note: I am choosing the airline industry because it is my understanding that the cost of fuel is becoming very expensive. This is affecting their business. That will be shown in their financial statements. And so this assignment is the first phase. Having identified this problem of high fuel cost, the next phase will be to come up with a strategy that can be used to arrest this huge burden that is affecting the airline industry and customers. For now we are only doing the first Phase


For quick reference, please attach all documents used mainly, the financial statements used to calculate these ratios for the airline and two competitors. For Example: three airlines Security exchange commission; 10-K (annual report); companies’ overview, number of employees and risk factors. Not sure but I think all of these documents are in one location.  






Subject Business
Due By (Pacific Time) 09/02/2014 12:00 am
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