BUS FPX 4070 Assessment 1

Part 1: Ratio Analysis

Ratio of XYZ Inc. to Industry Average

Power 1.43 2.0x

Quick 1.07 1.3x

Sales of days outstanding 68 days, 35 days

Inventory turnover 12.86 6.7X

Total property turnover 1.61 3.0x

Benefit margin: 1.7%, 1.2%

Roa 2.7% 3.6%

ROE 6.8% 9.0%

1) Current

Current property / short-term debt = $500,000 / $350,000 = 1.43

Quick (Current Property – Inventory) / Customer Obligations = ($500,000 – $125,000) / $350,000 = 1.07

Daily Sales Responsibility (received / income) x 365 = ($300,000 / $1,607,500) x 365 = 68.12

Inventory Turnover = Sales / Average inventory = $1,607,500 / $125,000 = 12.86

Total Property Sales = Net Sales / Average Total Assets = $1,607,500 / $1,000,000 = 1.61

Benefit Margin = Pure Income / Clean Sales = $27,300 / $1,607,500 = 0.017

ROA = net income / average total assets = $27,300 / $1,000,000 = 0.027

ROE = Equity to pure income / shareholders = $27,300 / $400,000 = 0.068

2) DuPont

DuPont analysis, as described by Hargrave (2022) and Wall Street Prep (2022), assists in determining a company’s strengths and weaknesses and can be calculated through the formula:

Net Income vs. Revenue x Total Assets

Revenue, Total Assets, Shareholders’ Equity

Or

Net profit margin x Asset turnover x Equity multiplier

XYZ Inc.: 0.017 x 1.61 x 2.5 = 0.068

Industry: 0.012 x 3 x 2.5 = 0.09

3) BUS FPX 4070 Assessment 1:Strengths and Weaknesses

The strong and rapid relationship suggests the company’s strength compared to the industry average, though being a bit below indicates a minor weakness. Inventory sales are a key strength for XYZ Ink, which surpasses industry norms, whereas asset sales are a key weakness. The surplus goes beyond the threshold of the margin industry, meaning power, whereas ROA and ROE go below the industry average, signifying the weak areas.

4) Validity of Ratio Analysis

Doubling sales, invention, and equity will influence the validity of relationship analysis. Some conditions can touch the industry average, while others will be poorer, leading to astonishing numbers.

Part 2: Investment Analysis

Different qualitative aspects, including the primary occupation, business administration, quality of management, and competitive edge, need to be taken into account prior to investment, as identified by Mukhopadhyay (2022). The monetary relationships that Kennan emphasized (2022), such as P/E terms, asset sales, and profit margins, are crucial for investment purposes. Non-object factors like climate issues, employees’ motivation, and market trends, as highlighted by Hybrid Accountant (2022), also need to be considered.

Part 3: Forecast

Annual reports, revenue analysis, balance sheets, and storage levels, if it is required to analyze those when Zuchi said (2022). Competence can be verified per Ionos (2019) by verifying pure turnover and costs. Qualitative approaches are favored for forecasts because of unexpectedness in the market, as noted by Boyle (2022). Like the reputation of a company, inspiration, employees, and market trends are significant concepts with factors.

BUS FPX 4070 Assessment 1 Investment Analysis and Forecasting 

Zuchi, K. (2022, February 8). Stock analysis: Future revenue and growth. Investopedia. September 2, 2022, https://www.investopedia.com/articles/activetrading/022315/stock-analysis-forecasting-revenue-and-growth.asp

Ionos. (2019, February 5). Business profitability—the way to evaluate the chance for success for your business. Ionos startup. September 2, 2022 Retrieved from https://www.ionos.com/startupguide/grow-your-business/profitability-forecast/

Boyles, M. (2022, June 21). 7 economic forecasting methods for predicting professional performance. Business Insights Blog. September 2, 2022 Retrieved from https://online.hbs.edu/blog/post/financial-forecasting-methods