Calculate Financial Ratios In Excel For The Fiscal Year

In Excel Calculate The Financial Ratios For The Fiscal Year Year 2

In Excel, calculate the financial ratios for the fiscal year Year 2. Use Excel to create formulas and calculate results (see Excel tutorial if needed). Do not just type in results. The necessary ratios are those found in the TRI documents. You will be required to do research outside of the book to complete the ratios.

In a Word document: In a maximum of 500 words, analyze what each of these financial ratios means in terms of TRI's financial stability and operating efficiency. Provide a dollar-for-dollar explanation of what they mean for TRI—rather than a general definition. For example, a current ratio of 1.2 means that for every dollar of current debt, the company has $1.20 in current assets to pay them. Make sure you express the ratios properly (as a decimal, dollar, or percentage).

Paper For Above instruction

Analysis of Financial Ratios for TRI's Fiscal Year 2

Understanding a company's financial health requires diligent analysis of its key financial ratios, which offer insight into stability and operational efficiency. For TRI, analyzing these ratios involves calculating them accurately in Excel and interpreting their implications concretely for the company's financial condition.

Liquidity Ratios

The current ratio, a primary liquidity measure, indicates how well TRI can meet its short-term liabilities with its short-term assets. Suppose TRI’s current assets are $3,600,000, and current liabilities are $2,700,000. The current ratio would be calculated as 3,600,000 / 2,700,000 ≈ 1.33. This implies TRI has $1.33 in current assets for every dollar of current debt, suggesting a comfortable liquidity position that minimizes the risk of short-term insolvency.

Similarly, the quick ratio, which excludes inventory from current assets, offers a more stringent view. If TRI’s quick assets (cash, receivables, marketable securities) total $2,700,000 with current liabilities of $2,700,000, the quick ratio would be 1.0, indicating TRI can exactly cover its short-term debts with its most liquid assets, reflecting prudent liquidity management.

Leverage Ratios

The debt-to-equity ratio measures TRI's leverage and financial risk. Suppose total liabilities are $4,200,000, and owner’s equity is $3,075,000. Calculating 4,200,000 / 3,075,000 ≈ 1.37 indicates that TRI uses debt capital to finance its assets, which can amplify returns but also increases financial risk if earnings decline. A balanced debt-to-equity ratio (around 1) suggests manageable leverage.

Profitability Ratios

Return on assets (ROA) and return on equity (ROE) are core indicators of profitability efficiency. If TRI reports net income of $750,000 and total assets of $9,000,000, then ROA is 750,000 / 9,000,000 ≈ 8.33%. This suggests TRI generates approximately 8.33 cents profit for every dollar of assets employed, reflecting moderate operational efficiency.

If owner’s equity is $3,075,000, then ROE is 750,000 / 3,075,000 ≈ 24.39%, which indicates high returns for shareholders, showcasing effective use of equity capital.

Efficiency Ratios

Asset turnover ratio assesses how effectively TRI utilizes its assets to generate sales. For instance, if TRI’s sales total $15,000,000, then asset turnover is 15,000,000 / 9,000,000 ≈ 1.67. This means TRI generates $1.67 in sales for every dollar in assets, signifying efficient asset utilization.

Similarly, receivables turnover ratio gauges collection efficiency. If net credit sales are $14,250,000 and average receivables are $950,000, then receivables turnover equals 14,250,000 / 950,000 ≈ 15.0, indicating quick collection periods and effective receivables management.

Conclusion

Each ratio provides a piece of the puzzle in assessing TRI’s financial stability and operational proficiency. A healthy liquidity position (current and quick ratios above 1), balanced leverage, solid profitability (ROA and ROE within industry standards), and efficient asset management indicate TRI’s strong financial health and operational effectiveness. Continual monitoring and comparison with industry benchmarks are essential for sustaining competitiveness and financial resilience.

References

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AccountingTools. (2020). Financial Ratios. Retrieved from https://www.accountingtools.com/articles/financial-ratios.html