3.5 assignment: mini case study


Getting Started

There are many different scenarios where managers or other stakeholders need to assess the financial strength of a company. Investors may desire to evaluate the safety of a potential investment. Customers may wish to determine the ability of a prospective supplier to handle their orders. Regulators may look to measure a firm’s capacity to survive economic shocks. Lenders assess financial strength to ascertain whether a company could reasonably be expected to repay loans. 

One blessed situation that may call for an assessment of financial strength is unexpected growth. To the surprise of many, growth can be deadly. Poor cash flow management, inability to secure appropriate funding, overly aggressive risk taking, or other mistakes can lead fast-growing companies down a path to bankruptcy. Managers may wish to assess a firm’s ability to handle the growth opportunities they face. In this assignment, you will have an opportunity to exercise your financial analysis skills to evaluate the financial strength of a real-world company of your choice.

Upon successful completion of this assignment, you will be able to:

  • Apply financial analysis techniques to form constructive conclusions about a company’s financial position.
  • Utilize financial analysis techniques to assess the financial strength of an organization.
  • Recommend improvement strategies based on financial analysis.


  • Textbook: Analysis for Financial Management
  • Textbook: Principles of Accounting: Volume 1, Financial Accounting
  • Website: Connect
  • File: Higgins Chapter 2 Slides

Background Information

Up until this point in the course, you have been practicing financial analysis techniques on hypothetical companies. The financial statements you have been studying are intentionally simplified, to aid in your learning process. However, now we are going have an opportunity to apply the concepts and techniques you have learned to a real-world company of your choice, with all their complexities.

In this assignment, you are going to play the role of consultant, hired to evaluate a company’s financial strength in anticipation of a tremendous growth opportunity. The company is going to launch a revolutionary new product that will grow its sales by at least 50% over the next year. In addition, to support this sales growth, the company will have to grow its investment in fixed and current assets by 50%. Your job is to assess the company’s ability to support this level of growth by performing a basic horizontal (trend) and ratio analysis.

Begin by selecting a company you are interested in studying. It is highly recommended you choose a company that would be beneficial for you to learn more about, such as one that is in your current industry. However, the only requirement is that you select a publicly traded company whose financial statements are readily available. You will then be asked to dig deep into this company’s financial statements, looking at trends and ratios to assess its financial strength and readiness for rapid growth.


  1. Review the rubric to make sure you understand the criteria for earning your grade.
  2. In your textbook, Analysis for Financial Management, read Chapter 2, “Evaluating Financial Performance.”
    1. Download and review the Higgins Chapter 2 Slides to help you further understand the chapter.
  3. In your textbook, Principles of Accounting, study Appendix A, “Financial Statement Analysis.”
  4. Research the financial statements for a company of your choice.
    1. You can locate the annual statements (called “10-K” forms) for all public U.S. companies in the SEC’s EDGAR system. https://www.sec.gov/edgar.shtml Annual statements will often include commentary explaining recent financial changes and events.
    2. Many free financial websites, such as Morningstar, https://www.morningstar.com/ provide financial data and ratios for public companies. Search for your company on Morningstar and then select “Operating Performance” for a list of ratios for previous years.
    3. Consider accessing company reports through OCLS using the Business Insights: Essentials tool   https://www.gale.com/c/business-insights-essentials. Detailed financial and investment reports are available for hundreds of companies.
  5. Prepare a paper analyzing the company’s past three years of financial results:
    1. Begin by creating a table listing at least 10 financial ratios for the last three years (three years trend, 10 ratios, 30 ratios total). You can either calculate these ratios yourself using the financial data found, or use the ratios you find from your sources.
    2. The ratios you study are up to you. Use whatever ratios you find most revealing. However, you should include return on equity (ROE) and its three components: total asset turnover, profit margin, and financial leverage (asset/equity or debt/equity). 
    3. Evaluate and comment on any interesting trends you find. What ratios have changed significantly over the past three years? What does this indicate? Do the ratios suggest financial strength? What potential weaknesses do you see? What could the company do to improve these ratios?
    4. Conclude with a recommendation, based on your analysis, as to whether the company is prepared to take on a large growth opportunity.
  6. Be sure to provide a detailed recommendation that demonstrates your critical thinking and understanding of financial analysis. Your finished paper should be 500 to 600 words in length.
  7. Prepare your paper in Microsoft Word in a professional manner, using proper spelling, grammar, and APA style. Include a reference list. Be sure to appropriately cite your sources for your financial data and any commentary or analysis you rely upon.
    1. For questions on APA style, go to OCLS APA Writing Styles Guides.
  8. When you have completed your assignment, save a copy for yourself and submit a copy to your instructor by the end of the workshop.
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