Return on equity, Times interest earned, Current ratio, Quick ratio, and Debt-to-equity ratio

  • Use the company’s most recent Form 10-K to read the debt footnote(s). Answer the following questions and include the answers in your deliverable:
    • Does the company use short- or long-term debt?
    • Does the debt carry covenants that provide protection to creditors?
    • Was there any mention of default or renegotiated covenants?
  • Using the Excel worksheet provided separately, compute the following ratios for three years for the company:
    • Return on equity
    • Times interest earned
    • Current ratio
    • Quick ratio
    • Debt-to-equity ratio

    Compare the ratios calculated over time for the company. Is the company more or less liquid or solvent? Include the results of this work in your deliverable.

  • Conclude with an assessment about the company’s liquidity or solvency. You should express an opinion about whether the company has an appropriate level and types of debt and whether you expect the company to continue operating with its existing capital structure.

2.

  • Using the Excel worksheets provided separately, complete a parsimonious forecast and discounted cash flow valuation for the company. Include a screen capture of the results in your deliverable.
  • Summarize in your deliverable keynotes to the forecast and valuation for the company, explaining your main assumptions and providing sources for your assumptions where applicable.
  • Based on the results of your forecast and valuation, answer the following questions for the company and include the answers in your deliverable:
    • Is the stock over-or under-valued based on your valuation?
    • What are the two main reasons you believe the stock is over- or under-valued?
    • When you review information from analysts and other experts on the Internet, do their comments and conclusions support your conclusions about the stock valuation you have prepared? When answering this question, include support from at least one reputable analyst or expert to support the validity of your conclusion.
    • Based on comparison of the company’s stock price to your valuation, would you recommend buying the company and, if so, at what price per share?

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