Internet Case 14.5 – Evaluating Liquidity and Profitability
As an employee, write an internal memo to your manager addressing the following:
Use the Internet search engine of your choice and do a general search on the name of a company of interest to you. Explore the web site of the company you choose and locate that company’s most recent financial statements. You may need to look under a category that provides general information about the company and/ or investor information.
- Find and read the description of the company, including the type of business it is in. Why is gaining an understanding of the industry and type of business an important starting point for financial statement analysis?
- Locate the company’s primary financial statements. Find the summary table of ratios in this chapter in Exhibit 14–26. Calculate three of the listed ratios under each of the following categories: “Measures of short-term liquidity” and “Measures of profitability.” Show your work in calculating these ratios. Write a brief statement describing what you have learned about your company’s liquidity and profitability.
- Why do you think the Internet has become such a widely used source of financial information by investors and creditors?