Overview:
For this milestone, submit the Analysis of Financial Situation for your chosen case study. Use the worksheet provided to complete the analysis of the financial situation. Specifically, the following critical elements from the final project must be addressed:
III. Financials – Examine the company’s financial statements to assess organizational health.
1. Explain what the balance sheet, income statement, and cash flow statement reveal about how the company is functioning.
2. Calculate financial ratios and interpret what those say about the organization’s financial health. Support with specifics.
3. Identify the potential problem areas in the company as reflected in the financials.
In this assignment, look at the financial statements of your chosen company (American Apparel) and calculate some basic financial ratios to analyze the company’s health and performance.
• Fill in the table below with information from the financial statements provided in your chosen company’s case study. Calculate the % change between the current year and previous year for each item. Remember to correctly identify the currency for your case study.
Most Current Year % Chg (+/–) Previous Year
Current Assets
Total Assets
Current Liabilities
Total Debt
Sales/Revenue
Cost of Goods Sold
Inventory
Net Income/Loss
• From the information in the table above, identify which line items are increasing with a plus sign and which are decreasing with a minus sign. Evaluate whether the change from the previous year is good or bad for the company’s performance and explain why.
• Use the information in the table above to calculate the following financial ratios. Explain what the result of each ratio says about your chosen company’s financial health.
○ Current Ratio
○ Debt to Asset Ratio (Debt Ratio)
○ Inventory Turnover
○ Return on Sales (Profit Margin)
• Summarize your information and identify potential problem areas as reflected in the financials.
