OL 501 Milestone Two Worksheet
In this assignment, look at the financial statements of your chosen company 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
% Chg (+/) Previous Year
Year
Current Assets
$215,296
-4.05%
$224,390
Total Assets
$333,752
+ 1.68%
$328,212
Current
$161,989
+
$161,609
Liabilities
25%
Total Debt
$249,167
+
$144,519
72.41 +
Sales/Revenue
$633,941
$617,310
2.96% +
Cost of Goods
$313,056
$289,927
Sold Inventory
7.98%
$169,378
$174,229
2.78%
Net Income/Loss
$106,298
+
$37,272
185%
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
Based on the chart items that are increasing with a plus sign are total assets,
current liabilities, total debt, sales/revenue, cost of goods sold, and net income lost
with current assets and inventory being in the minus. I think the company did a lot
of good in their current year and a lot of bad. What really stuck out on this chart
was the debt from the previous year compared to the current year and with their
current ratio the company just doesn't have enough liquidity to pay off their debts
which makes it a lot difficult to strive. I think the company tried to reach new
heights in the current year but resulted in more risk than the previous year.
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: 1.33
Current ratio determines if a company has the ability to pay for their short-term debts.
(Pride, 2019). To find the current ratio you must calculate the company's current assets and
divide that by its current liabilities (Mehta, 2016). Based on the calculations, American Apparel
lacks liquidity to pay off their debts. The higher the ratio has more liquidity to pay off debts. A
current ratio of less than one means American Apparel could possibly run out of money within a
year.
Debt to Asset Ratio (Debt Ratio): 1.23
To determine debt to ratio, you must divide all of the company's liabilities by their assets
(Mehta, 2016). Having a debt ratio of 1.23 means that their assets having been accumulated
through debt. With a ratio of in this range also means that American Apparel has enough cash to
pay its debts, but not too much finance tied up in with their current assets.
o Inventory Turnover: 1.82
To determine the inventory turnover ratio, you must first calculate the average of two
inventory years, then divide the cost of goods so