Question

company - H&R Block

You must use the annual report, from the company's own website, or from the SEC database. Quarterly financial statements should not be used to do ratios because (1) many companies are seasonal and quarterly numbers may not be representative of annual performance and (2) quarterly numbers are not audited, whereas annual financials are. Financial information provided by third parties like Yahoo Finance or Google Finance are not acceptable, as these numbers are not necessarily accurate. You must use the company's official annual report. If you go to the company website, and select investor section, annual reports, or SEC filings and you should get the correct information (which also might be in the form of a 10K report)

Show the ratio calculation for each year, the calculation result, and the interpretation of the numbers. I suggest you put it in tabular format and cut and paste into discussion to maintain formatting

What do you note in the changes of ratios from year to year? Explain what the ratios mean. Do these ratios correlate with what you know about these companies? Be sure to provide the raw data so we can see how you calculated these ratios. Do not use calculated ratios you might find on financial websites. They are often incorrect or use old data.


1. Gross Profit margin

2. Profit Margin

3. Debt Ratio ( Liabilities/Assets)

4. Quick Ratio

Answer 1

Company chosen: Accenture plc.

Source: Annual reports (Form 10 K filing) by the company

Income Statement - Raw Data

Balance Sheet - raw data

Ratios Calculations:

Relevant data has been picked up from the raw data shown above. Ratios have been calculated based on this data. Please see the column titled "How" to understand how each of the ratios had been calculated.

Relevant Data for ratio calculation			FY10A	FY11A	FY12A
A	Revenues		23.09	27.35	29.78
B	Cost of Services		15.84	18.97	20.79
C	Net income		2.06	2.55	2.82
D	Total Current Liabilities		6.57	7.91	8.11
E	Total non current liabilities		2.99	3.47	3.93
F	Total Assets		12.84	15.73	16.67
	Quick Assets
G	Cash and cash equivalents		4.84	5.70	6.64
H	[+] Short-term investments		0.00	0.00	0.00
I	[+] Receivables from clients, net		2.53	3.24	3.08
J	[+] Unbilled services, net		1.13	1.39	1.40
How?	Ratios		FY10A	FY11A	FY12A
(A - B) / A	Gross Profit Margin		31.39%	30.66%	30.18%
C / A	Profit margin		8.92%	9.33%	9.49%
(D + E) / F	Debt Ratio		0.7449	0.7234	0.7225
(G + H + I + J) / D	Quick ratio		1.2948	1.3062	1.3717

Interpretation, What do you note in the changes of ratios from year to year? Explain what the ratios mean. Do these ratios correlate with what you know about these companies?

The gross profit margin is in a very stable zone of 30 - 31%. This ratio means how much the firms makes at a gross level. This indicates what proportion of revenue translates into gross profit. Accenture is now a stable and mature company. It's pricing and cost structure has attained maturity and stability. It's gross margin is therefore very stable.

Net profit margin is another profitability ratio that indicates what kind of net profit the firm is making from the business. The net profit margin is also in a very stable zone of 9 to 9.5%. The stability of the margin is commendable. This stability is due to: mature, stable cost structure, revenue sources, lack of leverage and asset light business model. Accenture is a consulting firm which is debt free and very low capital expenditure.

Debt ratio is the proportion of liabilities against the total assets of the company. The ratio is stable.

Quick ratio is a measure of liquidity. Quick Ratio is a modified current ratio that excludes inventory or less liquid items from current assets to assess company’s immediate liquidity position. Inventory is excluded while calculating this ratio because inventory is considered to have a longer realization period. Quick Ratio ≥ 1.0 is considered healthy. Quick ratio should be compared over the years and industry benchmarks for further analysis. Accenture's quick ratio is well above 1 and hence the firm can be considered to enjoy healthy liquidity.