Question

Company H&R BLOCK

Be sure to provide a link to the financial statements. You must use the annual report, from the H &R Block 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 H & R Blocks official annual report. If you go to H& R Blocks 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 Do not post as an attachment.

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

Please be sure to use H&R Block as the company!

Answer 1

1]

GP margin = gross profit / revenue

gross profit = revenue - cost of revenue

GP margin (2019) = (3,094,881 - 1,756,922) / 3,094,881 = 0.4323, or 43.23%

GP margin (2018) = (3,159,931 - 1,739,729) / 3,159,931 = 0.4494, or 44.94%

GP margin (2017) = (3,036,314 - 1,644,377) / 3,036,314 = 0.4584, or 45.84%

2]

Profit margin = net income / revenue

Profit margin (2019) = 422,509 / 3,094,881 = 0.1365, or 13.65%

Profit margin (2018) = 613,149 / 3,159,931 = 0.1940, or 19.40%

Profit margin (2017) = 408,945 / 3,036,314 = 0.1347, or 13.47%

3]

debt ratio = total liabilities / total assets

2019 = 2,758,418 / 3,299,945 = 0.84

2018 = 2,747,238 / 3,140,949 = 0.87

4]

Quick ratio = (cash + accounts receivable) / current liabilities

2019 = (1,572,510 + 135,577 + 138,965) / 923,001 = 2.00

2018 = (1,544,944 + 118,734 + 146,744) / 843,651 = 2.15

GP margin and profit margin are profitability ratios. They measure the profitability of the company as a % of sales. The GP margin has been declining over the years. However the profit margin has stayed flat, except for a sharp increase in 2018

Debt ratio measures the leverage of the company, or the percentage of assets financed by debt. This ratio has declined from 2018 to 2019

Quick ratio measures the short-term liquidity. It has declined from 2018 to 2019.