Question

Using the financial statements for HealthSouth Corp for the quarter ending 6/30/2002, or use the current financial statements for either Microsoft or Facebook. Choose your primary ratio and post your analysis.

2 Calculate several ratios—I would suggest at least one from each of the categories (profitability, liquidity, solvency, and activity/efficiency) from chapter 4 (chapter 11 in Marshall) in the text plus at least one ratio that you have found somewhere else or even made up. You should examine these ratios over a 4 year period (No need to look at every quarter). For example you might look at quarter 2 every year for 4 years—including the quarter that I have chosen. Once you are used to looking up financial statements--if you do this strategically you should be able to examine 4 years of data by looking at only two separate years of financial statements.   Please do not discuss all of these ratios. Your goal in calculating a number of ratios is to increase your chances of finding a ratio that is interesting and important.  

INCOME STATEMENTS - USD ($) shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Revenue
Product	$ 17,926	$ 18,273	$ 32,224	$ 33,241
Service and other	10,992	7,553	21,232	14,513
Total revenue	28,918	25,826	53,456	47,754
Cost of revenue
Product	5,498	5,378	8,478	8,959
Service and other	5,566	4,523	10,864	8,786
Total cost of revenue	11,064	9,901	19,342	17,745
Gross margin	17,854	15,925	34,114	30,009
Research and development	3,504	3,062	7,078	6,168
Sales and marketing	4,562	4,079	8,374	7,297
General and administrative	1,109	879	2,275	1,924
Operating income	8,679	7,905	16,387	14,620
Other income, net	490	117	766	229
Income before income taxes	9,169	8,022	17,153	14,849
Provision for income taxes	15,471	1,755	16,879	2,915
Net income (loss)	$ (6,302)	$ 6,267	$ 274	$ 11,934
Earnings (loss) per share:
Basic	$ (0.82)	$ 0.81	$ 0.04	$ 1.54
Diluted	$ (0.82)	$ 0.80	$ 0.04	$ 1.52
Weighted average shares outstanding:
Basic	7,710	7,755	7,709	7,772
Diluted	7,710	7,830	7,799	7,853
Cash dividends declared per common share	$ 0.42	$ 0.39	$ 0.84	$ 0.78

BALANCE SHEETS - USD ($) $ in Millions	Dec. 31, 2017	Jun. 30, 2017
Current assets:
Cash and cash equivalents	$ 12,859	$ 7,663
Short-term investments (including securities loaned of $4,247 and $3,694)	129,921	125,318
Total cash, cash equivalents, and short-term investments	142,780	132,981
Accounts receivable, net of allowance for doubtful accounts of $337 and $345	18,428	22,431
Inventories	2,003	2,181
Other	4,422	5,103
Total current assets	167,633	162,696
Property and equipment, net of accumulated depreciation of $26,849 and $24,179	26,304	23,734
Operating lease right-of-use assets	6,749	6,555
Equity and other investments	3,961	6,023
Goodwill	35,355	35,122
Intangible assets, net	9,034	10,106
Other long-term assets	6,967	6,076
Total assets	256,003	250,312
Current liabilities:
Accounts payable	7,850	7,390
Short-term debt	12,466	9,072
Current portion of long-term debt	3,446	1,049
Accrued compensation	4,427	5,819
Short-term income taxes	788	718
Short-term unearned revenue	21,309	24,013
Securities lending payable	26	97
Other	7,787	7,587
Total current liabilities	58,099	55,745
Long-term debt	73,348	76,073
Long-term income taxes	30,050	13,485
Long-term unearned revenue	2,500	2,643
Deferred income taxes	3,186	5,734
Operating lease liabilities	5,640	5,372
Other long-term liabilities	4,820	3,549
Total liabilities	177,643	162,601
Commitments and contingencies
Stockholders’ equity:
Common stock and paid-in capital – shares authorized 24,000; outstanding 7,705 and 7,708	70,192	69,315
Retained earnings	8,567	17,769
Accumulated other comprehensive income (loss)	(399)	627
Total stockholders’ equity	78,360	87,711
Total liabilities and stockholders' equity	$ 256,003	$ 250,312

Answer 1

Profitability ratios:
	3 months ended		6 Months ended
	31-Dec-17	31-Dec-16	31-Dec-17	31-Dec-16
Gross margin ratio
(Gross margin x 100 /Total revenue)
Gross margin	17854	15925	34114	30009
Total revenue	28918	25826	53456	47754
Gross margin ratio	61.74009268	61.66266553	63.81697097	62.84080915
(Gross margin x 100 /Total revenue)
Operating profit ratio
Operating income	8679	7905	16387	14620
Total revenue	28918	25826	53456	47754
Operating profit ratio	30.01244899	30.60868892	30.65511823	30.61523642
(Operating income x 100 / Total revenue)
Liquidity ratios:
	31-Dec-17	30-06-17
Total current assets	167633	162696
Total current liabilities	58099	55745
Current ratio (Total current assets / Total current liabilities)	2.885299231	2.918575657
Acid test ratio
Total current assets less inventories	165630	160515
Total current liabilities	58099	55745
Acid test ratio (Current assets less inventories / current liabilities)	2.850823594	2.879451072
Solvency ratio:
Capital gearing ratio:
Equity shareholders' funds	78360	87711
Long term debt	73348	76073
Capital gearing ratio (Equity shareholders' fund / long term debt fund)	1.068331788	1.152984633
Debt to equity ratio
Long term debt	73348	76073
Equity shareholders' funds	78360	87711
Debt to equity ratio (Debt fund / Equity fund)	0.936038795	0.867314248
Activity / efficiency ratio
	3 months ended		6 Months ended
	31-Dec-17	31-Dec-16	31-Dec-17	31-Dec-16
Total revenue	28918	25826	53456	47754
Average inventories	2092	2092	2092	2092
Inventories turnover ratio (Total revenue / average inventories)	13.82313576	12.34512428	25.55258126	22.82695985