Question

	Firm 1	Firm 2	Farm 3	Farm 4	Farm 5	Farm 6
	Amazon	Apple	Dunkin'	Walmart	PepsiCo	Facebook
	AMZN	AAPL	DNKN	WMT	PEP	FB
Current Ratio	1.18	1.47	1.60	0.79	0.97	6.03
D/E ratio	114.01%	32.42%	29.15%	21.58%	26.55%	30.34%
Asset Turnover=sales/total assets	1.25	0.77	0.35	2.22	0.86	0.53
Time Interest Earned=EBIT/interest	15.74	19.38	3.49	8.74	9.20	1241.60
Profit Margin	4.10%	21.33%	16.79%	3.30%	10.13%	31.30%
PE ratio	122.03	37.91	29.53	21.80	27.18	31.15
Market to Book (Price to Book)	21.57	29.58	N/A	5.14	14.77	6.57
Closing Stock Price (Sep 1st, 2020)	3499.12	134.18	76.18	147.59	139.19	295.44

Please explain EACH of the ratios of EACH of the firms to the potential investors of these six stocks.(Use the structure of the textbook and compare them with the industry averages, if possible)

Short-term solvency or liquidity ratios:

Long-term solvency or financial leverage ratios: .

Asset management or turnover ratios:

Profitability ratios:

Market value ratios:

Answer 1

Financial ratios	Explanation	Ratio	Industry average	Remarks
Short term solvency or liquidity ratios	This ratio determine a company’s ability to pay its short-term debt obligations. For investors, they will analyze a company using liquidity ratios to ensure that a company is financially healthy and worthy of their investment. Working capital is flowing easily in the business. Low ratio indicates inability to pay off short term debt and too high ratio signifies that the company is holding large amount of liquid assets	Current ratio	1.55	In the given case Facebook, Apple, dunkin maintains a better current ratio than amazon walmart and pesico
Long term solvency or Financial leverage ratios	A leverage ratio measurement that shows how much capital comes in the form of debt (loans) or assesses the ability of a company to meet its financial obligations. For investors these ratios provide an indication of how the company’s assets and business operations are financed (using debt or equity).	D/E ratio	1.01	Amazon maintains a good leverage ratio of 1.14 times than other firms as it assets are financed by debt and levered company's performance using debt
Asset management or turnover ratios	For investors these ratios are indicator of the efficiency with which a company is deploying its assets to produce the revenue. The higher the better	Asset turnover	1.66	Asset turnover of Amzon and walmart are better than of other four firms
Profitability ratios	For investors it indicates company's ability to generate income relative to its revenue, operating costs, balance sheet assets, or shareholders' equity. The higher the better	Profit margin	3.30%	Facebook and Apple maintains a good profit margin and other four firm's profit margin is doing good as per industry average
Market Value ratios	For investor market value ratios indicates that how much is higher the market value of the share is than it book value A ratio of less than 1 can mean a stock might be undervalued, while a ratio greater than 1 might mean it's overvalued.	Market to Book value	4 times	Amazon,apple and pepsico has market to book price more than the industry avearge than other three firms