Appendix A of the textbook describes several ratios as well as vertical analysis and horizontal analysis of financial statements. Using the annual report and excel file of financial statements for Carnival, prepare the following items. Use the spreadsheets provided and modify them with your calculations. You must use spreadsheets for this assignment.
Common Size Balance Sheet
Prepare a spreadsheet with common size balance sheets for the years ended 2017 and 2018. For 2017, each line item should be shown as a percentage of total assets on December 31, 2017. Likewise, for 2018, each item should be shown as a percentage of total assets on 2018. In your calculations, round each percentage to three digits. For example if cash as a percentage of total assets is .054029834, your answer should be shown as 5.4%. Remember, these numbers on the financial statements are rounded to the nearest million, so it is a bit silly to show calculations with more precision than the underlying data.
Common Size Income Statement
Prepare a spreadsheet with common size income statements for the 2018 and 2017 fiscal years. In this case, your denominator will be Net Sales. Again, remember to round.
Horizontal Analysis of both financial statements
Prepare a horizontal analysis of the balance sheet and income statement, showing the percentage change from 2017 to 2018 (the dollar amounts, not the percentages you calculated in the common size statements). This is calculated as follows:
2018 amount – 2017 amount
Thus, each line item on the balance sheet and income statement should show a percentage increase or decrease. A negative number, or decrease, can be formatted to show in parentheses, which is the preferable notation in accounting circles.
Calculate all of the solvency ratios listed in on the Ratio sheet in Royal Caribbean 10-k data analyzed -2.xlsPreview the document
Calculate Accounts Receivable Turnover (note: this one is missing from your textbook but is calculated as Net Sales / Average Accounts Receivable)
In any place where the formula calls for an average, use the 2017 number plus the 2018 number divided by 2.
Helpful Hint: There are no marketable securities, so the acid test ratio is just (cash + receivables) / current liabilities. Use both lines of receivables in any ratio involving receivables.
Calculate the following performance ratios from Chapter 14:
Return on Sales contains a typo in the book. The formula should say (Net Income + Net-of-tax interest expense)/Sales.
Return on Assets
Return on Equity
Average Interest Rate
Also calculate Gross Margin (this is also missing from your book but is a widely used ratio. It is gross profit divided by Net Sales)
For the tax rate used in the ROA, assume their effective income tax rate is 35% because tax reform did not take effect until 2018.
The listed items should be submitted in an Excel file, with separate tabs for the income statement (including common size 2016 and 2017, as well as the horizontal analysis in one tab), balance sheet (common size 2016 and 2017 plus horizontal analysis in another tab), and ratios in another tab (clearly labelled!).
HERE IS THE CARNIVAL FILE WHICH YOU WILL USE TO DO YOUR ASSIGNMENT:
Carnival 10-K data Final
Here is the file with the completed Royal Caribbean analysis( THIS IS INTENDED TO HELP YOU TO FINISH THE CARNIVAL ASSIGNMENT):
Royal Caribbean 10-k data analyzed
Compare your results from Royal Caribbean with Carnival on a separate Word document. Your analysis must address at least three key ratios or trends that are similar and three that are different, as well as what those differences mean. You will not receive full credit if you discuss dollars instead of ratios, and you must interpret, not just list, your results.
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