Financial Statement Analysis: Financial Ratios

Financial statement analysis involves gaining an understanding of an organization’s financial situation by reviewing its financial reports. The results can be used to make investment and lending decisions.

Financial statement analysis is also an exceptionally powerful tool for a variety of users of financial statements. Each having different objectives in learning about the financial circumstances of the entity.

The student will be provided with another UTX scenario in which there are a 5-year forecast and developed ratios, based upon industry trends. The student will get the financial data from the Deloitte Website.


Financial Statement Analysis and Financial Ratios

1. If you are having trouble looking at growth rates, or finding them, please find the annual US GDP growth rate for the next 5 years and use that, or if you and perform research and find a more exact number forecast you may use this but just please reference it if you do.

2. Develop a financial forecast for the years 2019 to 2023. You will use 2018 from part 1, week 7, as your starting point to use for 2019, and beyond, for all balance sheet and income statement categories.

a. For example, for each category please use your growth rate and then forecast out for 2019-2023 for all balance
sheet and income statement categories.

3. Use your 5 ratios/metrics that you had used from week 7. Additionally, calculate them for each year and perform a variance analysis as to the percent increase from year over year for each ratio.

4. Lastly, develop a financial statement analysis, based upon the financial forecast, and ratio increases, as to potential areas where UTX can capitalize on and state your reasons and the overall financial impact, both positive and negative.

a. For example, you can investigate the opportunity to but a division or decrease costs.  Furthermore, you will state your reasoning, provide some short examples and provide high-level snapshots showing financial and operational impacts.

i. Remember you will not be creating any project but just providing recommendations and then scenario impacts to the financial health of the company.

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