In Module 2 you examine balance sheets to determine how different firms finance investment in assets. This discussion activity looks further at financial statements to analyze and compare the financial positions of firms competing in the same industry.
Note: Before beginning the discussion activity for Module 2, be sure to study Chapter 9, “Analysis of Financial Statements.”
Discussion Activity
Choose two firms that compete within the same industry (e.g., J.C. Penney and Sears, Johnson & Johnson and Merck, Ford and GM).
Go to each firm’s website, and then access and download their annual reports (financial statements).
Using the accounting data from the firms’ financial statements and the ratios studied in Chapter 9 of the textbook, calculate all ratios for each firm (liquidity ratios, activity ratios, profitability ratios, leverage ratios, and coverage ratios).
Analyze and compare your calculations for the two firms.
