My Mini-Financial Analysis Ratio Project in Excel

Ratios that can be found on the Balance Sheet and Income Statement

Hi yah!

After taking some online courses in Excel and doing a little research on financial statement, let’s try to apply what we learned and make a mini basic analysis project.

I’m excited!

Tada….

Although not all ratios were included in my Excel dashboard, I have successfully achieved my goal of enhancing my Excel skills and gaining knowledge on the side. While I wished I could employ a Pivot table, my data was limited to a single year.

Example Analysis

In the provided data, we can observe that ABC Company had $6,000 available in 2020 to support its day-to-day operations and short-term financial obligations.

A current ratio of 1.32 signifies that for every dollar of short-term liabilities or obligations the company holds, it possesses $1.32 of short-term assets to cover those obligations. Consequently, ABC Company’s current assets exceed its current liabilities by a factor of 1.32.

However, with a quick ratio of 0.84, it suggests a slightly lower immediate liquidity. This indicates that the company has fewer readily available quick assets to address its short-term debts. Quick assets encompass cash, cash equivalents, and accounts receivable — assets that can be swiftly converted into cash.

Moreover, a lower debt ratio translates to reduced risk. ABC Company’s debt ratio of 0.35 reveals that 35% of its total assets are financed by debt capital, maintaining a manageable level of indebtedness.

Furthermore, a debt-to-equity ratio of 0.55 suggests that for every dollar of equity in the company, there is $0.55 of debt. This ratio indicates that the company possesses higher equity relative to its debt. It signifies the proportion of total liabilities financed by shareholders’ equity. A lower debt-to-equity ratio is often viewed favorably, indicating lower financial risk and a stronger financial position. However, if I were an investor, I believe a debt-to-equity ratio of 0.55 can be favorable if the company generates substantial and consistent returns in the long run, depending on its leverage strategy.

In addition, with a gross margin of 46%, it implies that for every dollar of revenue generated, 46 cents remain as gross profit after considering the direct costs of goods or services. This demonstrates ABC Company’s effective management of production costs and pricing.

An operating margin of 11% signifies that for every dollar of revenue, 11 cents are retained as operating profit. This deduction accounts for both the cost of goods sold (COGS) and operating expenses. This figure offers insight into how efficiently the company’s core operations generate profit.

Lastly, a profit margin of 10% indicates the company’s capability to convert 10 cents of each revenue dollar into net profit. This margin assesses ABC Company’s efficiency in managing expenses and generating profit from its operations. It illustrates the percentage of revenue retained as net profit.

In conclusion, based on the available data, would we invest in ABC Company? The decision requires a more comprehensive analysis encompassing various factors, such as industry trends, market conditions, growth potential, and more. So for now, I think it’s best to research further as we can’t make a definitive statement. However, what I can say is that ABC Company has a well-built system, which is quite impressive considering it’s their first year in business, way back in 2020.

So, how was it?

That’s it!

See yah for our next self-development session.

Note: I will update the data visuals above after I enhanced my data visualization skills. ;)

Source: Data, OpenAI