Reference no: EM133705103

Assignment

Alberto

I. Briefly describe each element of the accounting equation. Explain why it is necessary for the equation to remain in balance.

II. Briefly describe the four financial statements created by accountants. Explain how each of these statements assist owners and management in running a profitable business.

III. Briefly explain the difference between liquidity, solvency, and profitability analysis. Explain what analysis might be most helpful to a short-term creditor and why. What analysis might be most helpful to an investor and why?

IV. Ratio analysis can be used to analyze the data in financial statements, but a single ratio by itself does not indicate very much. Explain why this is true by giving an example.

V. It is important to know how to calculate the various ratios for analysis and to perform both horizontal and vertical analyses on the income statement and balance sheet. However, it is also vital to be able reflect on these analyses and to interpret what the various calculations tell us about a particular company and its financial health. This paper will give you an opportunity to analyze the ratios and the horizontal/vertical analyses in terms of the company's overall financial health.

Evaluate Nike Co. in terms of the ratio analysis, horizontal analysis and vertical analysis. In 500 to 700 words address the following:

I. What do the ratios calculated over the two-year period tell us about the company's (i) liquidity (ii) profitability and (iii) solvency? Evaluate the company's financial health based on each category of ratios.

II. Based on the changes reflected in the horizontal and vertical analyses of the income statement and balance sheet, discuss any changes that would be significant and what these changes might indicate for the company.