Problem - Explore a valuable resource used to locate financial information used in computing ratios: EDGAR, a powerful search engine. Use the link to navigate to the home page for the US SEC (Links to an external site.)
Then select the "Filings" category and the "Company Filings Search" option. Enter a publicly traded company of your choice (e.g., Apple, Best Buy) and click Search. Review the search results and click on the CIK link next to the most appropriate company listing. Then look for a 10-K (annual) or a 10-Q (quarterly) filing preferably with "interactive data" noted next to it.
To locate the financial reports, click on either the documents or the interactive data options. Either selection will take you to financial reports, but the interactive data option is more direct and contains less detail. If you select the documents option, click on the .htm file link for a 10-K or 10-Q report. Then search the table of contents and locate the financial statements.
The above process actually is easy to learn and quick to execute. You may have to try a couple of times to locate a suitable company, but the search process is a quick one.
Once you locate a suitable company (one, unique company per student):
- Calculate the working capital.
- Calculate the current ratio.
- Calculate the quick ratio.
- What is your opinion of the results?
- Based on these ratios, do you think the company is healthy? Why or why not?