FIN 3010 Module 2 Statement Analysis Assignment Example

Course	FIN-3010 Principles of Finance
Module	Module 2
Paper type	Written assignment 2: analysis of financial statements
Length	About 798 words, 5 pages
Format	APA 7 student paper
School	Thomas Edison State University
Program	Bachelor of Science in Business Administration
Updated	October 2026

Free sample paper for FIN 3010 Module 2

Analyzing a Heating and Cooling Distributor's Statements: Common-Size, Ratios, DuPont and a Z-Score

Student Name

Bachelor of Science in Business Administration, Thomas Edison State University

FIN-3010: Principles of Finance

Mentor Name

Month Day, Year

What this page is doingThe title names the company type and the four tools applied, which tells the mentor how the work is organized. The company and its figures are a composite created for these original exercises.

Analyzing a Heating and Cooling Distributor's Statements: Common-Size, Ratios, DuPont and a Z-Score

The exercises below apply Module 2's tools to Garden State Climate Supply, Inc., a composite distributor of heating, ventilation and air-conditioning equipment to contractors in New Jersey. The company's shares trade over the counter, so outside investors depend on its published statements. Figures are in millions of dollars. As with all FIN-3010 written assignments, every problem shows the formula and the work (Mayo & Lavelle, 2024).

Income statement item	$ millions	Balance sheet item	$ millions
Net sales	48.6	Cash	1.4
Cost of goods sold	36.0	Accounts receivable	6.9
Selling, general and administrative	8.1	Inventory	9.8
Depreciation	1.2	Other current assets	0.4
Earnings before interest and taxes	3.3	Net fixed assets	8.5
Interest expense	1.1	Total assets	27.0
Taxes at 25%	0.55	Current liabilities	7.6
Net income	1.65	Long-term debt	9.0
		Stockholders' equity (retained earnings 5.2)	10.4

Problem 1: Common-Size Income Statement

Dividing every line by net sales lets the company be compared with competitors of different sizes.

Line	Calculation	Percent of sales
Cost of goods sold	36.0 / 48.6	74.1%
SG&A	8.1 / 48.6	16.7%
Depreciation	1.2 / 48.6	2.5%
EBIT	3.3 / 48.6	6.8%
Interest	1.1 / 48.6	2.3%
Net income	1.65 / 48.6	3.4%

The company keeps about 26 cents of gross profit from each sales dollar but spends most of it on selling and administration, leaving a thin 3.4% net margin, typical of distributors that compete on service and availability.

Problem 2: Liquidity and Activity Ratios

Ratio	Formula and calculation	Result
Current ratio	Current assets / current liabilities = 18.5 / 7.6	2.43
Quick ratio	(Cash + receivables) / current liabilities = 8.3 / 7.6	1.09
Inventory turnover	COGS / inventory = 36.0 / 9.8	3.67 times (about 99 days)
Days sales outstanding	Receivables / sales x 365 = 6.9 / 48.6 x 365	51.8 days

Liquidity is adequate, but the activity ratios deserve attention. Inventory sits for about 99 days, a long time for equipment whose models change, and customers take almost 52 days to pay on what are typically 30-day contractor terms. Both tie up cash that the company is financing with debt.

Problem 3: Debt Ratios

Ratio	Formula and calculation	Result
Debt ratio	Total liabilities / total assets = (7.6 + 9.0) / 27.0	61.5%
Times interest earned	EBIT / interest = 3.3 / 1.1	3.0 times

Creditors provide more than 60% of the company's financing, and operating earnings cover interest only three times. A downturn in construction that cut EBIT by a third would leave coverage near two times, a level many lenders treat as a warning sign.

Problem 4: DuPont Analysis of Return on Equity

The DuPont system breaks return on equity into profitability, efficiency and the use of debt.

Component	Calculation	Result
Net profit margin	1.65 / 48.6	3.4%
Total asset turnover	48.6 / 27.0	1.80
Equity multiplier	27.0 / 10.4	2.60
Return on equity	3.4% x 1.80 x 2.60	15.9%

A 15.9% return on equity looks healthy, but the breakdown shows where it comes from: a thin margin, decent asset turnover and an equity multiplier of 2.6, meaning substantial borrowing. Much of the return reflects debt rather than operating strength, which raises risk for shareholders.

Problem 5: Altman Z-Score

Altman (1968) combined five ratios in a discriminant model that correctly classified most bankrupt and nonbankrupt manufacturing firms in his sample one year before failure. Although the model was built on manufacturers, it is widely used as a rough screen. With a market value of equity of $11.0 million:

Term	Calculation	Value
1.2 x working capital / TA	1.2 x (18.5 minus 7.6) / 27.0	0.485
1.4 x retained earnings / TA	1.4 x 5.2 / 27.0	0.270
3.3 x EBIT / TA	3.3 x 3.3 / 27.0	0.403
0.6 x market equity / total liabilities	0.6 x 11.0 / 16.6	0.398
1.0 x sales / TA	48.6 / 27.0	1.800
Z-score	Sum	3.36

A score above about 3.0 falls in the range Altman associated with financially sound firms, so the company is not in distress today. The score depends heavily on asset turnover, however, and slower sales would lower it quickly.

What this page is doingEvery ratio is shown with its formula and inputs, and each problem ends with an interpretation. On a FIN-3010 written assignment, the work earns the points and the interpretation shows understanding.

Overall Assessment

Taken together, the ratios describe a company that is solvent and profitable but leaning on debt to carry slow-moving inventory and slow-paying customers. Ratios built from historical statements can still be informative about the future. Piotroski (2000) showed that a handful of simple accounting signals, such as improving profitability, falling debt and rising margins, helped separate high book-to-market firms whose shares later did well from those that did poorly. For Garden State Climate Supply, the signals to watch are inventory days, collection days and interest coverage; improvement in all three would strengthen both its financial position and its appeal to investors.

References

Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23(4), 589-609. https://doi.org/10.1111/j.1540-6261.1968.tb00843.x

Mayo, H. B., & Lavelle, M. (2024). Basic finance: An introduction to financial institutions, investments, and management (13th ed.). Cengage Learning.

Piotroski, J. D. (2000). Value investing: The use of historical financial statement information to separate winners from losers. Journal of Accounting Research, 38, 1-41. https://doi.org/10.2307/2672906

What the FIN 3010 Module 2 instructions ask for

Module 2 of FIN-3010 is the second financial tool: analysis of financial statements. The assignment again draws its exercises from the textbook, and each should be headed with its chapter and exercise number, followed by the full working. Expect to compute and interpret ratios in the liquidity, activity, debt and profitability groups, prepare common-size statements and possibly break return on equity into its DuPont components. Keep your figures in consistent units, write each formula before substituting numbers and add a brief interpretation where the problem asks what the result means for the company. Keep the statements open beside the exercises so each input is easy to find.

Inside the FIN 3010 Module 2 example

The sample begins with a condensed income statement and balance sheet in one table, so every later calculation can be traced to its source. Five problems follow the textbook's usual sequence: common-size percentages, liquidity and activity ratios, debt ratios, the DuPont system and a bankruptcy prediction score. Each problem uses a small table with formula and calculation side by side, then one or two sentences on what the result means for this distributor. The DuPont problem shows how borrowing raises return on equity, and the closing section draws the ratios into one assessment, supported by research on financial statement signals. Units are stated once, in millions, to avoid confusion.

Where the marks sit in the FIN 3010 Module 2 rubric

FIN-3010 written assignments are graded on accuracy and completeness of work. For financial statement analysis, mentors check that each ratio uses the correct formula and inputs, that averages or year-end figures are used as the problem specifies, and that results are rounded sensibly. Because the syllabus requires all work to be shown, a correct final number without the calculation may not earn full credit. Interpretations, where requested, should explain what a ratio means for the company rather than restating it. Clear headings for each exercise speed up grading. A short comparison with the prior year or peers turns a number into an interpretation.

Common FIN 3010 Module 2 mistakes, and how to avoid them

Ratio errors usually come from using the wrong numerator or denominator, such as sales instead of cost of goods sold for inventory turnover, or total debt instead of total liabilities. Write the formula first, then substitute. Another common slip is mixing thousands and millions. When interpreting, compare a ratio with something, the prior year, a competitor or an industry figure, rather than calling it good or bad in isolation. In DuPont problems, check that the three components multiply back to the return on equity. Our tutors can sit down with your Module 2 exercises and walk through each ratio with you. Recheck that your DuPont components multiply back to return on equity. When a ratio looks unusual, check the inputs before interpreting it.

Write yours, or have the desk draft it

This paper is an original model document written by our desk, not a submitted student paper and not an official Thomas Edison State University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.

More FIN 3010 and Bachelor of Science in Business Administration sample papers

FIN 3010 Module 2 questions, answered

Where can I find a free FIN 3010 Module 2 sample paper?

The solved Module 2 exercises are all here: five original problems on common-size statements, ratio groups, DuPont analysis and the Altman Z-score, each with formula, work and interpretation.

What are the main groups of financial ratios?

Liquidity, activity, debt and profitability ratios. Together they show whether a company can pay its bills, uses its assets efficiently, borrows prudently and earns an adequate return.

What does the DuPont system show?

It breaks return on equity into net profit margin, total asset turnover and the equity multiplier, revealing whether returns come from profitability, efficiency or borrowing.

What is an Altman Z-score?

A weighted combination of five ratios designed to predict bankruptcy. Higher scores suggest financial soundness; low scores suggest distress.

Do I need to interpret ratios in FIN-3010 assignments?

When the exercise asks for it. Even when it does not, a brief interpretation shows understanding and helps on the midterm's problems.

FIN 3010 Module 2 Financial Statement Analysis Problems Example