Avista & Rite Aid Financial Statements Spring 2024 - Pre-work

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Washington State University *

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Finance

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Apr 3, 2024

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docx

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Avista Utilities & Rite Aid Financial Statements – Pre-Work 1. How much net income or net loss did Avista Utilities and Rite Aid each make in the most recent year they reported? HINT: be sure to look at the last line of the heading so you are accurate in the numbers you report. Avista’s net income for 2021 was $147,334 while Rite aid’s Net loss for February of 2022 was $- 538,478 2. Review Avista and Rite Aid’s current and quick ratios. Why are these ratios the same as each other for Avista but different for Rite Aid? Explain why this makes sense given the type of companies Avista Utilities and Rite Aid are. Avista’s current and quick ratios are the same because they are an energy company that has constant cash flow, fewer liabilities, and lower turnover rates. Rite aid’s current and quick ratios are different because they have fewer constant cash flow and more liabilities to run their business like turnover inconsistent customer times and stock. 3. a) Provide the formula for the debt-to-equity ratio for Rite Aid. b) Then provide the actual numbers you would use to calculate the debt-to-equity ratio for the fiscal year ending February 26, 2022. Calculate the ratio and verify it matches the value provided on the ratios tab. c) Then describe what the ratio means. Formula: Debt to equity= Total debt/Total Stockholders’ Equity $-1,081,561/714,187= -1.514
4. a) Provide the formula for Return on Equity and Net Profit Margin ratios for Avista Utilities. b) Then provide the actual numbers you would use to calculate these two ratios for 2021. Calculate the ratios and verify they match the values provided on the ratios tab. c) Then describe what the ratios mean. Return on Equity formula= Net income/Shareholders Equity $473,801/2,666,220= 0.17 This means that avista being a lower ROE, they’re not getting as much profit since being fairly lower than 1 but enough above zero that their company is still good to invest in. Net Profit Margin Formula= Net Profit/Total Revenue x100 $473,801/4,106,449 x100= 11.53 The net profit margin of 11.53% means they have a good margin with 10% being healthy and 20% being high, they’re right in the sweet spot. 5. Review Avistas’ Net Profit Margin ratio across 2019, 2020, and 2021. Describe the trend in the ratio. Using values from the income statement, explain what is causing the trend. What’s causing this trend is that over the years Avista’s operating costs have been increasing at a faster rate than revenue, which is lowering net profit margin ratios. 6. On each of the income statement and balance sheet tabs, you are provided with each value as a % of revenue. Analyzing these values allows you to look for trends in expenses and compare financial statements across companies. (This is what we did in class when introducing financial statements where we compared a bank to a pharmaceutical company.) Review the %ages of revenue and identify and describe 2 observations about either a trend in expenses or a difference between Avista Utilities and Rite Aid.
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