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Review the requirements of the below Mini-Case

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Review the requirements of the below Mini-Case, parts b through j. Then apply those same requirements to do an analysis of Brinker International, which is a real company. Do the analysis on the basis of the figures for the most recent year. For part g, use the 2 most recent years (reports attached below). Download 10K financial statements (attached below) for the most recent year for Brinker. A good source is the company's home page. Also compare the Brinker ratios to the industry averages. (Access industry averages). You'll note that some of the company's ratios you calculate won't agree with those found on the web page. Ratios are calculated in different ways, however, you should use the formulas in the text. Also, you won't find all of the industry averages, but you will find most of them. You'll need the company's stock price for several of the ratios; use the fiscal year end price. The company's stock symbol is EAT.

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Solution Summary

The review requirements of the below mini-case is determined.

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Potential Limitations and problems of Financial ratio analysis:

Many of the ratios are calculated on the basis of the balance-sheet figures which are as on only and may not be indicative of the year-round position. Comparison of the ratios with past trends and with competitors in the industry may not give a correct picture as the figures may not be easily comparable due to the difference in accounting policies, accounting period etc. which may differ from company to company.
It ...

Solution provided by:
Sonia Agarwal, CA
Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
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  • "I got this feedback and I wanted to know if you can explain it to me. I noticed something within your workings which I believe is incorrect.  It looks like you've mistaken the Debt ratio for the Equity Multiplier.  You've done a calculation to determine Return on Equity (ROE) but if you take a look at the ratios provided for us you'll see ROE listed on the bottom line already.  You can use ROE, Profit Margin and Total Asset Turnover to figure out the Equity Multiplier amount.  Equity multiplier is not provided for us and we need to calculate it.  I really hope this is helpful to you.  "
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