| Course | GB550 Financial Management |
|---|---|
| Unit | Unit 1 |
| Paper type | Ratio groundwork exercise |
| Length | About 930 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MBA |
| Updated | October 2026 |
Free sample paper for GB550 Unit 1
The Arithmetic Every Later Unit Leans On: A Unit 1 Ratio Groundwork Exercise for an Inland Barge Operator
[Student Name]
Purdue University Global
GB550: Financial Management
Unit 1 Ratio Groundwork Exercise
[Instructor Name]
[Date]
The barge operator and its statements are composite and illustrative; the methods and the sources cited are real.
1. Common-Size Income Statement
Each line is shown in millions of dollars and as a share of revenue.
Revenue: $612.4 million, 100 percent.
Fuel: $128.6 million, 21.0 percent.
Crew wages and benefits: $171.5 million, 28.0 percent.
Maintenance and repairs: $73.5 million, 12.0 percent.
Other operating costs: $82.3 million, 13.4 percent.
EBITDA: $156.5 million, 25.6 percent.
Depreciation and amortization: $71.2 million, 11.6 percent.
Operating income (EBIT): $85.3 million, 13.9 percent.
Interest: $24.6 million, 4.0 percent.
Pretax income: $60.7 million; income tax at 24 percent: $14.6 million.
Net income: $46.1 million, 7.5 percent.
The common-size view shows where the money goes before ratios compress it. Crew and fuel together take nearly half of revenue, and depreciation takes almost twelve cents of every dollar, which is what an asset-heavy fleet looks like on an income statement.
2. Common-Size Balance Sheet
Cash $38.0 million, receivables $71.2 million and fuel and parts inventory $15.8 million make current assets of $125.0 million, 10.6 percent of assets.
Vessels and barges, net: $1,019.5 million, 86.4 percent.
Other noncurrent assets: $35.5 million, 3.0 percent.
Total assets: $1,180.0 million.
Current liabilities $112.6 million, long-term debt $420.0 million and deferred taxes and other $107.6 million make liabilities of $640.2 million; shareholders' equity is $539.8 million, 45.7 percent of assets.
With 86 percent of its assets afloat, this company earns its return by keeping barges loaded, not by turning assets over quickly.
3. Ratio Table
EBITDA margin: 156.5 / 612.4 = 25.6 percent.
Net margin: 46.1 / 612.4 = 7.53 percent.
Asset turnover: 612.4 / 1,180.0 = 0.52 times.
Current ratio: 125.0 / 112.6 = 1.11.
Quick ratio: (125.0 − 15.8) / 112.6 = 0.97.
Debt to EBITDA: 420.0 / 156.5 = 2.68 times.
Interest coverage: 85.3 / 24.6 = 3.47 times.
Return on assets: 46.1 / 1,180.0 = 3.91 percent.
Return on equity: 46.1 / 539.8 = 8.54 percent.
Debt to capital: 420.0 / (420.0 + 539.8) = 43.8 percent.
Published ratios for inland marine carriers are thin, so the comparison leans on the prior year and on two composite peers, and says so: a larger operator at 2.9 times debt to EBITDA with interest covered 3.1 times, and a smaller one at 2.2 times and 4.0 times. This company sits between them on both.
4. DuPont Split
Return on equity of 8.54 percent equals a net margin of 7.53 percent times asset turnover of 0.52 times an equity multiplier of 2.19 (1,180.0 / 539.8). Last year's 9.55 percent split into an 8.30 percent margin, turnover of 0.53 and a multiplier of 2.17.
The split explains the decline. The equity multiplier rose slightly, which on its own would have raised return on equity, and turnover barely moved. Nearly all of the drop comes from margin, which fell 0.77 points. The common-size statement shows where: fuel rose from 19.6 to 21.0 percent of revenue as diesel prices climbed, and a low-water autumn forced lighter loads, so revenue per barge trip fell while crew costs did not. Brealey et al. (2023) caution that a DuPont split identifies where a change sits, not what caused it, and the causes named here come from the operating data behind the statements.
5. The Overall Picture
Taken as a set, the ten figures show an operator that is sound but has little slack. Liquidity is adequate rather than generous: a current ratio of 1.11 and a quick ratio of 0.97 mean the operator can meet near-term obligations, but a bad quarter would draw on its bank line. Borrowing is moderate at 2.68 times EBITDA, comfortably inside the 3.75 covenant in a normal year, and interest is covered 3.47 times. Return on equity of 8.54 percent is the figure most likely to concern shareholders, because later units will estimate a cost of equity near 10 percent, which would mean the company currently earns less on equity than its investors require. That gap is the thread the rest of the term follows: whether the fleet program in Units 7 and 8 can lift returns, and how it should be financed without pushing debt toward the covenant.
6. Carry-Forward Sheet
Each figure is recorded once, with its source, so it does not drift between units.
Tax rate: 24 percent, from the income statement.
Debt: $420.0 million book value: $250.0 million of 6.125 percent unsecured notes due in eight years, $110.0 million of secured equipment notes and a $60.0 million bank loan. Market values come in Unit 3.
Shares outstanding: 28.4 million; earnings per share $1.623.
Dividend: $0.96 a share, a payout of 59 percent and retention of 41 percent, for Unit 4.
EBITDA and coverage: $156.5 million and 3.47 times, for Units 3 and 9.
Return on equity: 8.54 percent, for the growth estimate in Unit 4.
Covenant: debt may not exceed 3.75 times EBITDA, for Units 9 and 10.
Brigham and Ehrhardt (2020) note that ratio analysis is most useful when the same definitions are applied consistently across periods and decisions, and the sheet exists to enforce that across the term. Koller et al. (2020) add that operating ratios such as return on assets are more stable than equity returns for asset-heavy firms, which is worth remembering when later units judge the 8.54 percent against a cost of equity.
References
Brealey, R. A., Myers, S. C., & Allen, F. (2023). Principles of corporate finance (14th ed.). McGraw Hill.
Brigham, E. F., & Ehrhardt, M. C. (2020). Financial management: Theory and practice (16th ed.). Cengage.
Koller, T., Goedhart, M., & Wessels, D. (2020). Valuation: Measuring and managing the value of companies (7th ed.). Wiley.
What the GB550 Unit 1 assignment asks for
The first GB550 assignment asks you to analyze a company's financial statements and set up the figures later units will use. Prepare common-size income and balance sheet statements. Calculate a set of liquidity, efficiency, debt, coverage and profitability ratios, showing each formula with its inputs. Compare them with a benchmark, such as the prior year or peers, and say what you used. Decompose the return on equity into margin, asset use and financing, then explain any change from the prior year using the statements behind it. Summarize what the ratios say together. Close with a sheet recording the figures later units need, each with its source. Roughly five pages with APA 7 citations to finance texts is the usual scope.
How this GB550 Unit 1 example is built
The common-size income statement shows crew and fuel taking nearly half of revenue and depreciation almost twelve cents a dollar. The balance sheet puts 86.4 percent of assets in vessels, and the highlighted sentence explains what that means for returns. Ten ratios run from a 25.6 percent EBITDA margin to 43.8 percent debt to capital, compared with the prior year and two composite peers. The DuPont split traces the fall from 9.55 to 8.54 percent to margin, then to fuel and a low-water autumn, with Brealey and colleagues on the split's limits. Brigham and Ehrhardt and Koller and colleagues frame the carry-forward sheet that records the tax rate, debt, shares, dividend and covenant.
Where the points sit in the GB550 Unit 1 rubric
Instructors grading this GB550 exercise look for ratios that are interpreted, not just calculated. Common-size statements earn points because they show where money goes before ratios compress it. Showing each formula with inputs lets a grader check the arithmetic. A stated benchmark, even a thin one, shows judgment. A DuPont split that explains a change using operating facts shows analytical depth. Summarizing what the ratios say together shows synthesis. A carry-forward sheet with sources shows foresight about later units. Avoiding unexplained jargon keeps the analysis readable. Three finance texts, by Brealey's team, by Brigham and Ehrhardt and by Koller's valuation group, supply the references.
GB550 Unit 1 help: mistakes that cost points
Many GB550 Unit 1 papers present a table of ratios with a one-line comment on each and never explain why a ratio moved. Others compare figures with an industry average without citing a source or admitting none was available. A frequent gap is the DuPont split: decomposing return on equity is only useful if the paper then traces the weak component back to the statements and the business. Some writers skip the carry-forward sheet, then use different debt or share figures in later units. Prepare common-size statements, calculate ratios with formulas, state the benchmark, split return on equity, explain the change, summarize the picture and record the figures later units need.
Get a GB550 Unit 1 example written to your instructions
Name the company on your assignment sheet, or the firm you chose yourself, and attach its statements with the Unit 1 instructions and rubric. Ratios come back grouped and computed with formulas shown, the DuPont split explained, and a carry-forward sheet built for the units ahead. The opening custom sample is free and normally arrives within 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GB550 Unit 1 questions, answered
Why does the sample use common-size statements before the ratios?
Because they show where the money goes before ratios compress it into comparisons. A barge operator spends heavily on depreciation and fuel, and a common-size statement makes that visible in one column. Some sections do not require the step, but it gives the ratio commentary a starting point and helps a grader see why a margin moved rather than only that it did.
Should the ratios be compared with an industry average?
Usually, since most prompts ask for one by the second or third unit. Published figures for inland marine carriers are thin, so the sample leans on the prior year and on two composite peers, and says so. The custom version uses whatever benchmark source your section names or your library database provides, with the source cited beside the table.
What is the carry-forward sheet for?
It keeps later units consistent. The cost of capital estimate needs debt, the tax rate and share count; the stock valuation needs the dividend and payout; capital budgeting needs the tax rate again. Recording each figure once, with its source, prevents the common problem of a number changing between units without explanation. Not every section asks for it, and it can be dropped if yours does not.
Where can I find a free GB550 Unit 1 sample paper?
This page carries a full GB550 Unit 1 ratio groundwork exercise for a composite barge operator, with common-size statements, ten ratios, a DuPont split, a carry-forward sheet and APA 7 references.
Why did return on equity fall from 9.55 to 8.54 percent?
Nearly all of the drop came from net margin, which fell 0.77 points as fuel rose to 21.0 percent of revenue and a low-water autumn forced lighter loads. Turnover barely moved, and the equity multiplier rose slightly.