| Course | FIN 5013 Strategic Financial Management |
|---|---|
| Module | Module 2 |
| Paper type | Financial ratio and trend analysis |
| Length | 1,220 words, about 4 pages plus title and reference pages |
| Format | APA 7 student paper |
| School | American College of Education |
| Program | M.S. in Organizational Leadership |
| Updated | October 2026 |
Free sample paper for FIN 5013 Module 2
From 27 Percent to 21 Percent: A Ratio and Trend Analysis of Toro's Return on Equity, Fiscal 2023 to 2025
Student Name
American College of Education
FIN5013: Strategic Financial Management
Module 2 Assignment
Instructor Name
October 18, 2027
Introduction
My first paper for this course showed how The Toro Company's financial choices support its strategy of serving professional customers. This paper tests that picture with ratios. Using the income statements, balance sheets and cash flow statements in Toro's fiscal 2025 annual report, which cover the years ended October 31, 2023 through 2025, it calculates profitability, DuPont, liquidity, debt load, coverage and efficiency ratios, compares the three years and explains what changed (The Toro Company, 2025). Figures are in millions of dollars and rounded, and averages use the beginning and end of each year.
Profitability
Net sales were nearly flat over the three years: $4,553 million in fiscal 2023, $4,584 million in 2024 and $4,510 million in 2025. Gross margin slipped each year, from 34.6 percent to 33.8 percent to 33.4 percent, as product mix and costs weighed on prices. Operating margin rose from 9.5 percent in 2023 to 11.6 percent in 2024 and fell to 9.1 percent in 2025. Net margin followed the same path: 7.2, 9.1 and 7.0 percent. Diluted earnings per share were $3.13, $4.01 and $3.17. Part of the 2025 decline came from writing down the Spartan brand by $81.1 million, a charge that used no cash; the company's own adjusted figures, which exclude that charge and productivity program costs, show earnings per share of $4.20 in 2025 against $4.17 in 2024.
Breaking Down Return on Equity
Return on equity fell from about 27.4 percent in fiscal 2024 to about 21.0 percent in 2025. The DuPont method splits that return into three parts: profit per dollar of sales, sales per dollar of assets and an equity multiplier that compares the assets a company holds with the owners' stake that supports them. In 2024, a 9.1 percent margin times turnover of 1.27 times a multiplier of 2.36 gives about 27.4 percent. In 2025, a 7.0 percent margin times turnover of 1.28 times a multiplier of 2.34 gives about 21.0 percent. Turnover and debt load barely moved. Nearly the whole decline came from the margin, and much of the margin decline came from the impairment and program costs rather than from weaker core operations.
What Research Says About the Parts
The breakdown matters for forecasting. Fairfield and Yohn (2001) found that a change in asset turnover helped predict the next year's change in return on assets, while a change in profit margin did not, suggesting that improvements in how efficiently assets generate sales tend to persist. Soliman (2008) found that market participants respond to the DuPont components, and that changes in asset turnover carry information about future operating performance. For Toro, a stable turnover of about 1.28 means the company is not losing efficiency in its use of assets. The margin decline, driven partly by one-time charges, is less likely to signal lasting deterioration on its own.
Liquidity
Toro's liquidity improved in fiscal 2025. Short-term assets covered short-term obligations 1.87 times at the end of fiscal 2025, up from 1.81, which is the current ratio. The quick ratio, which excludes inventory, rose from 0.74 to 0.86, because inventory fell from $1,039 million to $921 million while cash rose from $200 million to $341 million. A quick ratio below one is common for manufacturers that carry large seasonal inventories, but the improvement shows the company converting stock into cash. The cash statement backs this up, with $662 million generated by operations, up from $570 million in 2024 and $307 million in 2023.
Debt and Coverage
Long-term debt held steady at about $922 million, but because equity fell from $1,552 million to $1,453 million, mainly through share repurchases, debt to equity rose from about 0.59 to 0.63. Total liabilities rose slightly as a share of assets, from about 56.7 percent to 57.7 percent. Operating income covered interest expense 8.6 times in 2024; that cover fell to 6.9 times, reflecting lower operating income rather than higher interest. These levels describe a moderately borrowed company with comfortable coverage. The post-year-end Tornado acquisition, funded with borrowing, will raise debt in fiscal 2026, so coverage is worth watching.
Efficiency
Dividing the year's product costs by the inventory carried on average gives a turnover of about 3.07 in fiscal 2025, meaning inventory turned roughly every 119 days. Measured at year end, the stock on hand would have covered about 112 days of production costs, against about 125 days a year before. Receivables at year end equaled about 31 days of sales, down from about 37. Payables fell too, from about 55 days to about 45 days of cost of goods sold, which partly offset the cash gains from lower inventory and receivables. The next module examines these working capital measures in detail, but the direction is clear: Toro tied up less cash in operations at the end of 2025 than a year earlier.
Cash Flow Ratios
Cash flow ratios add a check on earnings quality. In fiscal 2025, operating cash flow of $662 million was about 2.1 times net earnings of $316 million, helped by the non-cash impairment, depreciation and amortization of $143 million and the release of working capital. After $84 million of spending on plants and equipment, about $578 million of free cash remained. Dividends and buybacks of $441 million used about 76 percent of that free cash flow, leaving room to add cash to the balance sheet. In fiscal 2023, by contrast, operating cash flow of $307 million barely exceeded capital spending and dividends combined, which shows how much the swing in working capital improved the company's cash position over two years.
Reading the Trends Together
Taken together, the ratios describe a company with flat sales, slowly eroding gross margins and a reported profit decline that is partly one-time. Its asset efficiency is stable, its liquidity and cash flow improved, and its debt load rose modestly because of buybacks rather than new borrowing. The most important trend to watch is gross margin: three years of decline, despite price actions, suggest that the productivity program's $125 million savings target is needed to stabilize profitability. If gross margin recovers while turnover holds, return on equity should recover even without sales growth.
Limits of Ratio Analysis
Ratios have limits. Three years is a short window, and fiscal 2023 included post-pandemic supply effects that make comparisons uneven. Toro's seasonality means year-end balances may not represent average conditions, which is why averages were used where possible. Adjusted earnings figures are management's own and exclude items it considers unusual. And comparisons with competitors, which this paper does not include, would show whether Toro's ratios are strong or weak for its industry. Even with these limits, the ratios point in a consistent direction, which gives the conclusions more weight than any single figure would.
Conclusion
Toro's return on equity fell from about 27 percent to 21 percent between fiscal 2024 and 2025, and the DuPont breakdown shows that almost all of the decline came from the net margin, much of it from an impairment and program costs. Liquidity, cash flow and asset efficiency improved or held steady, and debt load rose modestly through buybacks. Research on the DuPont components suggests the stable turnover is a reassuring sign. Module 3 will examine the working capital improvements behind the stronger cash flow.
References
Fairfield, P. M., & Yohn, T. L. (2001). Using asset turnover and profit margin to forecast changes in profitability. Review of Accounting Studies, 6(4), 371-385. https://doi.org/10.1023/A:1012430513430
Soliman, M. T. (2008). The use of DuPont analysis by market participants. The Accounting Review, 83(3), 823-853. https://doi.org/10.2308/accr.2008.83.3.823
The Toro Company. (2025). Form 10-K for the fiscal year ended October 31, 2025. U.S. Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/737758/000073775825000115/ttc-20251031.htm
FIN 5013 Module 2 instructions, in plain terms
In the second FIN 5013 paper, students commonly work through an organization's statements with ratios covering two or more years. Calculate profitability, liquidity, debt load and efficiency measures and show the inputs behind each. Most prompts want trends explained rather than merely reported, so say what changed and why. A DuPont breakdown of return on equity is a common and useful tool. Some sections ask you to separate one-time items from underlying performance or to compare with competitors. Use research on financial analysis where it helps interpretation, cite the filings in APA and keep the analysis tied to the strategy described in Module 1. State whether you used year-end or average balances.
How this FIN 5013 Module 2 example is built
Three years of sales, margins and earnings per share open the sample, with the impairment and the company's adjusted figures noted. A DuPont section multiplies margin, turnover and multiplier for two years to show that almost all of the change came from margin. Two accounting studies on the forecasting value of turnover and margin interpret the result. Liquidity, debt load and coverage sections give each ratio with inputs and explain movements, such as buybacks raising debt to equity. An efficiency section previews inventory, receivable and payable days, and closing sections read the trends together and list the limits of a three-year window. A cash flow section checks earnings quality and payout coverage.
Where the points sit in the FIN 5013 Module 2 rubric
Three things decide the grade on a ratio paper: correct arithmetic, full coverage and convincing interpretation. Graders recheck calculations and expect inputs to be shown, with consistent use of averages or year-end figures. Coverage of profitability, liquidity, debt load and efficiency is usually required. The heaviest weight goes to explaining trends: identifying what drove a change, such as a DuPont component or a one-time charge, and what it means for the company's direction. Research support and a link to the company's strategy earn additional credit. Tables of ratios without commentary, unexplained swings and ignoring one-time items tend to cost marks. Filings and studies should carry APA 7 citations. A short section on cash flow ratios is a welcome extra.
FIN 5013 Module 2 help from the desk
Ratio papers often turn into long lists of numbers with a sentence each. If you are unsure which ratios to include, how to run a DuPont breakdown or how to separate one-time items from real trends, we can help. Share the company you are analyzing and the module instructions, and our writer will calculate the ratios from the filings, show the inputs and explain what moved and why. Public companies in any industry, and many large nonprofits with audited statements, work for this assignment. Ratio and trend analyses are typically completed in about two days. Every ratio comes with its formula.
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 American College of Education 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.
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FIN 5013 Module 2 questions, answered
What does FIN5013 Module 2 usually ask for?
For the second FIN5013 paper, students usually take several years of one organization's statements, compute ratios and explain what the movements reveal.
What is a DuPont analysis?
A breakdown of return on equity into net margin, asset turnover and the equity multiplier, which shows whether profitability, efficiency or debt load drove a change.
Which ratios matter most in a trend analysis?
Gross, operating and net margins, return on equity with its DuPont parts, current and quick ratios, debt to equity, interest coverage and inventory and receivable days.
Where can I find a free FIN 5013 Module 2 sample paper?
This page includes one: three years of Toro ratios showing return on equity falling from 27.4 to 21.0 percent, traced almost entirely to the net margin and an $81 million impairment.
Should I use adjusted or reported earnings in ratios?
Use reported figures for the core ratios, then compare with the company's adjusted figures to show how much one-time items affected the trend, and say whose adjustments they are.