Research Project Part 1
Due at the end of week 2
This project is closely aligned with
the Course Outcomes and Finance Program Objectives. Completion of this
project can be used as part of a portfolio to show potential employers the
student is skilled at performing company valuations and financial statement
analysis and can be included on the student’s resume.
Ratio Analysis
OBJECTIVE
You are to assume you have been recently hired by The
Company and have been assigned to a team that reports to the CEO of THE COMPANY
(SELECTED BY INSTRUCTOR). The head of your team is the CFO who is concerned
about THE COMPANY’s current financial performance and comparison against major
competitors in the industry and the impact that may have on the firm’s stock
price. The CFO would like your team to provide insights that will help them to
project future financial performance. Specifically, the primary question to
answer is: will THE COMPANY be financially viable over the next two to three years,
and which steps should be done to improve its financial stability?
THE COMPANY that is to be analyzed
for this project is to be a company selected by instructor.
Alternatively, you can request
approval of another publicly traded company. This request must be submitted
before the end of the first week of the course. The request must include
- identification of the company by ticker symbol and name
- a reasonable and appropriate explanation of why you
want to examine the alternative company
- the source of the analyst’s report that will be used in
the analysis (which must be submitted to me)
- acknowledgement by you that all of the specific
elements of the assignment (see below) will be prepared by you and
included in the final research project report
SUGGESTED WEBSITES
www.morningstar.com – To find the information for your company you need to type
the stock symbol in the Quotes window to get into the company’s page.
www.marketwatch.com -To find the information for your company you need to
type the stock symbol in the Search window to get into the company’s
page.
www.Finviz.com – To find the information for your company you need click on
Screener on the top of the screen, type the stock symbol in the Ticker window to get into the company’s
page., and click on the company in the list.
www.money.cnn.com -To find the information for your company you need to
type the stock symbol in the Search window to get into the company’s
page.
www.finance.yahoo.com – To find the information for your company you need to type
the stock symbol in the Search window to get into the company’s page.
www.nyse.com
– Click on Data, then click on Stocks (under Quotes), and type the name of the
company or the stock symbol in the window “Keyword or symbol” to get into the
company’s page.
www.nasdaq.com – To find the information for your company you need to type
the stock symbol in the Search window to get into the company’s page.
Company’s websites
YOUR SPECIFIC ASSIGNMENT
Using the information from the websites the students will develop
evaluation of the financial performance for THE COMPANY (SELECTED BY
INSTRUCTOR). (The evaluation portion will total 85% of the assignment
grade)
-1—Background and Industry (one short
paragraph).
-2— Common size analysis (15% of the project grade). You can find the
common size financial statements for the company for the last 3-5 years on www.morningstar.com.
Type the stock symbol in the Quotes window to get into the
company’s page. Scroll down and click on All Financial Data. Switch View from
“$” to “%”.
Create a table that contains the most significant common size
financial performance results for the last 3-5 years for THE COMPANY and for the last year for the
major competitor. Present the table with this information in your report.
Write about 1-2 pages of the
analysis of the financial conditions, its stability, and trends.
-3— Trend analysis (15% of the project grade)
Analyze the financial trends over 5
years of Revenue, net income, and any other of the most significant financial performance results of your choice.
To present your findings, you will use the table(s) and/or graphs. You can use
the bar graphs provided by www.morningstar.com. Or create
your own ones.
Write about 1-2 pages of the report
of the results that you received. What important information does this analysis
provide?
-4— Financial ratio analysis. (20%
of the project grade)
In
this part of the project you will complete ratio analysis of THE COMPANY.
Please remember that you are the financial analyst of THE COMPANY and should
prepare the report to be read by the chairman (CEO) of THE COMPANY. The ratio
analysis should be completed from the point of view of THE COMPANY’s the
management.
The chairman of THE COMPANY is especially concerned about
the following groups of ratios:
- Liquidity (current ratio, quick
ratio, and net working capital-to-sales ratio)
- Operating performance ratio (Days of
Sales in Inventory, Days of Sales in Receivables), turnovers
- Profitability ratios (Gross Profit
Margin, Operating Profit Margin, Net Profit Margin)
- Return on Investment ratios: (Basic
Earning Power ratio, ROA, ROE)
You can find financial ratios for the company for the last 3-5 years in
the Internet or calculate them. If you use published ratios you must indicate
that and cite their source.
a)
Present the ratios as the table(s) in your project. Create graphs for
some ratios on your choice over three years to show trends.
b) Write 2 pages (or more) of
analysis of the ratio results that you found. In your analysis you should
answer the following questions:
- How liquid is the company?
- Is management generating a
substantial profit on the company’s assets?
- If the management of the company
would like to improve the company’s financial performance, what should the
management of THE COMPANY do?
-5- Evaluate Return on Equity for
the company for the last three years using the DuPont analysis. (15% of
the project grade).
- Find ROE,
Net profit margin (listed as net margin), asset turnover, financial leverage
for the last three years for your company. You also may use
debt/equity ratio in your analysis. Present
the ratios as the table(s) in your project.
- Find ROE,
Net profit margin (listed as net margin), asset turnover, financial leverage
for the last year for its major peer competitor. You also may use
debt/equity ratio of peer competitor in your analysis. Present the ratios as the table(s) in your project.
- Has the company’s ROE changed over
the last three years? What was the main factor that influenced this change?
- Compare the ratios of you company to
the peer competitor. If the management of the company would like to improve
their return on equity, what should the management of the company do?
Write about 1 page of analysis to
answer the questions (c) and (d).
–6- Develop a specific
recommendation, with supporting rationale, as to whether the assigned company’s
recent trends and results in financial performance is of sufficient financial
strength, will THE COMPANY be financially sustainable over the next two to
three years, and which steps should be done to improve its financial stability?
(about 1 page) (15% of the project
grade).
-7- Reflection – the student should write a paragraph in their own
words reflecting on specifically what they learned from the assignment and how
they think they could apply what they learned in the workplace. (5% of the
project grade)
PRESENTATION OF PAPER AND WRITING (15%)
of the project grade):
-Organization, Format and
Presentation of Paper including the Title page, Introduction, Body, and Summary.
Each
section of the paper must begin with sub-headings. Please use the sub-headings included in the
assignment (4% of the project grade)
Use of Tables, Figures and Other
Graphics to Summarize and Support Analysis Presented in the Paper (3% of the
project grade)
Logical and Smooth Flowing
Transitions and Relationships among Sections of the Written Report (3% of the
project grade)
Research Sources and Significance of
Research Information and Data, Use of APA Citation Methodology (5% of the
project grade)
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