Week 6 – Discussion Form
See attached project instructions:
This is really a continuation of material from FIN 305 as I am asking you to analyze a company using the traditional tools of ratios and a common size income statement. Additionally, in item III G. you will see that I have asked you to evaluate the firm’s capital structure (the proportion of debt vs. equity).
You will prepare a PowerPoint presentation. Use as many slides as necessary but please don’t get carried away. Also, remember that PowerPoints are not meant to be “paragraph after paragraph” of writing, but rather the highlights of your findings which will be mostly in bullet-point format. You may need to explain some of your findings in more detail, of course, and I am looking for an analysis that would include the “so what” of your findings.
What you should do this week is select the two publicly-traded companies IN THE SAME INDUSTRY you will be using for your project. Note that they should NOT be financial institutions. Also, please do not use Wal-Mart, K-mart, Coke, or Pepsi. I’ve seen too many of these!
Boeing and Lockheed Martin
FIN 306 Individual Project
Structured External Assignment
You are a financial analyst working for a major investment house. You have been given a major corporation (actually it’s your choice*) to analyze for its investment potential.
(Do NOT choose a financial organization (their financial statements will drive you crazy!) Pick a manufacturing or retail company that is publicly traded (on the New York Stock Exchange). ALSO – remember you need to make comparisons – your company compared a good competitor in the same industry. THEREFORE you need to select TWO companies: yours and the competitor for the comparisons!
You have been asked to create a PowerPoint presentation based on your SWOT analysis – actually only HALF a SWOT – just the Strengths (S) and Weaknesses (W). The S&W will be based upon your financial analysis of the Income Statement and Balance Sheet of that major corporation. Identify areas in which the company is performing well (strengths) and advise your boss of any problem areas (weaknesses).
Include in your analysis an assessment of how the firm’s strengths and weaknesses affect its credit worthiness and investment potential.
The time period for the analysis should include a minimum of THREE full years (five is better) plus interim statements for the most recent year. You need to “crunch” the numbers – three years of ratios (refer back to chapter 3 for the ratios to use) and three years of the “Common-sized” Income Statement for your company (again, chapter 3 is where you will find the common-sized statement). In addition to the financial statements and other material in the annual and/or 10K reports, you should review relevant materials from other sources mentioned in class or found in your text. For comparison data use whomever you consider to be your major competitor. For the comparison company, you just need the most recent year’s numbers are good: both their ratios and their common-sized Income Statement.
Remember – your must use both financial ratios and common-sized income statements.
Required outline for your Powerpoint follows:
The attached outline is provided for guidance, but the analysis should be adjusted, as appropriate, to conform to the individual characteristics of the firm.
Note to students: please remember do not select a financial institution for your company.
Required Outline for Financial Statement Analysis – PowerPoint Presentation
For PowerPoints items in Sections 1 & 2 should be 1 slide each. For section 3 it’s your call. Cover those important ratios and significant issues found in the common-sized income statement and in your analysis of the capital structure of the firm. Remember however that PowerPoint slides are not meant to be an eye chart. If you have more than 6 typed lines on one slide – you needed another slide!
II. Firm, Industry and Environment (please be brief, this IS a finance and accounting course not a history class!)
A. Description of firm and its management
B. Discussion of the competitive environment
C. Economic climate and outlook
D. Other factors as appropriate, e.g. governmental regulations, labor issues, litigation pending
III. Evaluation of Financial Statements (note key word is “evaluation”)
Show your numbers here: “Presentation” (some ideas in parenthesis – not meant to be all inclusive). Analysis of those numbers – what those numbers should tell us about the company or “Evaluation” should directly follow each ratio or set of ratios. The same for the “Common Sized Analysis”: after the numbers, tell us the “so what”! You will need to show your actual CALCULATIONS in an appendix slide at the end.
B. Short-term liquidity
C. Activity Ratios
D. Financial Leverage (Debt Ratios)
E. Profitability and Market Ratios
F. Common-sized Income Statement Analysis
G. Discussion of the Company’s capital structure
IV. Outlook, Summary and Conclusions
A. Outlook for performance (investment potential, credit assessment, etc.)
D. Summary and Conclusions
A. You must cite your information. While not an APA paper, the plagiarism rules still apply.
A. This is where you will include the calculations for ALL of your ratios. If you do not provide your calculations, you will not receive credit for any of section III. (That is the largest part of your grade for the project so it is very important.)