Financial Statement Analysis Case Requirements
For this project, you will be analyzing the financial statements (contained in the Form 10-K) of two companies in the same industry for the last five years. You will draw conclusions about the overall health of each company and recommend one company stock to invest in. You will create a video or na
ative PowerPoint presentation of your analysis. In week 5 a draft will be shared with class in week 5 and final presentation will be submitted for grading in week 6. Your project will culminate in a written report that will include a paper with supporting Excel worksheet that details your analysis.
Instructions for finding Form 10-Ks
You will need to locate a company's Form 10-Ks, which is the annual report that publicly held companies file with the Securities and Exchange Commission (SEC). The Form 10-Ks are usually quite long, exceeding 100 pages in most cases.
The first thing you need to do is find a recent 10-Ks for the publicly held company in which you are interested. This company must meet the criteria described below. You will need the 10-Ks that contain the financial data for the most recent year plus the preceding four years. A total of five years financial data will be needed for the financial statement analysis.
To find a Form 10-K, go to http:
www.sec.gov/edgar.shtml#.VOhw6vnF9mX. If you know what company you are interested in, you might also be able to go to that company's Investor Relations website and locate its Form 10-K there. You can also view a short video about how to locate a Form 10-K on the SEC EDGAR site; you can view that video at http:
Select two companies to study throughout the course. Selected companies must be in the same general industry (i.e. retailers, restaurants, toy manufacturers, etc.). The companies selected must meet all the following criteria:
· Must be a publicly held corporation cu
ently traded on a U.S. stock exchange (NYSE or NASDAQ)
· Headquartered in the United States
· Form 10-K must be available for 2019 (or 2018 if 2019 is not yet filed)
· Must not be in bankruptcy
Be sure to obtain the Form 10-Ks for each of the companies selected and make sure each criterion is met prior to making your company selections. Sample example company pairings used in the past include Wal-Mart/Target, 21st Century Fox/Disney, GM/Ford, Home Depot/Lowe’s, Apple/Microsoft, and Constellation Brands/Brown-Forman. It is recommended that unless you are versed in the industry, do not select industries with overly complex financial statements such as financial services or oil/gas companies. Discuss with instructor before going down selecting these types of companies.
Post selected companies on the Canvas discussion board
Post the names of your companies on the discussion board on Canvas. The same two companies cannot be selected by more than one person - so check the discussion board postings before making your posting. First come, first serve, so the sooner you do this, the better your selection choices. Post your companies on the discussion board no later than Sunday, end of week 1.
When you post your companies, please be sure to post the companies' formal names and ticker symbols. Be sure that your companies meet the listed criteria - your overall project grade will be negatively impacted if a company you post do not meet the criteria - and you will need to choose a new company that does meet the criteria. If you cannot find a ticker symbol then your company may not meet the trading criteria.
After you have selected and poste the company names, gather the financial statement data for both companies. As the course progresses, you may be asked to be posted about your company’s and their financial data on weekly discussion boards. See separate instruction sheet on how to access Financial Statement data and suggested tool to accomplish this for the course.
There are three separate deliverables for this project that are each discussed in more detail below:
1. Excel spreadsheet with calculations of financial ratios and anlysis due in week 6 of course.
2. Written Analysis report due in week 6 of course.
ated or video presentation using PowerPoint slides to summary analysis and key points. A draft of this presentation will be shared with classmates in week 5 with final presentation submitted for grading in week 6.
1. Excel Spreadsheet:
Calculate the following analysis, ratios. and measures and document calculations in the Excel Spreadsheet.
1. Ratio Analysis: Calculate the ratios appearing in chapter 3: profitability, turnover-control, and leverage/liquidity ratios. The definitions/formulas for these ratios can be found on page 68 of the textbook. Table 2.2 on page 63 provides example of ratio analysis on Has
1. Common size analysis Prepare a common-size financial statement analysis including industry averages. Table 2.3 on page 66 provides example of common size analysis for Has
1. Annual growth rate in sales: calculate the compound annual growth rates of sales and ratios tied to sales to use as assumptions in financial statement forecast. See table 3.2 on page 83 for example
1. Forecasting: Create high level forecasted pro forma financial statements: income statement and balance sheet for the next fiscal year. See tables 3.3 (page 84) and 3.4 (page 88) for example on how to prepare proforma financial statements Table 3.5 on page 90 shows the spreadsheet formulas used to prepare the forecast. Make sure to summarize assumptions used for forecasting in your written report.
2. Written Report
General Writing Instructions for Written Report
Your source documents for the information you will be using for this project will primarily be your companies' Form 10-Ks, data from the annual 10-K reports, and cu
ent news or announcements about the company. You are to use the Form 10-Ks for your companies to answer the questions including conclusion on financial health of the two companies and recommendation for which company to invest in..
Write your answers in paragraph form (do not use bullet points). Use headings to separate each section. You may want to use tables or graphs for numbers (i.e., ratio presentations). Please use proper English, grammar, and spelling. Along with the written report submit Excel workbook that supports calculations such as ratios or other analysis used in your paper.
The primary objective of the financial statement analysis is to decide which company stock you recommend to purchase with explanation of why.
Sections of Written Report
Provide summary on important analysis results and state the objective or purpose of your analysis before the overview. The objective is to determine which company stock you will purchase as a long-term investment. In your own words explain in this section why you selected the two companies.
Industry and company (analysis) overview
Write a XXXXXXXXXXwords paragraph including general facts about the industry in which your companies operate. The EWU li
ary has research guides for MBA students and there are some guides specific for researching company and industry databases. Here is link to the li
ary research guides: https:
esearch.ewu.edu/c.php?g=673544&p= XXXXXXXXXXAlso summarize each company you selected (in your own words) from reading the Form 10-K. Each company description should be XXXXXXXXXXwords in length. Do not copy and paste information; put the information in your own words and acknowledge the source of the information. A great source is the most recent 10K or the company website.
Inferences and overall analysis
In this section you will provide summarized forecasts, estimates, interpretations, and conclusions from analysis included in spreadsheet that accompanies the report. Summarize each of the four analyses performed in the spreadsheet. Mention all four analyses performed, summarize data, and refer to the Excel Spreadsheet as the appendix for more details on calculations. Discuss any insights and compare the two companies using all four analyses.
Determine which ratios or comparisons in evidential matter are most meaningful in deciding which company stock to purchase. Summarize the important favorable and unfavorable factors for company performance. Include both quantitative and qualitative factors. These should be the relevant factors used to select the company stock to purchase as a long-term investment.
For data presentation consider tables or charts in your paper to summarize the detailed data in the Excel spreadsheet. Use the Excel spreadsheet like an appendix that can be refe
ed to for more detail, but the key data or crucial factors should be noted and discussed in body of the paper.
Conclusion and Recommendation
This section is the overall analysis of your two companies. Which company do you believe is healthier? Why? Which company would you recommend investing in? Why? Be specific in your reasoning. Make an explicit recommendation to buy or sell the stock selected based on their financial statement analysis. Be sure to fully support your conclusion of which company is the best investment and why. For example, is one company healthier than the other. Be sure to include a variety of measures, not just one measure of financial health to support conclusion and recommendation for stock trade.
You will be condensing all the project parts into one cohesive written document that is no more than ten double-spaced pages (11-point font, Times New Roman, Cali
i, or Candara, 1-inch margins, Word format.) The Excel spreadsheet will be submitted with the written report as your detailed evidential matter. Use headings to make your document readable (I would expect one or two headings per page in most cases). Please use proper English, grammar, and spelling. Your paper will be checked for plagiarism. You will submit your final paper on Canvas. Your paper must be submitted no later than Friday, end of week 6.
Written report (paper and Excel analysis) ru
The following grading ru
ic will be used to evaluate your written paper.
Paper is well organized and flows well. Written in complete paragraphs. Appropriate use of headings. Seamless integration of company information.
Paper is well organized with mostly complete paragraphs. Can follow the organization flow of the paper. Company information is integrated, although some information is not aligned.
Paper is average in terms of organization. Appears to simply be responses to questions, transitions are lacking a bit. Some differences in analyses are visible.
Questions are answered, mostly in bullet format. Paper appears to be a list of answers. Few headings for organization; somewhat difficult to follow. Coverage of companies differs.
Paper is not organized and lacks headings. Hard to follow structure. Analyses of companies varies widely throughout paper.
Paper indicates a thorough understanding and analysis of financial statements.
Paper indicates a good understanding and analysis of financial statement analysis.