Financial Statement Analysis

Pair of Companies： Coca-Cola & Pepsi

COURSE PROJECT GUIDELINES

The final project paper must be well organized, coherent, with a cover sheet, abstract, table of contents, an introductory statement, statement of objective, description of companies, business models, strategy and relevant industry, quantitative and qualitative analysis, an appendix with exhibits such as charts and graphs, footnotes and bibliography.

The project is both historical and forward looking and should at a minimum address the following questions: 1) who has been and who is the superior competitor? Why? 2) Are the companies presently valued properly and why or why not? 3) What is the growth prospects for the companies and which company is a better investment to add to an investment portfolio and why? 4) Which company has superior qualitative and quantitative accounting metrics? Why? 5) What non-accounting factors influence your prediction and decision? Why? 6) Which company exhibits superior corporate governance metrics and corporate social responsibility and how did this influence your decision? 7) What recent activities did the companies undertake, e.g. M&A activity that influenced your decision? 8) What external factors [regulatory matters, macroeconomic (monetary and fiscal) events, political trends, social factors, and international events] influence and affect your predictions?

SUGGESTED PROCEDURES

STEP ONE (1):

DATA COLLECTION:

All project / case assignments require gathering recent financial statements and current investment research data in which public information is available. Obviously, the fiscal or calendar year-ends may determine the time periods in which certified audited financial statements were publicly filed. It is also recommended that students investigate other financial reports filed with the Securities and Exchange Commission such as 10-Q and 8-K reports, and other filings such as Insider Trading dis- closures, reports and data. The project/ case assignment should incorporate trend analysis employing different financial measures and comparing them against the industry standards and major competitor(s) in addition to the results for the selected companies. Lastly, it is recommended that you look at independent research reports (e.g. Value Line Investment Research) to gather other financial information, qualitative and/or quantitative, including reports that utilize other financial valuation models, such as beta risk measures, smart beta and/or EVA analysis. The project / case Assignment should also incorporate qualitative analysis of the management of these companies. For example, what is the company’s score on business ethics, stakeholder and community issues, environmental protection, and other corporate governance matters?

STEP TWO (2):

INVESTMENT PERSPECTIVE:

The Project Case Assignment requires an analytical decisional perspective of committing independent capital investment resources in the context of lenders/bankers (debt) and shareholders/ common stockholders (equity). The analysis may include risk-reward trade-off analysis based upon the data gathered and analyzed in step 1).

STEP THREE (3):

DATA ANALYSIS AND COMPARISON:

Meaningful presentation of the data in graphs and charts and the interpretation of the data should be carefully explained with commentary and analysis.

STEP FOUR (4)

VALUATION MODEL:

The choice of the valuation model(s) should be explained and supported. Why was the model selected for the particular report or case?

STEP FIVE (5)

FORECASTS:

What are the quantitative results from each forecasted model and what do we learn from the results? What are the conclusions and predictions and how do we accomplish them.

STEP SIX (6)

PERFORMANCE MEASUREMENT:

How do actual results compare with the predictions and can we explain the errors or differences?