Company Analysis

BA 620 Managerial Finance

Group Project Guidelines

Group/Company Project. One of the goals BA 620 Managerial Finance is to introduce you to various concepts, theories, and methods of evaluating the financial strength of a company. This paper is opportunities to put into practice these concepts, theories, etc. that apply to a company. Select a publicly traded company and record your selection with me. During the course, it will be your responsibility to use the class concepts to research the company and apply the class learning to the information obtained about the company.

Important:

The professor will assign you to groups at the beginning of this class. Each group will be assigned one or more companies to analyze. Please note that the professor reserves the right to modify the requirements of the group project.

Guide to Group Company Analysis

Part I (40 points)

A. Research and then describe your company's primary business activities. Include: 1. A brief historical summary, 2. A list of competitors, 3. The company's position within the industry, 4. Recent developments within the company/industry, 5. Future direction, and 6. Other items of significance to your corporation.

B. Include information from a variety of resources. For example: 1. Consult the Form 10-K filed with the SEC. 2. Review the Annual Report and especially the Letter to Shareholders 3. Explore the corporate website. 4. Select at least two significant news items from recent business periodicals

C. Submit a written report that is 5-7 pages long. The report should be well written with cover page, introduction, body of paper (with appropriate subheadings), conclusion, and reference page. References must be appropriately cited. Be sure to address all of the points in Section A above, using all of the resources listed in Section B. Format: Double- spaced, one-inch margins, using a 12-point Times New Roman font.

D. Due Date: Last day of Week/Module 2

Part II (60 points):

The purpose of the second part of the comprehensive project is to compute financial statement ratios. Based on the company you selected in Part I, complete the following:

A. Compute the following ratios for two years. You may use Excel to compute your ratios. 1. Debt ratio 2. Gross profit margin 3. Free cash flow 4. Times interest earned 5. Accounts receivable turnover 6. Inventory turnover

B. Prepare a DuPont Analysis of ROE for two years, including computations of 1. Return on Sales 2. Asset Turnover 3. Return on Assets 4. Financial Leverage 5. Return on Equity

C. Briefly evaluate the ratio trends. Indicate on your worksheet whether each ratio is: 1. stronger / weaker 2. quicker /slower 3. more / less liquid 4. more / less risk

Write a 3-6 page report evaluating trends in all of the above ratios. Discuss whether your company's profitability, efficiency, liquidity, and solvency are improving or deteriorating. Suggest ways the company can improve the ratios that show problems. The report should be well written with cover page, introduction, body of paper (with appropriate subheadings), conclusion, and reference page. References must be appropriately cited. Use APA throughout. Format: Double-spaced, one-inch margins, using a 12-point Times New Roman font.

D. Due: Last day of Module 4

Part III (60 points):

The purpose of the third part of the comprehensive project is to use resources available to obtain industry averages for commonly used ratios. Additionally, you will compare company ratio results to industry averages.

A. Obtain the four-digit primary SIC (Standard Industrial Classification) Code and industry title for your company. Record the primary SIC code and industry title at the top of the Ratio Analysis Worksheet.

B. Obtain industry averages for commonly used ratios in the current period. Industry average information is reported by industry title or SIC code.

C. Look up the following industry-average ratios: 1. Current ratio 2. Debt ratio 3. Gross profit margin 4. Times interest earned 5. Accounts receivable turnover 6. Inventory turnover 7. Return on Sales 8. Asset Turnover 9. Return on Assets 10. Financial Leverage 11. Return on Equity

Note that some industry averages may not apply to your company.

Write a 4-6 page report comparing the above ratios to industry averages. Discuss whether your company's profitability, efficiency, liquidity, and solvency are better than, or worse then, its peers. The report should be well written with cover page, introduction, body of paper (with appropriate subheadings), conclusion, and reference page. References must be appropriately cited. Format: Double-spaced, one-inch margins, using a 12-point Times New Roman font. Use APA throughout.

E. Due: Last day of Module 6

Part IV: Final Written Paper (40 points)

The final written paper requires you to prepare a well-written titled "Would You Advise a Friend to Invest in This Company?" based upon your research and analysis of this company's financial information. You should identify at 5-7 significant points that justify your conclusion. Support your points with a comprehensive explanation incorporating sound reasoning. The significant points you identified should be consistent with what you said in Parts I, II, and III.

A. Your final written paper should be 4-5 pages long. The report should be well written with cover page, introduction, body of paper (with appropriate subheadings), conclusion, and reference page. References must be appropriately cited. Format: Double-spaced, one- inch margins, using a 12-point Times New Roman font. Use APA throughout.

B. Due: Last day of Module 8