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Comprehensive Investment Analysis

Project Objective The Comprehensive Investment Analysis consists of three reports as assignments throughout the

course.

The project objective is to provide an investment decision recommendation based on the financial

performance of a listed company. In order to achieve this objective, you will need to work on three

reports that are connected to each other. This project will provide you with an opportunity to utilize

business and accounting knowledge gained in this course in the context of business decision making.

It is important to inform your readers of the project objective and the section objective of each report.

The instruction of each report will help you to frame your report within the context of an investment

decision analysis. So it is important to read through the full project requirements before you start the

project. You will need to use a variety of resources to research your corporation.

Data and Sources

Company Selection First choose a company to research.

• The company must be publicly traded.

• It may be the company you currently work for, a company related to a hobby of yours, a

possible stock investment, or simply sound interesting.

As a starting point, the following link provides information on companies listed on the New York Stock

Exchange. Note that if this link is not working you can always search for “NYSE company listings” in a

search engine such as Google. The advantage of using the link above to search for companies is that it

gives you a filter (on the left side), where you can search for companies by Industry and Market Cap.

There are also other sources of companies provided through the library.

Competitor Information You need to also identify a competitor of the company you research. Companies may be within the

same industry. There are a variety of sources to get information on a competitor for the company you

have selected. An online search on “competitors for <name of your company> is always a good starting

point. Other sources include

• Nasdaq: type the name of your company in the search area and search for competitors using the

tab on the left. For example, the following link provides you with a list of competitors for

PepsiCo.

• Search online for “Yahoo Finance: Industry Brower” and select the industry that your company

belongs to. This will provide you with a list of companies in the industry your company belongs

to.

While the above sources are good starting points, you will need to understand the environment in which

your company operates in order to find a suitable competitor. Reading the Management Discussion and

Analysis including the risk factor statements within the 10-K of your company will provide you with

sufficient context on your company to help you in your choice. It is difficult to find a perfect match for a

competitor and so your objective is to select a company that is similar (rather than the same) as your

company to provide a useful benchmark. It is important that you have provided a reason for your choice

of competitor in your report.

Part 1: Overview of Company (Module 4)

Section Objective You are going to write a report to provide your readers with the most pertinent information that will

enable them to get an overview of your company and its position within the industry, before you

analyze the financial performance of the company in Part 2.

Instructions Research and then describe your company's primary business activities. You need to address all the

following topics:

1. Inform your readers how part 1 aligns with the project objective

2. A brief historical summary

3. A discussion of competitors including the reason for the choice of competitors (rather than just

a list of competitors)

4. The company's position within the industry

5. Recent developments within the company/industry

6. The key risk factors

7. The strategic direction of the company

8. Other items of significance to your corporation

9. Provide a brief summary of your findings in your conclusion and inform your readers of what

your next steps are within the project objective.

In your report, utilize information from a variety of resources and select the most pertinent information.

For example:

• Start your research using the Library’s research guide.

• Consult the Form 10-K filed with the SEC database.

• Review the Annual Report and especially the Letter to Shareholders and the risk factor

statement

• Explore the corporate website including the investor relations website

• Select at least two significant news items from recent business periodicals.

Submit a written report that is 2-4 pages long. The report should be well written with introductory and

concluding paragraphs. Include a complete bibliography.

Part 2: Financial Statement Analysis (Module 5)

Section Objective The objective this report is to analyze the financial performance of your company by computing and

analyzing financial statement ratios.

Instructions You need to address all the following topics:

1. Inform your readers how part 2 objective aligns with the project objective.

2. Select the most pertinent ratios from each category (Liquidity, Solvency and Profitability).

3. Calculate and compare ratios of the competitor. In order to aid your analysis, you should

compare the financial performance of your company with at least one competitor over the past

two years.

4. Discuss trends over time and in relation to at least one competitor. Discuss the reason for the

change by referring to the context of the company and the industry in which the company

operates.

5. Provide a brief summary of your findings in your conclusion and inform your readers of what

your next steps are within the project objective.

6. Include your calculations as an appendix to your report.

Tools and Methods Your analysis should focus on the following financial categories as highlighted in the textbook under the

chapter ‘Financial Statement Analysis’

• Liquidity

• Solvency

• Profitability

The specific ratios and formulas for each of the three categories above are provided in your textbook

reading. You can choose to calculate all the ratios provided in the textbook reading and include your

calculations in your appendix. However, you do not need to discuss all the ratios in your main discussion.

You will have to use your understanding of the company to select the most pertinent ratios. For

example, while the inventory turnover ratio is a very common ratio it may not be applicable to a service

company that does not deal with inventory.

Calculating the Du Pont ratio is an excellent way to analyze the overall performance of your company.

The Du Pont ratio is a way of disaggregating the Return on Equity ratio into the three categories of

liquidity, solvency and profitability. A quick online search on ‘Du Pont Ratio’ will provide you with plenty

of links on the Du Pont ratio. As an example, the Corporate Finance Institute is a useful source of

information.

Use the Library’s research guide.

Submit a report that includes 4-5 pages of main discussion besides the appendix.

Part 3: Investment Recommendation (Module 6)

Section Objective The objective of the final part is to provide an overall investment recommendation based on the analysis

conducted in parts 1 & 2. You will need to prepare a well-written report titled “<Name of company>,

Investment Recommendation”.

Unlike Parts 1 and 2, you are not gathering data in this section of the report. Instead, you need to

support your points with a comprehensive explanation incorporating sound reasoning. While the main

focus of your investment recommendation should be on the financial indicators, you should also

consider other non-financial factors in your overall analysis, including the overall strategic direction of

the company and industry trends that was examined in part 1 of your project.

Instructions You need to address all the following topics:

1. Inform your readers how part 3 objective aligns with the project objective.

2. Identify 3-5 significant points that justify your recommendations.

3. You should not repeat the history of the company covered in part 1 (unless the history is going

to play a major role in your final recommendation).

4. You should not include all the calculations covered in part 2, rather focus on the most important

for your investment case.

5. You should amalgamate the most important information from parts 1 and 2 to provide the basis

for your conclusion. You should focus on both the strengths and weaknesses of the company

and then provide a final justification for deciding to invest (or not to invest) in the company you

have selected.

6. You should also discuss the limitations of your analysis. The ‘Financial Statement Analysis’

chapter in your textbook provides examples of limitations of financial statement analysis

(towards the end of the chapter).

Submit a report that is 2-3 pages long. References must be appropriately cited.