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IndividualfinancialanalysismemoECC201911.docMEMO
TO: BA 452 Students
RE: Directions for Individual Financial Analysis Report
You need to place yourself in the role of a financial analyst who has been hired to help your firm identify its financial weaknesses and strengths. The point of a financial analysis is to discuss the financial health and how the firm using its money. Examine if the firm is operating efficiently in comparison to the industry. Find out if the firm has the flexibility to invest in itself. Note what has been changing for the firm. You need to compare the company to its competitors. Indicate whether the firm has a competitive advantage. Make use your knowledge from your previous accounting and finance courses.
The deliverable is no more than 5 pages of text plus additional pages for bibliography and exhibits. You must utilize and refer to your exhibits in the report. Remember that your audience is the top executives of the company. The data (numbers and charts) go into tables and figures, write your analysis referring to the data. It is the interpretation which matters. You need to cite your sources of financial data. The report is for a business audience and needs to fit a more business style of writing. Use the following web site for help if you are unsure about business writing style. http://owl.english.purdue.edu/owl/resource/590/1/ . (Hint start by looking at the firms’ 10Ks particularly the description and managerial discussion of financials will help you understand how the firm operates. SHARE your financials with your team members to help with comparisons)
The outline of the financial analysis:
1. Title
2. Introduce the company and frame your report (make sure you state the purpose of the report)
3. Discuss the Income statement and balance sheet ( must include 5 years as exhibits)
a. Discuss the trends for the company
b. Do these trends echo the industry? If not discuss reasons why. Do the numbers differ from the competitors and why.
c. Is there anything to be concerned about?
4. Discuss the Common sized income statement (3-5 years must include as an exhibit)
a. Discuss the trends
b. Identify any changes
c. Discuss if their common sized numbers differ from their competitors and why?
d. Is there anything to be concerned about?
5. Do the Ratio Analysis (profitability, liquidity, operating/asset management, debt, industry specific) for the last 3 years. I want numbers.
a. Compare to industry averages for the last 3 years (identify who is in your average and must include ratios as an exhibit).
b. Identify the best and worst performing firm in the industry. Explain why.
6. What has earnings been and how has this effected share price. What do analysts say about the firm meeting its target earnings. What about other firms in the industry?
7. Identify business units and product categories contribution to revenues and growth or decrease of contribution.
8. Has the firm announced any moves which will change their cash/debt position. (e.g. acquisitions, licensing deals, divestitures).
9. Summarize the strengths and weakness based on the analysis.
10. At the end attach Bibliography and Exhibits. Cite the sources for your numbers.
Remember – Headings, summaries, roadmaps, page numbers. Spelling and grammar count!
Financial Analysis Rubric
Name:___________________________________ Company: __________________
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Strategic Analysis (75%) |
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Category (Weight) |
1 |
2 |
3 |
4 |
Score |
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Income Statement Analysis and Quarter Performance (15%) |
Analysis did not identify and evaluate major trends or changes in the income statement or quarters. |
Analysis identified and some of the major trends in the income statement. |
Analysis identified and evaluated most of the major trends in the Income Statement and Quarters. Another Firm was used for comparison. |
Analysis thoroughly identified major trends and evaluated reasons for changes or the lack of changes. Industry was used as a comparison. Demonstrated that they understood why changes occurred.
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Balance Sheet Analysis (15%) |
Analysis did not identify and evaluate major trends or changes in the Balance Sheet. |
Analysis identified and some of the major trends in the Balance Sheet. |
Analysis identified and evaluated most of the major trends in the Balance Sheet. Another Firm was used for comparison. |
Analysis thoroughly identified major trends and evaluated reasons for changes or the lack of changes. Industry was used as a comparison. Demonstrated that they understood why changes occurred.
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Ratio Analysis & Industry Comparison (20%) |
Analysis did not fully identify and evaluate the firm’s ratios. |
Analysis identified and some of the major trends in the Ratios. |
Analysis identified and evaluated most of the major trends in the Ratios. Another Firm was used for comparison. |
Analysis thoroughly identified major trends and evaluated reasons for changes or the lack of changes. Industry was used as a comparison. Demonstrated that they understood why changes occurred and what the numbers meant to the firm.
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Share Price and Business Unit Analysis (10%) |
Analysis identified the share price, but did not account for Business unit analysis. |
Analysis identified trend in share price. |
Analysis considered multiple indicators for share price movement or lack. Discussion of analysts opinion was included. |
Analysis clearly identified what was happening in the share prices and what was happening in the strategic business units. |
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Strategic Discussion of Financial Data (15%) |
The analysis did not provide a strengths and weakness or opinion and/or recommendation. |
The analysis provided a weak discussion of strengths and weakness, opinion and/or recommendation. |
The analysis provided an adequate rationale for the findings from the financial analysis. |
The analysis provided well-reasoned supporting arguments in the discussion of strengths and weakness, opinion, and/or recommendation. |
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Sub-total for Analysis |
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Writing and Logic (25%) |
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Category (Weight) |
1 |
2 |
3 |
4 |
Score |
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Grammar/spel-ling/writing style (5%) |
Many errors that interfered with understanding the write-up. Writing flow was incomprehensible. |
Many errors, but the write-up was generally understandable. Writing flow was difficult. |
Some errors, but the write-up was very understandable. |
Very few errors and very understandable. |
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Logic (10%) |
Many logic errors that made following the logic of the write-up difficult. Poor understanding of the Financial Analysis. |
Many errors, but the general argument and finding were understandable. Students just reported numbers. |
Some logic errors, but there was little difficulty understanding the arguments and findings. Students interpreted numbers. |
Virtually no logic errors and resulting argument and findings were very strong. Students used numbers to make arguments and indicate findings. |
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Use of exhibits (10 %) |
Not all exhibits included. |
Appropriate exhibits included, but only general reference made to the exhibits. |
Appropriate exhibits included each of which was referred at an appropriate point in the write-up. |
Included exhibits that were very well designed and each was skillfully used in reinforcing the arguments in the write-up |
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Sub-total for Writing |
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Total |
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