GENERAL MOTORS FINANCIAL ANALYSIS CASE
h6000
updated_outline.docxFINA 408 Individual Final Company Analysis Project
Spring 2014
Grading Guidelines
Company: General Motors
The Final Company Analysis Project is worth 30% of your final grade in the course. The paper is graded on a 100-point scale. The following describes the breakdown of points available:
25 points for ORGANIZATION
This is a long and complicated paper, so it is essential that you are organized in your presentation of the information. Please be sure to present each item in the order suggested by the outline and have clear headings and sub-headings to make it easy to follow. Also, it is important to organize the paper in a way that prevents the reader from having to flip back and forth from one section to another to follow the discussion (e.g., ensure that each ratio/calculation is discussed immediately after it is presented, rather than having a separate table elsewhere in the report.
25 points for ANALYSIS
To receive the full amount of points for this category, be sure to provide thorough discussion of your analysis process and an explanation of what the ration/calculation means. It is important to demonstrate that you have a good understanding of why each calculation was done, and what information can be learned from it. Also, in this section I remove points for any situation where I feel that the analysis presented is not the students’ original work (i.e., taken from another source without attribution.) While you can certainly refer to other analysts’ work regarding your company, please be sure to conduct your own analyses and draw your own conclusions throughout the paper.
25 points for THOROUGHNESS
In order to receive the full amount of points available for this portion of the paper, you must include every item listed on the general outline provided at the beginning of the course. Points will be removed if any item is missing from the analysis.
25 points for CONTENT
In this category, I am assessing the extent to which the entire report provides a complete analysis of the company, utilizing the steps we practiced throughout the course. Do you tie it all together with connecting themes and findings? Or, is it just a list of the various calculations with a sentence or two in between explaining each. A successful paper will present a congruous and thorough analysis of the company with insightful and thoughtful commentary throughout.
Spring 2014 Project Outline
The most recent data should be used in your analyses (i.e., data from the most recently-filed Form 10-K). For all calculations, show each formula used as well as the numbers used in the formula. Explain any assumptions made and provide justifications for your assumptions. Cite any sources used other than the company’s SEC filings. The following is an outline for your individual project:
I. Governance and Communication Analysis
a. Answer and discuss the importance of the following:
i. Who is the company’s current CEO? Is he or she also the Chair of the Board?
ii. Who serves on the board’s Audit Committee? How many members are Financial Experts? What experience qualifies them for that designation?
iii. What was the CEO paid last year? What portion of his or her total pay was in the form of bonus? In the form of stock-based awards? What performance measures were used to determine the CEO’s pay?
iv. Who or what entity holds the highest percentage of the company's stock? Are most of the beneficial owners reported individuals or institutions?
v. How many common shares are outstanding? Is there more than one class of common stock outstanding? If so, how many votes do shares of each class get?
b. Analyst Call
i. Listen to a recording of an analyst call (AKA earnings call or quarterly conference call) for your company. Listen to about 15-20 minutes of the call and summarize your observations, including any questions that you might have wanted to ask the CEO/CFO, etc.
II. Industry and Strategy Analysis
a. Industry Analyses
i. Porter’s Five Forces
1. Rivalry among existing firms
2. Threat of new entrants
3. Threat of substitutes
4. Buyer power
5. Supplier power
ii. Value Chain Analysis
1. Industry Value Chain
2. Focus of your company
b. Company Strategy Analysis
i. Is your company following a Low Cost Leader or a Product/Service Differentiation Strategy?
ii. How should this impact their financials?
III. Accounting and Financial Analysis
a. Recasted Income Statement (3 years)
b. Recasted Balance Sheet (3 years)
c. Common Size Income Statement (3 years)
d. DuPont Analysis (1 year)
e. Profitability Analysis Ratios (3 years)
i. SG&A to Sales
ii. Tax Expense to Sales
iii. Accounts Receivable Turnover and Days
iv. Inventory Turnover and Days
v. Accounts Payable Turnover and Days
vi. Profit Margin
vii. Return on Assets (ROA)
viii. Return on Equity (ROE)
ix. Gross profit margin
x. EBIT Margin
xi. Dividend Payout Ratio
xii. Sustainable Growth Rate
f. Risk Analysis
i. Financial Risk Ratios (3 years)
1. Current ratio
2. Quick ratio
3. Cash ratio
4. Liabilities-to-equity ratio
5. Interest coverage ratio
6. Long-Term Asset Turnover
7. PP&E Turnover
ii. Non-Financial Risk Analysis
1. Review the Risk Factors section of the company’s most recent 10-K and discuss the three factors mentioned which, in your opinion, may have the most significant impact on the future of the company
2. Find and review your company’s CSR report
a. If they prepare a CSR report, review and comment on its key findings and the risks those may pose for the company’s financial performance
b. If they do not prepare a CSR report, find one of their competitors that does and review their report, and comment on how the key findings for that company do or do not apply to your company
IV. Weighted Average Cost of Capital
a. Use the CAPM to compute the required rate of return on equity capital for the company.
b. Determine the cost of debt (if any) and the cost of preferred stock (if any)
c. Compute the weighted average cost of capital for the company as of the start of the next fiscal year.
d. Discuss how this would be used to estimate the value of the company
V. Forecasting
a. Calculate projected net income for the company for the next five years based on forecasted income statements.
