FINANCIAL ANALYSIS PROJECT
Scenario: The Company that you work for has excess capital that needs to be invested. Because you have knowledge of managerial finance, the top management team of the organization has given you the assignment to conduct a thorough financial analysis on a publicly traded company and recommend if this company would be a good place to invest the excess capital. Your results are to be provided in a formal report and include several deliverables.
You will pick the company. See instructions in syllabus under Project.
Your report should start with background information on the company. How many years has the company been in operation? What are the products or services that the company provides? Are there any ethical issues the company is dealing with? As part of your analysis, I would like for you to find any information recently in the news regarding your company. Be sure to cite your sources using APA format. I would expect this section of the report to be around two pages and include at least three cited articles.
Next you will want to conduct an industry analysis. What industry is your company part of? Who are some of the company’s primary competitors? What doe the future look like for this industry? I am looking for a one page industry analysis. Again, you may want to research recent news for the industry and cite your sources.
The next several pages will be a ratio analysis. I would like for you to go through Chapter Four of your text book and provide as many ratios as possible for your company. To do this you will need to analyze the most recent Balance Sheet and Income Statement for your company. This information can be readily attained by using Yahoo Finance. When you are selecting your companies for consideration make sure that you can easily find this information for all the companies you are submitting.
Calculate your own ratios. I will expect the name of the ratio, what the ratio is used for, how the ratio is calculated, and interpret the ratio. You may also want to find another company in the same industry and calculate the ratio for comparison, or you might want to find the industry average. This will be the bulk of your project. For example, suppose you are analyzing the department store Target:
Current Ratio: The current ratio indicates the extent to which current liabilities are covered by those assets that are expected to be converted to cash in the near future.
The current ratio is calculated as current assets divided by current liabilities.
Target
$16,388 million/$14,031 million 1.17 current ratio
Kohl’s (industry competitor)
$4,719 million/$2,535 million 1.86 current ratio
Target’s current ratio is 1.17 which mean it has slightly more in current assets than in current liabilities. Kohl’s on the other hand has almost twice the amount in current assets that it has in current liabilities. Therefore, Kohl’s liquidity position is nearly twice that of Target’s – could be a “red flag” for Target.
After you have completed the ratios for your project, you may want to create a table that will show the ratios you have calculated for your company, your comparable company (or the industry standard) and a brief comment (see page 118 in text).
The final page(s) should provide your recommendation on whether your organization should or should not invest in the company you have analyzed. Remember . . . investment decisions are based on more than just financial information. In this section I will expect you to pull together what you have learned when researching your company’s background, current activity that has your company in the news, and the state of the industry, as well as your financial analysis.
Your final report should be in the form of a Word document, 1.5 spacing, using a 12 pt. Font and will be submitted in the Final Project drop box.
The document should have the following format:
Title Page
Company Background
Industry Analysis
Ratio Analysis
Recommendation
References