Financial analysis report will be driven by a rigorous ratio analysis, and supplemented with your written analysis, evaluation of the data and interpretation.
Your research could be strategically driven by two probing questions:
- Could you invest your financial capital in the selected firm as a shareholder?
- Could you invest your human and intellectual capital in the firm as an employee?
Steps in preparation of financial analysis report:
1. Select a publicly held company.
2. Select a benchmark firm to compare your company against. The benchmark firm is typically the largest competitor.
3. Get the firm's balance sheet, income statement, and statement of cash flows for the past 5 years.
http://sec.gov/edgar/searchedgar/webusers.htm
- Research EDGAR's database for additional SEC report filings:
- The following table is the type of Excel or Word table that should be used to gather and report your ratio and financial performance data.
Place your ratio evaluation in the table for your selected companies-primary company and benchmark competitor. Using 5 diagnostic categories, and 3 ratios to assess each category, results in 15 ratio measures per company that will be compared side by side.
- To validate your research, 5 years of data are required.
- Financial analysis report template follows.
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Financial diagnostic categories
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Chosen company vs.
NIKE
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Benchmark competitor
ADIDAS
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1.) Liquidity of short-term assets
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-Current ratio
-Cash ratio
-Quick ratio
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-Current ratio
-Cash ratio
-Quick ratio
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2.) Long-term debt-paying ability
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-Debt ratio
-Debt-equity ratio
-Times interest earned
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-Debt ratio
-Debt-equity ratio
-Times interest earned
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3.) Profitability
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-Net income/sales (profit margin)
-Net income/assets (ROA)
-Net income/shareholder equity (ROE)
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-Net income/sales (profit margin)
-Net income/assets (ROA)
-Net income/shareholder equity (ROE)
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4.) Asset utilization/ management efficiency
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-Total asset turnover
-Inventory turnover measures
-Accounts receivable turnover
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-Total asset turnover
-Inventory turnover measures
-Accounts receivable turnover
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5.) Market measures
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-Price/earnings ratio
-Earnings per common share
-Dividend payout
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-Price/earnings ratio
-Earnings per common share
-Dividend payout
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- Financial Analysis Summary. Based on your research and ratio analyses and calculations, comment on the following questions:
- How well has management added value?
- Is the company's financial performance improving?
- Would you invest your financial capital in the selected firm as a shareholder? Why or why not?
- Would you invest your human and intellectual capital in the firm as an employee? Why or why not?