Project Introduction:
This project signifies a milestone for you in your quest to earn an associate's degree in the Business Accounting Technology program. The focus of a financial analysis is to help management identify potential issues in the organization. A horizontal analysis compares the income statement and balance sheet information of different periods for the same organization. A vertical analysis uses the relationships among financial statement data elements to detect trends. A ratio analysis uses the relationships among various financial elements to measure liquidity, efficiency, and solvency. In this project, you need to carry out a financial analysis and comparisons for three different companies.
Course Objectives Tested:
1. Analyze the logic behind the determination of interest rates and the required rates of return in the capital markets.
2. Compute a firm's debt ratio to ascertain how the firm is financing its assets.
3. Calculate the present and future value of an investment and an annuity.
4. Demonstrate how portfolio diversification can affect the expected return and the riskiness of investments.
5. Compute the present and future value of a bond under conditions of varying market interest rates.
6. Research and use the guidelines for capital budgeting to evaluate investment proposals. Measure a project's free cash flows.
7. Calculate the cost of debt capital, preferred stock, and common stock.
Description/Requirements of Project
Assessment Preparation Checklist:
Perform the following tasks to prepare for this assessment:
• Review the topic "Project Reckoner" in Week 6 online lesson.
• Read Chapters 1-6, pp. 1-187, from your textbook, Foundations of Finance: The Logic and Practice of Financial Management. These chapters will help you while you are completing your research and compiling the ratios. The financial analysis will further enhance your conceptual understanding of the material.
Title: Financial Analysis
1. Identify three companies from the Standard and Poor's 500 Companies found in the ITT Tech Virtual Library. Two of the companies should be in the same industry Global Industry Classification Standards (GICS) while one should be from a different industry segment.
2. Obtain the financial information for the selected companies for the last three years by visiting the individual company website and utilizing the Investor or Investor Report link, which is where the financial statements are located. You can also visit the SEC website (www.sec.gov) to find the reports as well as each company needs to submit the reports on an annual basis. Calculate various financial ratios for each of the three companies and add information to an Excel spreadsheet.
3. Answer the following questions for each company:
a. What is the trend of each ratio during the three year timeframe?
b. Is the trend favorable or unfavorable to the company and give the rationale?
c. How does the company's ratios compare to those of the other same industry company chosen?
d. How does the company's ratios compare to those of the same industry chosen?
e. How does the company's ratios compare to those of the other industry company chosen by you earlier?
f. From an investor's standpoint, which company would you deem most financial viable and the best investment? What is your rationale?
Evaluation Criteria
• Did you analyze the trend for each ratio during the three year timeframe?
• Did you compare the three company's ratios properly?
• Did you provide sufficient rationale to justify your analysis of ratios for each company?
• Did you effectively and completely answer all the questions contained in project detail three?
• Did you use APA formatting for the entire paper?