Comparative Company Financial Analysis – Final Report Purpose The goal of the Comparative Company Financial Analysis is to enable students to perform a financial analysis of a publicly traded company, draw conclusions regarding the financial health of the company, and make an informed investment recommendation. Instructions Each student’s financial analysis report will be driven by a rigorous ratio analysis and aggressively supplemented with a written analysis, interpretation, and evaluation of the data. Student’s research must be strategically driven by two probing questions: Would you invest your financial capital in the selected firm as a shareholder? Would you invest your human and intellectual capital in the firm as an employee? This week, submit your final report. Obtain the following information for both the selected company and the benchmark company: Balance sheets Income statements Statements of cash flows Annual Reports for the past 3 years These reports may be obtained from the Security and Exchange Commission’s (SEC) website at: http://www.sec.gov/edgar/searchedgar/webusers.htm or from each company’s website. These reports are typically listed under the title “Form 10K” and include a company’s annual financial information and report to shareholders. Be sure to also research the SEC and company websites for additional SEC report filings: Form 8K (Interim material events) and Form 10-Q (Quarterly financial report). Utilizing the information from the reports obtained in step #4 above: Calculate 2-3 ratios per “financial diagnostic category” given in the table below. Place your ratio calculations in the table for your selected companies—primary company and benchmark competitor. Refer back to Chapter 3 of the text for an explanation and discussion of financial ratios. Financial Diagnostic Categories Chosen Company vs. Benchmark Competitor 1. Liquidity of Short-Term Assets Current Ratio Cash Ratio Quick Ratio Current Ratio Cash Ratio Quick Ratio 2. Long-Term Debt-paying Ability Debt Ratio Debt-equity Ratio Times Interest Earned Debt Ratio Debt-equity Ratio Times Interest Earned 3. Profitability Net Income / Sales (Profit Margin) Net Income / Assets (ROA) Net Income / Shareholder Equity (ROE) Net Income / Sales (Profit Margin) Net Income / Assets (ROA) Net Income / Shareholder Equity (ROE) 4. Asset Utilization / Management Efficiency Total Asset Turnover Inventory Turnover Measures Accounts Receivable Turnover Total Asset Turnover Inventory Turnover Measures Accounts Receivable Turnover 5. Market Measures Price / Earnings Ratio Earnings per Common Share Dividend Payout Price / Earnings Ratio Earnings per Common Share Dividend Payout Review the 3 years of ratios for the selected company, compared to the benchmark company’s ratios, and determine what the ratios reveal about the financial health of the selected company. In addition, be sure to analyze the Annual Reports, Form 8K’s, and Form 10Q’s for the selected and benchmark companies. These reports provide additional detailed financial and related information that can be useful in understanding the financial operation and condition of a company. Utilizing the findings from step #5 above, prepare a financial analysis report in accordance with APA guidelines. A title page, table of contents (as submitted in week 3 and updated as necessary), and references must be included. An abstract is not required. Direct quotations and paraphrased information must be properly cited in the body of the report and included in the list of references at the end of the report. There is no minimum or maximum length requirements. Make sure you fully, but succinctly, address each component of the assignment. Following is the expected minimum content of the financial analysis report. An overview of the corporation. Provide general information regarding the type of business, products and/or services, location of headquarters, name of CEO, number of employees, and countries of operation, etc. The latest fiscal year financial statements for both the chosen company and the benchmark company. Insert the income statement, balance sheet, and statement of cash flows (as retrieved above from the SEC or company’s website) into the report. Discussion/Overview of each of the latest fiscal year financial statements. Discuss the overall financial results of the company as the financial statements indicate for the selected company. Analysis of the company’s financial operations and status. Utilize the ratios calculated and information gathered above to analyze and discuss the financial operations and status of the company as revealed by, or inferred from, the ratios. Compare and discuss the selected company’s ratios to the benchmark company’s ratios. Provide/compare “Industry Averages” for each ratio calculated for the selected and benchmark company. Conclusions/Recommendations regarding the current and future operations of the company. Summarize the key and specific financial conclusions for the selected company, utilizing the findings from the analysis above. Provide any recommendations for the future that might be offered the company, based on the ratio analysis and conclusions. Indicate if you would, or would not, invest your financial capital in the selected firm as a shareholder. You must provide support for your decision by using the numerical data and conclusions from your analysis. Indicate if you would, or would not, invest your human and intellectual capital in the firm as an employee. You must provide support for your decision by using the numerical data and conclusions from your analysis.