See attached file.
FINC 322 FINANCIAL MANAGEMENT 1 Spring 2020 Financial Analysis Project (FAP) Plagiarism will result in an automatic course grade of F ● Goal To apply the concepts (financial ratios) learned in class by evaluating the financial performance of a company of your choice using publicly available financial information. ● Procedure First, choose any firm of your interest but make sure they have all financial and stock prices information for the last 4 years. Second, save on Excel the annual income statement, balance sheet, cash flow for the most recent 3 or 4 years available for your firm. See page 3-7 how to get the information. Finally, based on the information, you calculate financial ratios (just for 2 MOST RECENT years available for your firm) and write up your evaluation based on these 2 years only. ● What to do: 1. Calculation of Ratios (30 points) on MS Excel · Use the Financial statements of your chosen firm to calculate the financial ratios. Save your company’s financial data (Most recent 3 or 4 years of i) Income Statement, ii) Balance sheet, and iii) daily stock prices of 4 years) on Excel. Name and Save the completed file. · Name it as ”your last name_”+”your first name_”+”Ticker Symbol_”+”Ratios” For example, my Excel file for Apple, Inc. will be named as “Lee_Cheolwoo_AAPL_Ratios.xls” or “Lee_Cheolwoo_AAPL_Ratios. xlsx” · It should contain: · Most recent 3 or 4 years’ Income Statement and Balance Sheet · Daily Stock Prices for 4 years (Last day of those 4 years will be the day you get the prices data) · Ratio Table (Use most recent 2 years only). Please show the ticker symbol (Ticker symbol is explained in footnote 2 on page 3) for your firm somewhere in this table so I can check your ratios with your firm’s numbers. Although you provide 4 years of data, you will use just two years in order to construct your ratios. If you use other 2 years, you’ll be severely penalized. · For each ratio, type in the ratio formula into the cell. 2. Performance Evaluation (70 points) on MS Word (usually between 8 to 10 pages when double spaced) · Performance evaluation should be typed on MS Word and must be named as ”your last name_”+”your first name_”+”Ticker Symbol_”+”Evaluation.” For example, my word file will be name as “Lee_Cheolwoo_AAPL_Evaluation.doc” or “Lee_Cheolwoo_AAPL_Evaluation.docx” · Part 1 [20 pts]: Write a short company analysis of the firm IN YOUR OWN WORDS such as: · brief business history, what business the firm is in, the industry the firm is in, · information on the firm and its industry such as the size of the firm in terms of revenues, assets and market value, and how the industry as a whole is performing. · Part 2 [50 pts]: Write an evaluation of the firm by evaluating each ratio: · what each ratio measures · and whether the firm is doing better or worse compared i) to the previous year (Time-trend analysis) and also ii) to the industry average (Peer group analysis) [See Appendix A on page 8 for industry average]. Your ratio discussion should be interpretive and analytical instead of just describing relative magnitudes. Make sure your discussion is informative to the reader. · How would you explain your ROE performance over two years based on Du Pont Identity analysis? What drove the increase or decrease in your ROE over the 2-year period? · Would you invest or buy the stock of the firm based on your analysis? Why or why not? Explain in detail. · Where and when to submit: ► Email your two files as attachments to
[email protected] before or on 2/27/2019 by 11:59 pm. # Read Carefully: · Any failure to follow the instructions described here will cause severe deductions. · Make sure your Excel file and write-up include everything described in section ‘what to do’ on page 1. · Writing with spelling errors and with low level of elaboration will be penalized. · I won’t accept late project. Remember that you can turn in your project early, but I will not accept late project particularly for the following reasons: computer not working, disk lost, computer crashed, file not compatible, a university excused activity. For a university excused activity, you should arrange your project submission earlier than the submission deadline. · If you have any further question on the project, ask me after class or email me. · You are responsible for any consequence because you fail to read this information carefully. Calculate the following 17 ratios Column 1 Name of Ratio Column 2 Write the Formula Column 3 (C3) Calculate Ratio for Year 20xx Column 4 (C4) Calculate Ratio for Year 20xx 1 Current Ratio e.g., CA/CL 2 Quick Ratio (CA-Inv)/CL 3 Total Debt Ratio 4 Debt/Equity Ratio *Total Debt is shown as “Total Liabilities” *Total Equity can be calculated as TA-TD 5 Inventory Turnover *Cost of goods sold is shown as “Cost of Revenue, Total”; some services firms do not have inv. 6 Receivables Turnover *Sales is shown as “Total Revenue” | *AR are shown as “Net Receivables” 7 Capital Intensity Ratio 1/TAT 8 Profit Margin 9 ROA 10 ROE 11 Market Price *Find the price in http://finance.yahoo.com. Use the last trading day’s stock price for each year (year-closing price). Use “adj close” for this project. See pages 5-6 for instructions 12 Number of Shares Outstanding *On the first page (Summary) on Finance Yahoo, divide Market cap by current share price to get the number of shares. You may use a number after rounding up to nearest 1000. * Divide the calculated number by 1000 again to be consistent because most items in the balance sheet and income statement are expressed in thousands, except per share items. 13 Book value per Share =(Total Equity /number of shares outstanding) *Total Equity can be calculated as TA-TD 14 Market to Book (M/B) Ratio (Year-closing stock price/Book value per share) * year–closing stock price is the last trading day’s stock price for that year. 15 EPS =NI/# of shares outstanding (EPS=earnings per share) 16 P/E Ratio Price to Earnings Ratio=Market Price/EPS 17 Enterprise Value to EBITDA Ratio * =Enterprise Value/EBITDA * Enterprise Value = Total market value of the stock + The book value of all liabilities - Cash * Total market value of the stock = year-closing price (item 11)* number of shares outstanding (item 12) * Use ‘Total Liabilities’ for the book value of all liabilities * EBITDA= ‘Earnings Before Interest and Taxes’ from Income Statement + ‘Depreciation’ from Cash Flow Statement. Instructions: How to find the financial statements information in the internet. Attach the web page by copying the page and pasting it to your project. How to get the financial statements: 1. Go to https://finance.yahoo.com/ 2. Type in your ticker symbol[footnoteRef:1] (if you don’t know what the ticker symbol is, please refer to the original project packet) [1: Ticker Symbol: An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors use to place trade orders. Every listed security has a unique ticker symbol, facilitating the vast array of trade orders that flow through the financial markets every day. Stock symbols are the most recognized type of ticker symbol. Stocks listed and traded on U.S. exchanges such as the NYSE have symbols with up to three letters. Nasdaq-listed stocks have four-letter symbols. Ticker symbols for options are structured to represent the underlying stock ticker they are based on and also their expiration date and contract type (either a put or a call option). Mutual fund ticker symbols are usually alphanumeric and end with the letter X to differentiate them from stock symbols. e.g.) General Electric (GE), Goldman Sachs (GS), Starbucks Corps (SBUX), Progressive (PGR)] 3. Click on “Financial” 4. Choose “Annual Data.” Make sure you click on “Annual,” not “Quarterly,” in order to use annual financial statements information. 5. You will see I/S, B/S, Cash Flow under “Financials.” Clicking on “Income Statement” “Balance Sheet” “Cash Flow” will get you what you need. 6. Simply highlight 4 years of data and paste into your Excel spreadsheet. When you paste, use “paste special” and select “text” if copy and paste is not working as you intended. Instructions: In order to find Historical Stock Prices Source: http://finance.yahoo.com 1. Type in your ticker again on https://finance.yahoo.com/ 2. Then, click on “Historical Data” 3. Enter the information being asked such as a start date, and end date, daily. And click “Apply” button. 4. Right below ‘Apply’ button, you will find “Download Data.” Click and save it. Below is how your excel file saved looks. † FYI, csv files can’t have more than one worksheet. If you have multiple worksheets in a single file, save your file as an xlsx file. Appendix A. Industry Averages of Financial Ratios Assume that ratios in this table are the industry averages for the firm you choose for two years you consider. Use information in this table when you write up “Part 2 of the Performance Evaluation” Name of Ratio Industry Average 1 Current Ratio 1.5 2 Quick Ratio 1.3 3 Total Debt Ratio 0.5 4 Debt/Equity Ratio 1 5 Inventory Turnover 7x 6 Receivable Turnover 8X 7 Capital Intensity Ratio 0.5 8 Profit Margin 10% 9 ROA 15% 10 ROE 20% 11 Market Price 12 Number of Shares Outstanding 13 Book value per Share 14 Market to Book Value 5x 15 EPS $2 16 P/E Ratio 3x 17 Enterprise Value/EBITDA Ratio 5x †For items from 11 to 13, you don’t have to discuss in comparison to industry average. ††x means times Ethical Integrity: Plagiarism · Plagiarism or cheating of any kind will result in an automatic F. No tolerance and no second chance on this issue. · For more information, http://www.ferris.edu/htmls/colleges/artsands/languages-and-literature/writing-center/Other-Writing-References.htm · Alternatively, refer to http://www.suite101.com/content/a-definition-for-plagiarism-a10232 · It is your responsibility to know what defines plagiarism and how to avoid it; there is a huge amount of sources on the internet. 2