The objectives/purpose of the research paper project are to enable you to do a comprehensive financial analysis of a publicly traded corporation; and provide you with substantial information for you to make recommendations regarding investing in this corporation.
Your financial analysis report will be driven by a rigorous ratio analysis, and aggressively supplemented with your written analysis, interpretation, and evaluation of the data.
Your research should 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?
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.) Obtain the firm’s balance sheet, income statement, and statement of cash flows for the past 5 years. Download or read the firm’s annual report.
4.) Go to: http://www.sec.gov/edgar/searchedgar/webusers.htm9
Note: The Master of Business Administration classes (ACCT, BUSN, FINC, HCMG, HRMG, MGMT,
MKTG and MAPH) require a grade of C or better on the final assessment in the class in order to earn a
passing grade in the course. This requirement must be met by all students completing these courses
regardless of degree or program (excluding the Executive MBA students).
Research EDGAR’s database for additional SEC report filings: 8-k, 10-Q.
4.) 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. Note the 5 financial diagnostic categories that should be used in your analysis.
Financial diagnostic categories
Chosencompany 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
-Inventoryturnover measures
-Accounts receivable turnover
-Total asset turnover
-Inventoryturnover 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
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Use 2-3 ratios per diagnostic category. Place your ratio calculations 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.
6.) To validate your research, 5 years of data should be analyzed.
7.) The financial analysis report must be written properly. They must include a title page, a table of contents, and a reference page. For both midterm and final report, information sources from the web, etc. must be cited properly, using APA style.
This means that every table that you cut and pasted or typed from the web must have a source at the bottom of the table AND that citing must also be included in a reference page at the end of the report.
The parts of the research paper are discussed below. The completed report (parts a through h) is due day 7 of week 6. Your project should include:
a. Anoverviewofthecorporation.i. 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.
Thelatestfinancialstatements
Get the income statement, balance sheet, cash flow statement, and thestatement of owners’ equity for the past fiscal year. Create Turnitin-friendly versions of the financial statements; do not just ‘cut and paste’ them in your report. Do not forget to cite the source under each statement.
If you cannot cut and paste them, you may have to type in the information in a table in your report.
A summary of each financial statement
i. Take each statement and state the key parts in words. Tell a story from each
of the financial statements. For example, for the income statement, the story starts like, “Total Revenues in 2010 were $10 billion, while Cost of Goods Sold were $8 billion, leaving a gross profit margin of $2 billion, or 20 percent of total revenues….After taking out interest and taxes from EBIT, the net income was $0.5 billion, or 5 percent of total revenues.”
Ratiocalculation(include5majortypesofratios.Refertochapter3,Analysisof Financial Statements)
Organization of this section is based on the FIVE types of ratios listed in the text book. Calculate the ratios from the financial statements in part c above using Excel or your calculator and present them in a table.
Find industry financial ratios online (ex. Yahoo.com) and compare your corporation’s ratios to these industry ratios.
Present your results following the five types of ratios discussed in part d.
A table with both corporation and industry ratios is required;
v.
DiscussionofkeystatisticsprovidedbysourceslikeYahoofinance.
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i. There are many different other statistics available for your corporation. These include market value, beta, and diluted EPS, etc. Discuss some of the key statistics that you think can assist you to determine if this corporation is a good buy or sell.
For you to decide if a corporation’s stock is a good buy or sell, you must forecast several key variables, including the stock price.
Use historical prices (5 years of monthly data recommended) and forecast the stock price for the next year. Use regression analysis, and/or moving average, etc. to create your forecast.
Create a graph from the historical data and show your forecast on the same graph. You can add a trend line to the graph to help you with a forecast. Include the graph in your report.
You need to say specifically what the forecasted value of the stock price is.
You must address the question, “Is this forecast reasonable?” Must youamend your analysis to get a more reasonable forecast?
Otherinformationpertinenttothecorporationthatcouldaffectitsfutureperformance and stock price.
i. This could include dividend policy, capital structure, bond ratings, expert opinions on TV, new projects, litigation, regulation, etc. Search for information on the web regarding this corporation. Look at company complaint blogs, etc.
h. Recommendationregardingthefutureofthiscorporation.
Is the stock a good buy, average buy, or a poor buy (implying a good sell)?
Include a justification of your recommendation based on your analysis and research.
Finance 620 Research Paper Grading Rubric 2017-2018
FINC 620 RESEARCH PAPER RUBRIC
Objective of Paper: The objectives/purpose of the research paper project are to enable you to do a comprehensive financial analysis of a publicly traded corporation; and provide you with substantial information to make recommendations regarding investing in this corporation. (Total Points = 240):
a. An overview of the corporation YES NO PARTIAL
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. = 15 points
Total Points Awarded ( Possible) = 15 points
15
b. The latest financial statements & Summary of each financial statement. (b and c)
YES NO PARTIAL
Get the income statement, balance sheet, cash flow statement, and the statement of owners’ equity for the past fiscal year. Create SafeAssign- friendly versions of the financial statements; do not just ‘cut and paste’
12
them in your report. Do not forget to cite the source under each statement. If you cannot cut and paste them, you may have to type in the information in a table in your report.
= 15 points
Take each statement and state the key parts in words. Tell a story from each of the financial statements. For example, for the income statement, the story starts like, “Total Revenues in 2010 were $10 billion, while Cost of Goods Sold were $8 billion, leaving a gross profit margin of $2 billion, or 20 percent of total revenues….After taking out interest and taxes from EBIT, the net income was $0.5 billion, or 5 percent of total revenues.”
= 40 points
Total Points Awarded (Possible) = 55 points
55
d. Ratio calculation (include 5 major types of ratios) YES NO PARTIAL
Organization of this section is based on the FIVE types of ratios listed in the text book. Calculate the ratios from the financial statements in part c above using Excel or your calculator and present them in a table.
= 25 points
Find industry financial ratios online (eg. Yahoo.com) and compare your corporation’s ratios to these industry ratios.= 15 points
Present your results for the five types of ratios.A table with both corporation and industry ratios is required; = 40 points
Total Points Awarded ( Possible) = 80 points
80
e. Discussion of key statistics provided by sources like Yahoo finance
YES NO PARTIAL
There are many different other statistics available for your corporation. These include market value, beta, and diluted EPS, etc. Discuss some of the key statistics that you think can assist you to determine if this corporation is a good buy or sell.
=15 points
Total Points Awarded ( Possible) = 15 points
15
f. For you to decide if a corporation’s stock is a good buy or sell, YES NO PARTIAL you must forecast several key variables, including the stock price
Use historical prices (5 years of monthly data recommended) and forecast
13
the stock price for the next year. Use regression analysis, and/or moving average, etc. to create your forecast.
= 10 points
Create a graph from the historical data and show your forecast on the same graph. You can add a trend line to the graph to help you with a forecast. Include the graph in your report.
= 10 points
You need to say specifically what the forecasted value of the stock price is. = 5 points
You must address the question, “Is this forecast reasonable?” Must you amend your analysis to get a more reasonable forecast? =10 points
Total Points Awarded ( Possible) = 35 points
35
g. Other information pertinent to the corporation that could affect its future performance and stock price AND Recommendation regarding the future of the corporation (g and h)
YES
NO
PARTIAL
This could include dividend policy, capital structure, bond ratings, expert opinions on TV, new projects, litigation, regulation, etc. Search for information on the web regarding this corporation. Look at company complaint blogs, etc. = 10 points
Is the stock a good buy, average buy, or a poor buy (implying a good sell)? Include a justification of your recommendation based on your analysis and research. = 30 points
Total Points Awarded ( Possible) = 40 points
40
Grand total points
240
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