FINANCIAL ANALYSIS PROJECT GUIDELINES
1.The Task:You are to play the role of a financial analyst working for a leading investment management company.Your boss, who also happens to be your instructor, has asked you to evaluate a company for possible inclusion in your firm’s portfolio.Specifically, your boss wants you to choose a company and describe its current financial status.You are to prepare a formal report of your efforts for your boss.
2. Information sources:Use this handout, the company’s latest annual and quarterly reports, and business publications on the Internet and at the library as the basis for your analysis.
Good information sources on the Internet include:
‑ The company’s own website (good for overview information, annual and quarterly reports).
‑ www.sec.gov(search EDGAR for 10K and 10Q reports)
(see separate handout for specific instructions on using the SEC website)
‑ http://finance.yahoo.com/(Yahoo Financial Research)
‑ http://www.annualreports.com/ (annual reports here)
‑ Hoovers online (http://www.hoovers.com/free/) (company data, stats)
‑ Reuters (http://www.investor.reuters.com/StockEntry.aspx?target=/stocks)
‑ Many others (“Google” search for your company’s name, for example)
Note: Wikipedia.com is NOT an acceptable information source for your report.Since anybody can edit its information and the owners of the site do not attempt to verify the accuracy of what is posted, it does not meet minimum academic standards.
3.Format:The paper must be prepared in Microsoft Word and using APA style formatting.Use the outline that begins on the next page (recommend you copy and paste the outline into a new Word document and use it as the basis for your report).
4.Schedule:The final paper is due at the beginning of class on the LAST class meeting. (Monday class).Do not be late!LATE DOCUMENTS WILL NOT BE ACCEPTED.The course ends at 11:55 pm that night and I must submit grades within a few days.You must submit your entire project in TWO locations.The first is within the assignment module on the class website.The second is at turnitin.com.I’ll discuss more about this site as the semester progresses.Your paper will not be scored and you will receive a zero if your paper is not submitted to turnitin.com.
You will have a schedule for turning in portions of your project for review.You MUST submit these portions within the assignment module and also within turnitin.com by the stated deadlines.These staggered deadlines are to prevent students from waiting until the last moment to complete their work and to give the instructor an opportunity to review progress.Your instructor will do this review only once for each section requested.
Important Note on Using Information Obtained from the Internet
Caution:Most of the words in your report should be your own.Remember that the rule is that you should only quote when what has been stated is so unique that it would lose its impact or value if it were not kept together as a quote.(THIS IS RARELY THE CASE.)You may paraphrase and use quotes for emphasis when you need to, but when you do you must use quotes and identify the source of the information.
So to summarize, when you extract information from sources on the Internet for use in reports, there will be a strong temptation to copy and paste the information into your financial statement analysis.You should not do this.
Citing sources on a reference page is not enough. Remember that words shown in your paper are presented as if they are your own unless you provide a citation so your readers know where the information came from.The identification of a source must be sufficient to allow the reader to go DIRECTLY to the source…including the page!
There are multiple style sheets available to show you how to cite outside work in your document.
Be sure to ask me if you have any questions about the report in general or using quoted information in particular.
Graded Project Report Outline
(Your report MUST follow this outline)
APA Style is required!
Your cover sheet should have the following:
- Title: “Financial Analysis of the _______________ Company”
- Stock ticker symbol
- Exchange where traded
- Address of company headquarters
- Company phone number
- Your name, etc.
- Date of your analysis
Remember that APA format requires a running header and page number.It also requires double spacing.
PART I, COMPANY OVERVIEW:(be sure to include the headings below in your report!)
a.Brief description of the company (one paragraph, briefly summarizing the company’s business)
b.Company history (origin, major developments, etc.)
c.Organization (describe how the company is structured)
Note – Do NOT include a description or a lengthy list of the company’s board of directors.Your readers do not care how the board is organized or who the board members are.They want to know how the whole company is structured.
d.Main products and services (describe what the company sells; how it makes money)
e.Geographic area of operations (describe where the company sells its products)
f.Recent developments (list recent major news stories, if any)
– and so on (you may modify or add to this list depending on the nature of your company)
PART II, FINANCIAL OVERVIEW:
a. Sales and Income Record:Note that six years are required here.
—————– Fiscal Years ——————
‑‑ Percent change in
sales each year____________________
‑‑ Net Income________________________
‑‑ Percent change in
net income each year____________________
GRAPH OF SALES & NET INCOME, FY 2013 ‑ 2018
‑|(Plot Sales and Net Income for the
‑| last six fiscal years on the graph.)
‑|(Recommend preparing the graph in Excel,
‑|then copying and pasting into the report)
2013 2014 2015 2016 20172018
This should be a two-line, trend-line graph, NOT a bar chart.
COMMENTS: Comment on the trends you see in your numbers and on the graph.
Be sure to include comments!The numbers and the chart are meaningless by themselves. Comment on what you see.
Major Expenses Example:
(list the major expense categories ________
from the latest income statement. ________
Be sure to include COGS!)________
CHART OF EXPENSES, FY 2018
Note – Do not “explode”
the pie slices
(insert a pie chart of major expenses here)
COMMENTS: Comment on the company’s expense distribution.
c.Assets and Capital Structure:
Year-end FY 2018
Accounts receivable ________
CHART OF ASSETS, Year-end FY 2018
(insert a pie chart of major assets here)
COMMENTS: Comment on the company’s asset distribution.
Year-end FY 2018
Long-term & Other Liabilities________
Preferred Stock (if any) ________Note – Call your instructor
Common Equity________for instructions if common
equity is negative
CAPITAL STRUCTURE, Year-end FY 2018
(insert a pie chart showing capital structure here)
COMMENTS: Comment on the company’s capital structure.
PART III, RATIO ANALYSIS:
Include the following ratios in the following format:
Note:It is extremely difficult to obtain industry averages.Such information is available, but, with rare exceptions, you have to pay for it (which you are not required to do for this report).Sometimes you can find some industry average ratios at various websites (example:You can get some industry profitability ratios from Yahoo.com).Sometimes you can calculate the ratios yourself by averaging the ratios of several different competitor companies.An alternative is to just compare the company to its most significant competitor.Be certain to confirm with me that you are going to do this.Only as a LAST resort, when you can’t find any of the information or do the calculations, insert “not available.”It is highly unlikely that you will use this LAST option.Do everything that you can to avoid taking this final option.
THE SECONDARY COMPANY CAN BE USED IN LIEU OF THE INDUSTRY AVERAGE.
FY 2018FY 2017
COMMENTS ON THE COMPANY’S LIQUIDITY:
Be sure to include comments!The numbers are meaningless by themselves.Comment
on what you see.What story do the numbers tell?
(2) ASSET MANAGEMENT
FY 2018FY 2017
Total Asset Turnover:
Industry Avg ________
Average Collection Period:
Industry Avg ________
COMMENTS ON THE COMPANY’S ASSET MANAGEMENT:
(3) DEBT MANAGEMENT:
FY 2018FY 2017
Total Debt to Total Assets:
Times Interest Earned:
COMMENTS ON THE COMPANY’S DEBT MANAGEMENT:
FY 2018FY 2017
Net profit Margin:
Return on Assets:
Return on Equity:
COMMENTS ON THE COMPANY’S PROFITABILITY:
(5) MARKET VALUE RATIOS:
FY 2018FY 2017
Market to Book Ratio:
COMMENTS ON THE COMPANY’S MARKET VALUE RATIOS:
You must begin this comment section by stating the prices used in your calculations and how you arrived at these.
PART IV, CONCLUSIONS AND RECOMMENDATIONS
‑ Summarize your analysis.Review your comments in the financial analysis section and provide your assessment of the overall status of the firm.Include any recommendations you think are appropriate.
‑ List any other recommendations you have for the firm in view of your analysis.Remember to finish with a recommendation on whether we should or should not include your primary company in our corporate portfolio.
* End of report Outline *
See additional instructions on the following pages!
Obtaining Company Information
from the Securities and Exchange Commission’s Website
1.With your computer online, go to www.sec.gov.This is the U.S. Securities and Exchange Commission’s website.
2.At the website, click on Search for Company Filings (its in the Filings and Forms section).That will take you to the “Search the Next-Generation EDGAR System” page.
4.At the Search the EDGAR System page, click on Company or fund name, ticker symbol, CIK (Central Index Key), file number, state, country, or SIC (Standard Industrial Classification).This will take you to the “Company Search” page.
5.At the Company Search page, enter the name of your company in the box.Select “Starts with” or “Contains” as needed.Leave the other boxes blank.When you are done, click the Find Companies button at the bottom.
6.A list of companies matching the name you typed in will appear.The list may be short or long, depending on how many companies share the same words in their company names.Scroll down the list and locate the specific company you are interested in (you may have to go through several pages if the list is really long.)When you find your company, click the long red number in the left hand column next to the company name.This will bring up a “Search Results” page with a list of forms on it.Note – if there is only one company matching the name you typed in, the system will take you directly to the forms page.See the next paragraph.
7.On the forms page, scroll down the left hand column until you find an entry marked 10-K.These forms are the company’s annual report.
Note – you will normally find more than one 10-K Form listed, because the companies file one for each year.The one you want is the one with the latest date.Check the date of the form in the Filing Date column on the right.
Note – you can shorten the forms search process by entering 10-K in the Filing Type: window.Then scroll over to the right and click the Search button.The list of forms at the bottom of the page will then adjust to contain only 10-K forms.
8.When you have located the 10-K form that you want, click the Documents button for that form.This will take you to a Filing Detail page that contains a list of things that are in the 10-K report.You will normally want the first entry, which, in the Document column, will be identified with something like form10k.htm.Click the red entry in the Document column to take you to the form.
9.At this point you can print the entire report (100+ pages!) or you can scroll down through the document to locate the part you are interested in.When you find it, simply highlight it with your mouse, and copy and paste it into a Word document for your review later on.Be careful here!Do not just paste information from the form into your report unless you enclose the text in quotes and insert a footnote saying where you obtained it.