The most recent data should be used in your analyses (i.e., data from the most recently filed Form 10-K, proxy statement, etc.). Cite any sources used other than the company’s SEC filings. The following is an outline for the first two sections of your individual project:
I. Governance and Communication Analysis
a. Answer and discuss the importance of the following:
i. Who is the company’s current CEO? Is he or she also the Chair of the Board?
ii. Who serves on the board’s Audit Committee? How many members are Financial Experts? What experience qualifies them for that designation?
iii. What was the CEO paid last year? What portion of his or her total pay was in the form of bonus? In the form of stock-based awards? What performance measures were used to determine the CEO’s pay?
iv. Who or what entity holds the highest percentage of the company’s stock? Are most of the beneficial owners reported individuals or institutions?
v. How many common shares are outstanding? Is there more than one class of common stock outstanding? If so, how many votes do shares of each class get?
b. Analyst Call
i. Listen to a recording of an analyst call (AKA earnings call or quarterly conference call) for your company. Listen to about 15-20 minutes of the call and summarize your observations, including any questions that you might have wanted to ask the CEO/CFO, etc.
II. Industry and Strategy Analysis
a. Industry Analyses
i. Porter’s Five Forces
1. Rivalry among existing firms
2. Threat of new entrants
3. Threat of substitutes
4. Buyer power
5. Supplier power
ii. Value Chain Analysis
1. Industry Value Chain
2. Focus of your company
b. Company Strategy Analysis
i. Is your company following a Low Cost Leader or a Product/Service Differentiation Strategy?
ii. How should this impact their financials?
III. Accounting and Financial Analysis
a. Recasted Income Statement (3 years)
b. Recasted Balance Sheet (3 years)
c. Common Size Income Statement (3 years)
d. DuPont Analysis (1 year)
e. Profitability Analysis Ratios (3 years)
i. SG&A to Sales
ii. Tax Expense to Sales
iii. Accounts Receivable Turnover and Days
iv. Inventory Turnover and Days
v. Accounts Payable Turnover and Days
vi. Profit Margin
vii.Return on Assets (ROA)
viii.Return on Equity (ROE)
ix. Gross profit margin
x. EBIT Margin
f. Risk Analysis
i. Financial Risk Ratios (3 years)
1. Current ratio = Current assets / Current liabilities
2. Quick ratio = (Cash + Short-term investments + Accts. Receivable) / Current liabilities
3. Cash ratio = (Cash + Marketable securities) / Current liabilities
4. Liabilities-to-equity ratio = Total liabilities / Shareholders’ equity
5. Interest coverage ratio = (Net income + Interest expense +Tax expense) / Interest expense
6. Long-Term Asset Turnover = Sales / Long-Term Assets
7. PP&E Turnover = Sales / Property, Plant & Equipment
ii. Non-Financial Risk Analysis
1. Review the Risk Factors section of the company’s most recent 10-K and discuss the three factors mentioned which,in your opinion, may have the most significant impact on the future of the company
2. Find and review your company’s CSR report
a. If they prepare a CSR report, review and comment on its key findings and the risks those may pose for the company’s financial performance
b. If they do not prepare a CSR report, find one of their competitors that does and review their report, and comment on how the key findings for that company do or do not apply to your company