FINA 408 Individual Project Spring 2016

FINA 408 Individual Project Spring 2016

 Introduction

  1. Governance and Communication Analysis
    1. Analyst Call
      1. 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 write a summary of your observations, including any questions that you might have wanted to ask the CEO/CFO, etc.
    2. Answer and discuss the importance of the following:
      1. Who is the company’s current CEO? Is he or she also the Chair of the Board?  Discuss the company’s considerations in making this decision.
      2. Who serves on the board’s Audit Committee? How many members are Financial Experts?  What experience qualifies them for that designation?  Do you agree with this designation? Why or why not?
  • What was the CEO paid last year? What portion of his or her total pay was in the form of bonus? What performance measures were used to determine the CEO’s bonus?
  1. Who or what entity holds the highest percentage of the company’s stock? Are most of the beneficial owners reported individuals or institutions?
  2. Is there more than one class of common stock outstanding? How many votes does each share of each class of stock get?  Does any one person or entity control the voting rights at the company? If so, who?

 

  • Strategy Analysis
    1. Industry Analysis: Porter’s Five Forces
      1. Rivalry among existing firms
      2. Threat of new entrants
  • Threat of substitutes
  1. Buyer power
  2. Supplier power
  1. Company Strategy Analysis
    1. Is your company following a Low Cost Leader or a Product/Service Differentiation Strategy?
    2. Where would evidence of this strategy show up in their financials?

 

  1. Financial Analysis
    1. Recasted Income Statement (3 years)
    2. Recasted Balance Sheet (3 years)
    3. Common Size Income Statement (3 years)
    4. DuPont Analysis (1 year)

Final Outline:  FINA 408 Individual Project Spring 2016

  1. Introduction

2. Governance and Communication Analysis

    1. Analyst Call
      1. 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 write a summary of your observations, including any questions that you might have wanted to ask the CEO/CFO, etc.
    2. Answer and discuss the importance of the following:
      1. Who is the company’s current CEO? Is he or she also the Chair of the Board?  Discuss the company’s considerations in making this decision.
      2. Who serves on the board’s Audit Committee? How many members are Financial Experts?  What experience qualifies them for that designation?  Do you agree with this designation? Why or why not?
  • What was the CEO paid last year? What portion of his or her total pay was in the form of bonus? What performance measures were used to determine the CEO’s bonus?
  1. Who or what entity holds the highest percentage of the company’s stock? Are most of the beneficial owners reported individuals or institutions?
  2. Is there more than one class of common stock outstanding? How many votes does each share of each class of stock get?  Does any one person or entity control the voting rights at the company? If so, who?

 

  • Strategy Analysis
    1. Industry Analysis: Porter’s Five Forces
      1. Rivalry among existing firms
      2. Threat of new entrants
  • Threat of substitutes
  1. Buyer power
  2. Supplier power
  1. Company Strategy Analysis
    1. Is your company following a Low Cost Leader or a Product/Service Differentiation Strategy?
    2. Where would evidence of this strategy show up in their financials?

 

  1. Financial Analysis
    1. Recasted Income Statement (3 years)
    2. Recasted Balance Sheet (3 years)
    3. Common Size Income Statement (3 years)
    4. DuPont Analysis (1 year)

 

  1. Profitability Analysis Ratios (3 years)
    1. Profit Margin
    2. Return on Assets (ROA)
  • Return on Equity (ROE)
  1. Gross profit margin
  2. EBIT Margin
  3. Accounts Receivable Turnover and Days’ Receivable
  • Inventory Turnover and Days’ Inventory
  • Accounts Payable Turnover and Days’ Payable
  1. PP&E Turnover
  2. Long-term Asset Turnover
  1. Risk Analysis
    1. 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 company
    2. Financial Risk Ratios (3 years)
      1. Current ratio
      2. Quick ratio
      3. Cash ratio
      4. Liabilities-to-equity ratio
      5. Interest coverage ratio

 

  1. Forecasting
    1. Growth Rate
      1. Sustainable Growth Rate
        1. Calculate the company’s dividend payout ratio (if applicable) and the Sustainable Growth Rate
      2. Weighted Average Cost of Capital
        1. Use the CAPM to compute the required rate of return on equity capital for the company.
        2. Determine the cost of debt (if applicable) and the cost of preferred stock (if applicable)
        3. Compute the weighted average cost of capital for the company
      3. Forecasted Income Statement (5 years)

 

  1. Sustainability Report
    1. Determine whether or not your company prepares a Sustainability Report
    2. If so, review the report and write a brief description of the key issues identified in the report and your observations regarding the report

 

 

 

 

Grading Guidelines: FINA 408 Individual Final Company Analysis Project

The paper is graded on a 100-point scale.  The following describes the breakdown of points available:

25 points for ORGANIZATION

This is a long and complicated paper, so it is essential that you are organized in your presentation of the information.  Please be sure to present each item in the order suggested by the outline and have clear headings and sub-headings to make it easy to follow.  Also, it is important to organize the paper in a way that prevents the reader from having to flip back and forth from one section to another to follow the discussion (e.g., ensure that each ratio/calculation is discussed immediately after it is presented, rather than having a separate table elsewhere in the report.

25 points for ANALYSIS

To receive the full amount of points for this category, be sure to provide thorough discussion of your analysis process and an explanation of what the ratio/calculation means.  It is important to demonstrate that you have a good understanding of why each calculation was done, and what information can be learned from it.  Also, in this section I remove points for any situation where I feel that the analysis presented is not the students’ original work (i.e., taken from another source without attribution.)  While you can certainly refer to other analysts’ work regarding your company, please be sure to conduct your own analyses and draw your own conclusions throughout the paper.

25 points for THOROUGHNESS

In order to receive the full amount of points available for this portion of the paper, you must include every item listed on the general outline provided at the beginning of the course.  Points will be removed if any item is missing from the analysis.

25 points for CONTENT

In this category, I am assessing the extent to which the entire report provides a complete analysis of the company, utilizing the steps we practiced throughout the course.  Do you tie it all together with connecting themes and findings?  Or, is it just a list of the various calculations with a sentence or two in between explaining each.  A successful paper will present a congruous and thorough analysis of the company with insightful and thoughtful commentary throughout.

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