FIN 442 Company Analysis Project

FIN 442 Spring 2020

Company Analysis Project

The company analysis project is an individual project which will be delivered in two parts.

Part #1 is simply the identification of the firm, its two key competitors, and some other information captured on this form. (10 points) – Due Friday, May 1

Part #2 will be a comprehensive financial statement analysis utilizing what we will learn in this course. (90 points) – Due Tuesday, June 2

Part #1

Identify a publicly traded US corporation for your project, two of its key competitors, and some general information about the company and its competitors.（Only American public companies are analyzed）

• Company Name:
  • Stock symbol/Index:
  • Name/Acronym in EDGAR:
  • Investor relations URL:
  • Fiscal year dates:
  • Next fiscal quarter to be reported:
  • Next earnings release date:
  • Date/time of next earnings conference call:

• Primary competitor 1:
  • Stock symbol/Index:
  • Name in EDGAR:
  • Investor relations URL:
  • Fiscal year dates:
  • Next fiscal quarter to be reported:
  • Next earnings release date:

• Primary competitor 2:
  • Stock symbol/Index:
  • Name in EDGAR:
  • Investor relations URL:
  • Fiscal year dates:
  • Next fiscal quarter to be reported:
  • Next earnings release date:

Part #2

For this assignment, imagine you have successfully graduated from OSU with a major in Finance. (Congratulations!)

Further imagine, that you have been hired into a Finance role at a company, and your manager comes to you on your first day and says, “Hey, I heard you took an awesome course at OSU called, ‘Financial Statement Analysis.’ I would like you to use what you learned in that class and write a paper on the company that you identified, including comparisons to key competitors. This paper will be distributed and read by the senior executives in our Finance department to determine if you should be included in an accelerated advancement program we offer to new employees in Finance. If you are accepted in this program, you will progress rapidly through the company and you will be on your way to fame and fortune!”

This should be written in Microsoft Word and submitted in that format via Canvas. I’ve been asked about the format, length, etc. I’m intentionally keeping that less defined, since I would like you to approach this as a “work assignment” as described above. Most of you are seniors and you will be getting jobs in the near future. I want you to use this as an opportunity to submit something for my assessment as if you were working for me in a professional environment.

If it helps, I would suggest single-spacing, and I’ve given an approximation of length for each of the sections below. However, these are only suggestions. What you learn as you are doing the analysis and the comparisons for your company may leave you to be longer in some areas and shorter in others.

With all of this in mind, here is a brief overview of how the write up may be structured:

• Executive Summary (approx. 1 page)
• Brief background and history of the company (approx. 1 page)
• Industry and competitive environment, including an analysis of strengths, weaknesses, opportunities, and threats facing the company (SWOT analysis). Identify two key competitors identified in part #1 of the project. (approx. 2 – 3 pages)
• Calculate and analyze all relevant financial comparisons and ratios for the identified company, the two key competitors, the industry, etc. Some ideas are below (depending on the company, not all of these may be needed and there may be others that are relevant). The purpose isn’t that you blindly run a lot of numbers. The purpose is that you look at the relevant comparisons, and dive more deeply into areas that need further investigation to search for answers and explanations of the differences you are identifying. Highlight and explain key differences identified between the company and the industry, and the company and its key competitors. (approx. 5 – 10 pages)
  • Horizontal, vertical, benchmark, cause-of-change, common-size, etc. analyses
  • Liquidity & solvency
    • Current ratio
    • Quick ratio
    • Net working capital
    • Working capital ratio
    • Debt ratio
    • Equity ratio
    • Long term debt to assets
    • Long term debt to tangible assets
    • Interest coverage
    • Operating cash flow to total liabilities
    • Company credit rating
  • Profitability
    • Operating income
    • Gross profit/margin
    • Return on sales/Net profit/margin
    • Profit margin
    • ROA
      • Profit margin
      • Asset turnover
    • ROCE
  • Management efficiency
    • Accounts receivable turnover
    • Days accounts receivable outstanding
    • Growth rate in sales compared to growth rate in accounts receivable
    • Inventory turnover
    • Days inventory held
    • Accounts payable turnover
    • Days accounts payable outstanding
    • Operating cycle
    • Cash conversion cycle
    • Total asset turnover
  • Valuation
    • EPS
    • PE ratio
  • Cash flow
    • Cash from operating activities
    • Cash from investing activities
    • Cash from financing activities
  • Capital structure
  • Debt disclosures
  • Management compensation structure, incentives, and disclosures
  • Contingent liabilities
  • Lease disclosures
    • Operating leases
    • Capital leases
  • Composition of shareholders’ equity
  • Other
• Overall evaluation/assessment of the company and financial condition (approx. 2 – 3 pages)
  • Latest financial results compared to analyst expectations
  • Focus of analysts’ questions on earnings call
  • Analyst reactions to the earnings announcement (usually written a day or two after announcement), including forecast for future profitability and growth
  • Notes from the latest financial disclosure that were important
  • Anything that surprised you on the earnings call or in the earnings information
  • Your overall assessment/impression of latest earnings announcement, communications, and your expectations for the future health and profitability of the company
• References (as many pages as needed)
  • Information reported from Part #1 for company and key competitors
  • Financial statements and tables for company and competitors
    • Source data
    • Manipulated data for horizontal and vertical analysis and comparison
  • Sources of financial information

• Separate from what you would submit for your new boss (but part of this assignment), I want you to describe what you learned from this project. The purpose of this isn’t to just use your time, it is to give you exposure to financial information, and for you to dive deeply into that information to draw-out your insights, impressions, and conclusions. It is also to give you an opportunity to write up a business case in a professional format, and I will provide feedback from that perspective. (approx. 1 page)