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You have just been hired as a junior financial analyst working for The Fly-by-Night Investment and Storm Door Company (they believe in diversifying!). You have been given a major corporation (actually it’s your choice) to analyze for its investment potential.
(Do NOT choose a financial organization (their financial statements will drive you crazy!) Pick a manufacturing or retail company that is publicly traded (on the New York Stock Exchange). ALSO – remember you need to make comparisons – your company compared a good competitor in the same industry. THEREFORE you need to select TWO companies: yours and the competitor for the comparisons!
You have been asked to create a PowerPoint presentation based on your SWOT analysis – actually only HALF a SWOT – just the Strengths (S) and Weaknesses (W). The S&W will be based upon your financial analysis of the Income Statement and Balance Sheet of that major corporation. Identify areas in which the company is performing well (strengths) and advise your boss of any problem areas (weaknesses). Include in your analysis an assessment of how the firm’s strengths and weaknesses affect its credit worthiness and investment potential.
The time period for the analysis is TWO years. You need to “crunch” the numbers – two years of ratios and two years of the “Common-sized” Income Statement for your company. For the comparison company, just the most recent year’s numbers are good: both their ratios and their common-sized Income Statement.
Analysis: The two years of ratios for your company will show a trend (in the real world we would use 3-5 years). Look at that those trends carefully! Are they getting better or worse? I wonder why? Then compare your company’s most recent ratios to the competitor. Are the current ratios for your company better or worse than the major competitor? Either way, what is this telling you? Do the same with the Common-sized Income Statement.
PowerPoint Presentation Outline
Cover those important ratios and significant issues found in the common-sized income statement and in your analysis of the capital structure of the firm. Remember however that PowerPoint slides are not meant to be an eye chart. I. Introduction – opening slide: Company name – and your name
II. Description of the firm and its management. What business are they in – how long – this is for your classmates who may not be that familiar with the company you have chosen. (please be brief, this IS a finance course not a history class!)
III. Presentation & Evaluation of Financial Statement Data (note key word is “evaluation”)
Show your numbers here: “Presentation” (some ideas in parenthesis – not meant to be all inclusive). Analysis of those numbers – what those numbers should tell us about the company or “Evaluation”, should directly follow each ratio or set of ratios. The same for the “Common Sized Analysis”: after the numbers, tell us the “so what”!
A. Overview (Intro slide to this section)
B. Short-term liquidity (current & quick ratios)
C. Activity Ratios (total asset turnover; inventory turnover (if your company has inventory)
D. Financial Leverage (Debt Ratios)
E. Profitability and Market Ratios (minimum: net profit margin, ROA, ROE)
F. Common-sized Income Statement Analysis
G. Discussion of the Company’s capital structure (how did they fund their assets? Debt, equity?)
IV. Outlook, Summary and Recommendations
A. Strengths (which numbers – why!)
B. Weaknesses (which numbers – why!)
C. Summary/ Recommendations – based on your analysis – what we see in “S” and “W” above!