Write a short summary of the three main financial statem ents: Balance sheet, Income Statement and Cash Flow Statement for the last two years
FINAL PROJECT
GUIDELINES
(
25% of
final grade)
Your Project document (PowerPoint) should include:
1. Introduction (2 slides)
This part should be a short description of the company you are going to analyze
. You can mention the
objective of the company, the industry, latest news and a brief history. The introduction should be
no
longer than two slides
.
2. Common size financial statements (2
–
3 slides)
Write a short summary of the three main financial statem
ents: Balance sheet, Income Statement and
Cash Flow Statement for the last two years. You should include common size balance sheet and
income statement. Focus on performance of net income, dividend payments, asset size, shares
outstanding and the market pr
ice of the share.
3. Ratio (Trend) Analysis (5 slides)
This ratio analysis should include just a Trend analysis. It requires calculating the ratios mentioned
below for your company and compare the most current annual statements with the ones of one and
t
wo years ago
(trend analysis).
For this analysis, you should define (briefly) and calculate the following
ratios:
•
Liquidity Ratios
: Explain liquidity ratios, why they are important and what they mean.
Calculate and compare the Current Ratio and the Quick
Ratio and discuss implications for your
company.
•
Efficiency Ratios:
Explain asset management ratios, why they are important and what they
mean. Calculate and compare the Inventory Turnover, the Day Sales Outstanding and the
Total Asset Turnover Ratio and
discuss implications for your company in comparison to itself.
•
Leverage Ratios
: Explain debt management ratios, why they are important and what they
mean. Calculate and compare the Total Debt to Total Assets Ratio and the EBITDA Coverage
Ratio and discuss
implications for your company in comparison to itself.
•
Profitability Ratios
: Explain profitability ratios, why they are important and what they mean.
Calculate and compare the Profit Margin on Sales, Return on Total Assets and the
Return on
Equity and discuss implications for your company in comparison to itself.
•
Market Value Ratios
: Explain market value ratios, why they are important and what they
mean. Calculate and compare the Price/Earnings Ratio and the Market/Book Ratio and d
iscuss
implications for your company in comparison to itself.
4. Valuation (3
–
4 slides)
In th
is section, you should include:
the current stock price of your company
,
h
ow has the stock
pe
rformed relative to the market over the past
six
months?
Use a chart to explain.
Also, you have to calculate the value by two methodologies:
1.
DGM:
Let’s assume at first that the firm’s dividend is
expected
to grow at the same rate as the
last 5 years over time. If so, intrinsic value can be calculated using the Dividend
Constant growth
model.
Estimate the Price of the stock based on th
is model and say if the current price is
undervalued or overvalued in comparison to your calculation.
2.
CAPM:
Calculate the required rate of return of the company using the CAPM
. (You will require
current beta of the company, risk free rate (t
–
bill 90 days) and th
e expected return of the market
(S&P500 average return in last five years).
5
.
Conclusion (one slide)
General conclusions about the company. Do you think it is performing at optimum? Does this
company improve their situation during last two years? Is it ahead of its comp
etitor/industry? What
changes would you recommend?
6.
Appendix and Bibliography (3
–
4 slides)
The appendix should be a copy of the financial statements of your company: the income statements,
the balance sheets and the cash flow statements for the two most r
ecent years. Bibliography should
have a standardized format (You should include all other sources that you use in addition to your
textbook. It is strongly recommended to have at least three sources to complement).
Notes:
•
I would recommend referring material outside of your textbook
(library, Internet, etc.) in
order to explain your conclusions.
•
Number all your pages from the introduction onward.
•
You have to get your Financial Statements from the Database “MERGENT Online”. (You
can
find it on the UIW Library website).
•
Fo
r your presentatio
n you have to consider among 12
–
15
minute
s. N
o less, no more. It is very
important to talk more about group’s conclusion and less about history of the company.
•
For your presentation, I strongly recommend to practice before and double check every
slide
