For your first assignment, you will research how to evaluate stocks as an investment option and complete a company analysis using the provided template. You will start by selecting two companies to determine how free cash flow impacts their growth potential. Then you will select three competitors in the same industry to perform a company analysis. The point of this assignment is to practice finding and analyzing company financial information.
Instructions
Gather the Financials information.
- Access D&B HooversLinks to an external site. to search for companies by industry.
- Select domestic public companies at SEC.govLinks to an external site.
- Use the 10K annual report as indicated below or from the company's website under investor relations.
- Select domestic public companies at SEC.govLinks to an external site.
- Access the U.S. Securities and Exchange CommissionLinks to an external site. to access your selected companies’ financial filings.
- Select the Filings Tab and Company Filing Search in the drop-down menu to search for publicly traded companies.
- Enter the selected company in the search engine to locate the required financial information to complete the Company and Stock Analysis template Download Company and Stock Analysis template. (or)
- Search for a Company's Corporate Website and locate the link for investors to locate the required information to complete the Company and Stock Analysis template Download Company and Stock Analysis template.
- Select the Filings Tab and Company Filing Search in the drop-down menu to search for publicly traded companies.
- Review the Income Statement, Balance Sheet, and Statement of Cash Flows to gather the information that you need to complete the Company and Stock Analysis template Download Company and Stock Analysis template.
Complete the Company Analysis in the Company and Stock Analysis template.Download Company and Stock Analysis template.
Note: Select the correct tab (Company Analysis) at the bottom of the Excel document.
- Determine the free cash flow for the last two most recent years for the two companies.
- Select one company on each of the two different domestic (U.S.) stock exchanges to review.
- Free cash flow is defined as cash flow from operations minus capital expenditures.
- Select one company on each of the two different domestic (U.S.) stock exchanges to review.
- Explain how a company's free cash flow affects its growth potential.
- Include the inferences you can draw from a company's free cash flow.
- Complete the Company Analysis section including the Industry and the names of the three companies.
- Complete the Income Statement section for each company's Total Revenue, Gross Profit, Net Income, and/or EBITDA.
- Net Income is a generally accepted accounting principle (GAAP).
- The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is not GAAP, because it usually presents more favorable numbers.
- Complete the Balance Sheet section for each company's Total Assets, Total Liabilities, and Total Stockholder's Equity.
- Calculate the following three ratios for each company and enter the results in the template (the formulas to calculate the ratios are provided in the template).
- Debt-to-Equity Ratio.
- Gross Margin.
- Operating Margin.
- Please list the figures used for the calculation of each ratio.
- Calculate the following ratios for each company using the 10k annual report and enter the results in the template (the formulas to calculate the ratios are provided in the template).
- Profitability ratios.
- Efficiency ratios.
- Leverage ratios.
- Liquidity ratios.
- Discuss three takeaways or an analysis of what you have learned about each company based on their financial data.
- Include at least one paragraph for each company in the Template.
For help with research, writing, and citation, access the library or review library guides. You can also use the Notes to the Financial Statements that appear after the financial statements in the Annual (10K) Report, or you can use Management’s Discussion and Analysis in the Annual (10K) Report.
Company Analysis
| FIN534: Financial Management Name: Click or tap here to enter text. Professor Name: Click or tap here to enter text. Date: Click or tap here to enter text. | |||
| Company Analysis | |||
| U.S. Stock exchange: Company Name: | Company 1 | Company 2 | |
| Determine the free cash flow for the last two most recent years for the two companies. | |||
| Explain how a company’s free cash flow (cash flow from operating activities minus capital expenditures) impacts its growth potential. | |||
| Instructions: Find the numbers for these calculations from the income statement or balance sheet for each company from the annual report or 10-K. Make sure the numbers are not from the 10-Q or quarterly report as you want to make apples to apples comparisons. | |||
| Your Name: | |||
| Industry: | |||
| Company 1 Name: | |||
| Company 2 Name: | |||
| Company 3 Name: | |||
| Income Statement Information | |||
| Total Revenue | |||
| Company 1 Name: | $0.00 | ||
| Company 2 Name: | $0.00 | ||
| Company 3 Name: | $0.00 | ||
| Gross Profit | |||
| Company 1 Name: | $0.00 | ||
| Company 2 Name: | $0.00 | ||
| Company 3 Name: | $0.00 | ||
| Net Income | |||
| Company 1 Name: | $0.00 | Note: Choose Net Income or EBITDA. Generally accepted accounting principles (GAAP) only requires the use of Net Income and EBITDA is optional. Foreign companies generally do not follow GAAP and use EBITDA because it normally makes the numbers look better. | |
| Company 2 Name: | $0.00 | ||
| Company 3 Name: | $0.00 | ||
| EBITDA | |||
| Company 1 Name: | $0.00 | ||
| Company 2 Name: | $0.00 | ||
| Company 3 Name: | $0.00 | ||
| Balance Sheet Information | |||
| Total Assets | |||
| Company 1 Name: | $0.00 | ||
| Company 2 Name: | $0.00 | ||
| Company 3 Name: | $0.00 | ||
| Total Liabilities | |||
| Company 1 Name: | $0.00 | ||
| Company 2 Name: | $0.00 | ||
| Company 3 Name: | $0.00 | ||
| Total Stockholders' Equity | |||
| Company 1 Name: | $0.00 | ||
| Company 2 Name: | $0.00 | ||
| Company 3 Name: | $0.00 | ||
| Ratios Calculations | |||
| Calculate the Following Ratios: | |||
| Debt to Equity Ratio Formula (Total Debt/Total Equity) | Total Debt | Total Equity | Debt to Equity Ratio |
| Company 1 Name: | $0.00 | $0.00 | $0.00 |
| Company 2 Name: | $0.00 | $0.00 | $0.00 |
| Company 3 Name: | $0.00 | $0.00 | $0.00 |
| Gross Margin Formula (Gross Profits/Sales) | Gross Profits | Sales | Gross Margin |
| Company 1 Name: | $0.00 | $0.00 | $0.00 |
| Company 2 Name: | $0.00 | $0.00 | $0.00 |
| Company 3 Name: | $0.00 | $0.00 | $0.00 |
| Operating Margin Formula (Operating Income/Sales) | Operating Income | Sales | Operating Margin |
| Company 1 Name: | $0.00 | $0.00 | $0.00 |
| Company 2 Name: | $0.00 | $0.00 | $0.00 |
| Company 3 Name: | $0.00 | $0.00 | $0.00 |
| Find the appropriate amounts from the 10K annual report and insert them into the formula to calculate. | |||
| Formulas | Company A | Company B | Company C |
| Profitability ratios: | |||
| Profit margin = Net Income/Sales | |||
| Return on equity = Net Income/Shareholders' Equity | |||
| Efficiency ratios: | |||
| Inventory turnover = Cost of Goods Sold/Average Inventory | |||
| Accounts receivable turnover = Net Sales/Average Accounts Receivable | |||
| Leverage ratios: | |||
| Debt to equity ratio = Total Liabilities/Shareholders' Equity | |||
| Debt/Assets = Total Liabilities/Total Assets | |||
| Liquidity ratios: | |||
| Current ratio = Current Assets/Current Liabilities | |||
| Quick ratio = (Current Assets – Inventory)/Current Liabilities | |||
| Discuss three takeaways or an analysis of what you’ve learned about each company based on their financial data. Include at least one paragraph for each company. | |||
| Analysis | |||
| Company 1 Name: | |||
| Company 2 Name: | |||
| Company 3 Name: |
Stock Analysis
| Stock Analysis | ||
| Instructions: Find the numbers for these calculations from the income statement or balance sheet for each company from the annual report or 10-K. Make sure the numbers are not from the 10-Q or quarterly report as you want to make apples to apples comparisons. | ||
| Your Name: | ||
| Industry: | ||
| Company 1 Name: | ||
| Company 2 Name: | ||
| Company 3 Name: | ||
| Stock | ||
| Ticker Symbol | ||
| Company 1 Name: | ||
| Company 2 Name: | ||
| Company 3 Name: | ||
| Stock Price Include the stock price at the balance sheet date. (Stock prices fluctuate daily and are available in the Wall Street Journal) | ||
| Fiscal Year End Date: | ||
| Company 1 Name: | $0.00 | |
| Company 2 Name: | $0.00 | |
| Company 3 Name: | $0.00 | |
| Market Cap Formula (Share Price/Number of Shares) | ||
| Company 1 Name: | $0.00 | |
| Company 2 Name: | $0.00 | |
| Company 3 Name: | $0.00 | |
| Price to Earnings Ratio Formula (Share Price/EPS) | ||
| Company 1 Name: | $0.00 | |
| Company 2 Name: | $0.00 | |
| Company 3 Name: | $0.00 | |
| Current Dividend Yield – Year End Formula (DPS/Share Price) | ||
| Company 1 Name: | $0.00 | |
| Company 2 Name: | $0.00 | |
| Company 3 Name: | $0.00 | |
| Discuss the performance of the stocks, how the company's performance impacts the stock performance, and their investment potential. Include at least one paragraph for each company. You can consult the notes to the financial statements that appear right after the financial statements to find a detailed explanation or you can use Management's Discussion and Analysis in the Annual (10K) Report. | ||
| Analysis | ||
| Company 1 Name: | ||
| Company 2 Name: | ||
| Company 3 Name: |