Financial Analysis Project – Direct Measure Assignments | Online Homework Help
FIN3010 Principles of Finance
FINANCIAL ANALYSIS PAPER
Objective: Familiarize students with the application of ratio and trend analysis.
This project allows students the opportunity to perform critical thinking, by addressing specific financial trends and industry comparisons for a company of their choosing. This project will be a comparison/contrast paper that shows a demonstration of the application of financial analysis and critical thinking in a large organization. The student will be performing trend analysis and industry comparisons on 3-4 years worth of financial statement data (whatever tells the story).
Trend Analysis & Ratio Analysis
Ratio analysis uses percentage or decimal calculations of comparison to at least two different sets of financial data. You are comparing how one relates (compares) to another. Decision makers use ratios because they illuminate relationships between financial data taken from the company’s statements.
Although ratio analysis can be used to evaluate financial performance, the number, by itself, does not reveal the entire story. To take the analysis to the next level, one must engage in trend analysis. Trend analysis utilizes the aforementioned ratios and shows the changes in those ratios, over time. Stakeholders can use trend analysis to not only compare “this year” to “last year” for this company but can compare each year to the industry as a whole and even to the number one competitor for benchmarking purposes.
When you are setting up your paper, it would help to group your ratios and analysis together by content area (profitability, debt management, asset utilization, liquidity, and market value ratios).
Deliverables
Choose a publicly traded, publicly held, U.S. company. This means you need to pick a company that is public and has stock that trades on the exchange. You will use a variety of sites to find your financial data. Start with either Yahoo! Finance site or www.reuters.com. These two sites will allow you to capture at least one year of data for each of the two companies you are going to review as well as the industry ratios you will need. You will need to acquire annual reports for the company sites for years older than the most current year. You will need to review three-five years of financial information on this company, more years of data will produce a more thorough analysis.
Specific areas of analysis are noting major ratio categories and identifying whether the trend is up or down, whether that is good or bad, and why. Once the data are gathered, analyzed, and trends revealed; the student will acquire the same information for a competitor within the same industry. The same ratio and trend analysis will be gathered for the competitor. A comparison will ensue, identifying specific strengths and weaknesses of various components of the financial statements. Upon completion of the original company trend analysis and the competitor’s trend analysis, an analysis and trend comparison with the industry is required. This will allow the student to demonstrate an understanding of financial ratios and what trends are present between two different companies in one industry, as well as, being able to determine the position of the industry and be able to project future trends and how the company being evaluated can budget for changes in the industry.
So . . . .what is required . . . .
- Your chosen company (financial ratios and trend analysis)
- Using the data provided at the Yahoo! Finance site, use the ratios in the textbook and determine the status of your chosen company based on those ratios. Also, identify any trends you notice and what the impact might be if those trends continue. The ratios you will be reviewing are the same ratios; as you will find in your textbook. Note that some of these ratios may not be applicable to your company. Some ratios are specific to certain types of firms. Not all firms carry significant accounts receivable as an example.
- A competitor in the same industry (financial ratios and trend analysis)
- Using the data provided at the site, use the ratios in the textbook and determine the status of your chosen competitor based on those ratios. Also, identify any trends you notice and what the impact might be if those trends continue.
- The industry as a whole; how does your chosen company compare and what evaluations can you make (predict) for future financial success?
- Review industry data and determine where these two companies fit within that industry. Are they leaders/followers? What does the future hold for this industry?
- Using your chosen company and the current conditions in the financial markets, assume the firm needs to raise a large amount of cash. Compare the choices of raising these funds in the capital market (selling new shares of stock) versus the bond market (debt financing), and make a decision as to what is best and why. Also, consider ethical implications of financial reporting and how it relates to acquiring additional investors and accessing markets for additional capital.
- Take one of the following positions and justify your decision:
- You are a banker who has been approached by this company to borrow a sum of money (you decide how much, and why). Based on the company’s financials and its future business prospects, would you loan the money? Why or why not.
- You are an investor with a large sum of money (or a company looking for an investment), and buying either the company or shares of stock in the company is being considered. Determine, based on the company’s financials and its future business prospects, whether you will invest in this company or not.
There is no specific number of pages required to do this assignment, but past experience has shown it takes at least 10-12 pages of text to adequately complete this assignment. This is a critical thinking assignment so all the specifics are not laid out in front of you. You must research, assess, analyze, and strategize about the company you have chosen, the competitors, and the industry as a whole.
When using the Yahoo! Finance site or other similar financial sites, you are going to have access to a large volume of data, as well as company websites. Understand this must be cited using APA methodology. DO NOT COPY and PASTE anything from this or other sources without proper citing. Failure to properly do this will result in a violation of the Baker College Academic Honor Code, which can result in failure of assignment or failure of the course (for a first offense in the College), to dismissal from the College if a pattern is discovered
FIN3010 Financial Analysis Paper rubric
| Criteria | Exemplary | Competent | Developing | Needs Improvement |
| Provided an introduction of each company including background and historical information (10 points) | Demonstrates excellent understanding of the background and history | Some understanding, but at least one incorrect assertion made of the background and history | Little understanding or certain background history elements are incorrect or missing | Missing background and/or history of one or both companies |
| Performed ratio analysis and trend analysis for chosen company (30 points) | Consistently uses all the ratios to support findings; all ratios are evaluated from the perspective of the trends | Most of the ratios are used to support findings; most ratios are evaluated from the perspective of the trends | Most of the ratios are used to support findings; few of the ratios are evaluated from the perspective of the trends | Little or no use of ratios or trend analysis to support findings, use is inconsistent at best |
| Performed ratio and trend analysis for competitor in the same industry (30 points) | Consistently uses all the ratios to support findings; all ratios are evaluated from the perspective of the trends | Most of the ratios are used to support findings; most ratios are evaluated from the perspective of the trends | Most of the ratios are used to support findings; few of the ratios are evaluated from the perspective of the trends | Little or no use of ratios or trend analysis to support findings, use is inconsistent at best |
| Analyzed the chosen industry and current market conditions in that industry (30 points) | Consistently uses all the ratios and current events to support findings; all ratios are evaluated from the perspective of the trends about the industry | Most of the ratios are used to support findings; few of the ratios are evaluated from the perspective of the trends about the industry, nor is much current event information provided | Inconsistent use of ratios, current events, and trend analysis to support findings about the industry | Little or no use of ratios or current events, or trend analysis to support findings about the industry |
| Used the chosen company to analyze its fund raising potential in the stock and bond markets (30 points) | Consistently used appropriate data and financial market information to evaluate the benefits of stock financing and debt financing | Often used appropriate data and financial market information to evaluate the benefits of stock and debt financing | Occasionally used appropriate data and financial market information to evaluate the benefits of stock and debt financing | Inconsistent or no use of appropriate data and financial market information to evaluate the benefits of stock and debt financing |
| Position section (student chose banker or investor and justified the decision using financial analysis (30 points) | Consistently uses all the ratios to support findings; all ratios are evaluated from the perspective of the trends used in decision making | Most of the ratios are used to support findings; most ratios are evaluated from the perspective of the trends used in decision making | Most of the ratios are used to support findings; few of the ratios are evaluated from the perspective of the trends used in decision making | Inconsistent or no use of ratios are used to support findings as well as ratios evaluated from the perspective of the trends used in decision making |
| Support (References used) (20 points) | Consistently uses cites to support findings; All references are cited and all cites are referenced | Cites are used most of the time to support findings; all references are cited and all cites are referenced
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Developing ability to use cites to support findings; all references are cited and all cites are referenced | Little or no use of citing, meeting bare minimum of five; missing either one cited source from reference page or one reference is not cited |
| Grammar (20 points) | Sentence structure varied throughout; no incomplete or fragmented sentences; Superior grammar; no errors | Some variation of sentence structure; less than 2 incomplete or fragmented sentences; Good grammar; 1-4 errors | Consistent safe sentence structure; less than 4 incomplete or fragmented sentences; Consistent grammar errors; 5-8 errors | Simple sentence structure; more than 4 incomplete or fragmented sentences; Inattention to grammar; 9 or more errors |
