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Financial Statement Analysis BSAD 102: Principles...

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Financial Statement Analysis BSAD 102: Principles of Accounting II Comparison of Financial Statements for two companies within the same Industry Due Date: Monday, April 23, 2012 Total Points Possible: 70 points Assignment: You are a financial analyst for Wells Fargo. You are expected to evaluate and compare publically traded companies. Your boss (i.e., Kim Luken) has come to you and has asked you to do the following: ? Choose two publically traded stocks within the same industry to analyze. ? Using the two most current years complete a horizontal analysis of each company?s Income Statement and Balance sheet. This is to be done in Excel. ? Using the most current year complete a vertical analysis of each company?s Income Statement and Balance Sheet. This is to be done in Excel. ? Pick 7 financial ratios (see Chapter 14 of your textbook) on which to compare the two companies. Create a simple chart that shows your results. To support your results you must highlight within Excel the numbers that you used to calculate each ratio. A sample project has been provided on Blackboard so that you can understand how to reference the cells. You have to actually compute the ratios ? you are not to rely on ratios that you might find published on other sources such as Yahoo Finance. Your boss must be able to recalculate the numbers that you have arrived at using the numbers that you have highlighted in the tabs of your spreadsheet. On your chart you must indicate for each ratio which Company?s ratio is better. For example, if you decide to use Inventory Turnover as one of your ratios to analyze you would include something that looks like the following: Company A Company B Company with better ratio Ratio is acceptable Inventory Turnover 6.2 8.3 Company B Yes You also need to indicate, to the best of your ability, if the Ratio is acceptable. For example, see the following: ` Company A Company B Company with better ratio Ratio is acceptable Debt Ratio 1.2 1.8 Company A No ? Based on the analysis completed provide a recommendation regarding which of the two stocks, if either, you would encourage an investor to buy. Your analysis is to be summarized in the form of a memo: o Memo must be at least 3/4th of one page but no more than two pages in length. Memo must be typed. o At the beginning of the memo you should clearly state the two companies that were compared. o Memo is to clearly state your conclusion. You should provide a succinct explanation as to how this recommendation was reached. ? Financial Statement Analysis BSAD 102: Principles of Accounting II Comparison of Financial Statements for two companies within the same Industry Deliverables due on Monday, April 23, 2012: 1. Horizontal Analysis for each of the companies for both years in Excel or equivalent program 2. Vertical Analysis for each company for both years in Excel or equivalent program 3. Chart summarizing the seven financial ratios analyzed in Excel or equivalent program 4. Memo that is no more than 2 pages in length in Word or equivalent program Items 1 ? 4 are to be submitted via Blackboard. Resources: Members may wish to consult the following resources: ? www.stockmaven.com This website may be helpful in choosing two publically traded stocks all within the same industry. Go to www.stockmaven.com. In the top center of the page is a blue box that says ?Click on Research ? Industry Groups | Stocks within Groups?, under this heading there is a link that says ?31 Industry Categories?. Once you click on this you will find the 31 Industry sectors. You can then drill down into a specific sector to find all of the stocks that comprise that sector. For example, to find McDonald?s and like companies, you would go to the Leisure Sector, then restaurants. For this category you will notice that there are many stocks so running along the cross of the page is the alphabet broken down into segments, A-B, C-E, F-K, etc. Looking for Starbucks? go to Leisure, Special Eateries. Looking for Ameristar Casino? go to Leisure, Resorts & Casinos. Looking for Nike? go to Consumer ? Non-Durables, Textile ? Apparel Footwear Accessories. The three or four letter combinations that you see next to each company?s name on Stock Maven is the company?s ticker symbol, which is the symbol under which the stock trades. Once you have your two companies picked then you can either go to the company?s website to pull the financial statements or you can go to the www.sec.gov (see explanation below). ? Company websites I would strongly recommend that once you have selected the two companies that you are going to analyze that you then go to each of those company?s websites and download their financial statements. Many company?s financial statements are available for download in Excel on their websites. ? Chapter 14 Chapter 14 of your textbook explains financial statement analysis. Chapter 14 provides a description of several financial ratios. You need only to include 7 ratios in your analysis. ? www.sec.gov Publically traded companies are required to file an annual report called a 10K with the Securities and Exchange Commission (?SEC?). The 10K includes the company?s audited financial statements. You can find 10K filings on the SEC website under the Filings & Forms. Click on Search for Company Filings. You can then search by a Company?s name or Ticker symbol.

 

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