Comprehensive Investment Analysis – Part 2: Financial Statement Analysis
Please review the Comprehensive Investment Analysis Overview to get familiarized with the project objective.
Section Objective
The objective of this report is to analyze the financial performance of your company by computing and analyzing financial statement ratios.
Instructions
You will need to address all the following topics:
Inform your readers how part 2 objective aligns with the project objective.
Select the most pertinent ratios from each category (Liquidity, Solvency and Profitability).
Calculate and compare the ratios of the competitor. In order to aid your analysis, you should compare the financial performance of your company with at least one competitor over the past two years.
Discuss trends over time and in relation to at least one competitor. Discuss the reason for the change by referring to the context of the company and the industry in which the company operates.
Provide a brief summary of your findings in your conclusion and inform your readers of what your next steps are within the project objective.
Include your calculations as an appendix to your report.
Tools and Methods
Your analysis should focus on the following financial categories as highlighted in the textbook under the chapter ‘Financial Statement Analysis.’
Liquidity
Solvency
Profitability
The specific ratios and formulas for each of the three categories above are provided in your textbook reading. You can choose to calculate all the ratios provided in the textbook reading and include your calculations in your appendix. However, you do not need to discuss all the ratios in your main discussion. You will have to use your understanding of the company to select the most pertinent ratios. For example, while the inventory turnover ratio is a very common ratio it may not be applicable to a service company that does not deal with inventory.
Calculating the Du Pont ratio is an excellent way to analyze the overall performance of your company. The Du Pont ratio is a way of disaggregating the Return on Equity ratio into the three categories of liquidity, solvency, and profitability. A quick online search on ‘Du Pont Ratio’ will provide you with plenty of links on the Du Pont ratio. As an example, the Corporate Finance Institute
(Links to an external site.)
is a useful source of information.
Use the Library’s research guide
(Links to an external site.)
.
Submit a report that includes 4-5 pages of the main discussion besides the appendix. The format should be double-spaced, one-inch margins, using a 12-point Times New Roman font.
Links:
https://corporatefinanceinstitute.com/resources/knowledge/finance/dupont-analysis/
Turnitin®
This course has Turnitin® fully integrated into the course dropbox. This means that you should only submit your assignments to the dropbox below. Please do not submit your assignment directly to Turnitin.com.
Once submitted, your assignment will be evaluated by Turnitin® automatically. You will be able to view an Originality Report within minutes of your first submission that will show how much of your work has been identified as similar to other sources such as websites, textbooks, or other student papers. Use your Originality Report as a learning tool to identify areas of your assignment that you may not have cited appropriately. You may resubmit your assignment through this dropbox as many times as you need to check to see if you have made improvements, until the due date of the assignment. However, once you have made your first submission, you will need to wait 24 hours after each subsequent submission to receive a new Originality Report. Plan accordingly as you draft your assignment. Once the due date has passed, your assignment submission will be considered final.
Evaluation
This assignment will be graded using the rubric located on the Course Rubrics page within the Start Here section of the course. Please review the rubric prior to beginning your work so that you ensure your submission meets the criteria in place for this assignment. The Case Study Project assignments, together, are worth 30% of your final course grade.
Comprehensive Investment Analysis
Project Objective
The Comprehensive Investment Analysis consists of three reports as assignments throughout the
course.
The project objective is to provide an investment decision recommendation based on the financial
performance of a listed company. In order to achieve this objective, you will need to work on three
reports that are connected to each other. This project will provide you with an opportunity to utilize
business and accounting knowledge gained in this course in the context of business decision making.
It is important to inform your readers of the project objective and the section objective of each report.
The instruction of each report will help you to frame your report within the context of an investment
decision analysis. So it is important to read through the full project requirements before you start the
project. You will need to use a variety of resources to research your corporation.
Data and Sources
Company Selection
First choose a company to research.
• The company must be publicly traded.
• It may be the company you currently work for, a company related to a hobby of yours, a
possible stock investment, or simply sound interesting.
As a starting point, the following link provides information on companies listed on the New York Stock
Exchange. Note that if this link is not working you can always search for “NYSE company listings” in a
search engine such as Google. The advantage of using the link above to search for companies is that it
gives you a filter (on the left side), where you can search for companies by Industry and Market Cap.
There are also other sources of companies provided through the library.
https://www.nasdaq.com/screening/companies-by-industry.aspx?exchange=NYSE
https://www.nasdaq.com/screening/companies-by-industry.aspx?exchange=NYSE
http://libguides.excelsior.edu.vlib.excelsior.edu/bus500
Competitor Information
You need to also identify a competitor of the company you research. Companies may be within the
same industry. There are a variety of sources to get information on a competitor for the company you
have selected. An online search on “competitors for
point. Other sources include
• Nasdaq: type the name of your company in the search area and search for competitors using the
tab on the left. For example, the following link provides you with a list of competitors for
PepsiCo.
• Search online for “Yahoo Finance: Industry Brower” and select the industry that your company
belongs to. This will provide you with a list of companies in the industry your company belongs
to.
While the above sources are good starting points, you will need to understand the environment in which
your company operates in order to find a suitable competitor. Reading the Management Discussion and
Analysis including the risk factor statements within the 10-K of your company will provide you with
sufficient context on your company to help you in your choice. It is difficult to find a perfect match for a
competitor and so your objective is to select a company that is similar (rather than the same) as your
company to provide a useful benchmark. It is important that you have provided a reason for your choice
of competitor in your report.
Part 1: Overview of Company (Module 4)
Section Objective
You are going to write a report to provide your readers with the most pertinent information that will
enable them to get an overview of your company and its position within the industry, before you
analyze the financial performance of the company in Part 2.
Instructions
Research and then describe your company’s primary business activities. You need to address all the
following topics:
1. Inform your readers how part 1 aligns with the project objective
2. A brief historical summary
3. A discussion of competitors including the reason for the choice of competitors (rather than just
a list of competitors)
4. The company’s position within the industry
5. Recent developments within the company/industry
6. The key risk factors
7. The strategic direction of the company
8. Other items of significance to your corporation
9. Provide a brief summary of your findings in your conclusion and inform your readers of what
your next steps are within the project objective.
https://www.nasdaq.com/symbol/
https://www.nasdaq.com/symbol/pep/competitors
https://www.nasdaq.com/symbol/pep/competitors
In your report, utilize information from a variety of resources and select the most pertinent information.
For example:
• Start your research using the Library’s research guide.
• Consult the Form 10-K filed with the SEC database.
• Review the Annual Report and especially the Letter to Shareholders and the risk factor
statement
• Explore the corporate website including the investor relations website
• Select at least two significant news items from recent business periodicals.
Submit a written report that is 2-4 pages long. The report should be well written with introductory and
concluding paragraphs. Include a complete bibliography.
Part 2: Financial Statement Analysis (Module 5)
Section Objective
The objective this report is to analyze the financial performance of your company by computing and
analyzing financial statement ratios.
Instructions
You need to address all the following topics:
1. Inform your readers how part 2 objective aligns with the project objective.
2. Select the most pertinent ratios from each category (Liquidity, Solvency and Profitability).
3. Calculate and compare ratios of the competitor. In order to aid your analysis, you should
compare the financial performance of your company with at least one competitor over the past
two years.
4. Discuss trends over time and in relation to at least one competitor. Discuss the reason for the
change by referring to the context of the company and the industry in which the company
operates.
5. Provide a brief summary of your findings in your conclusion and inform your readers of what
your next steps are within the project objective.
6. Include your calculations as an appendix to your report.
Tools and Methods
Your analysis should focus on the following financial categories as highlighted in the textbook under the
chapter ‘Financial Statement Analysis’
• Liquidity
• Solvency
• Profitability
The specific ratios and formulas for each of the three categories above are provided in your textbook
reading. You can choose to calculate all the ratios provided in the textbook reading and include your
calculations in your appendix. However, you do not need to discuss all the ratios in your main discussion.
You will have to use your understanding of the company to select the most pertinent ratios. For
http://libguides.excelsior.edu.vlib.excelsior.edu/bus500
https://www.sec.gov/edgar/searchedgar/companysearch.html
example, while the inventory turnover ratio is a very common ratio it may not be applicable to a service
company that does not deal with inventory.
Calculating the Du Pont ratio is an excellent way to analyze the overall performance of your company.
The Du Pont ratio is a way of disaggregating the Return on Equity ratio into the three categories of
liquidity, solvency and profitability. A quick online search on ‘Du Pont Ratio’ will provide you with plenty
of links on the Du Pont ratio. As an example, the Corporate Finance Institute is a useful source of
information.
Use the Library’s research guide.
Submit a report that includes 4-5 pages of main discussion besides the appendix.
Part 3: Investment Recommendation (Module 6)
Section Objective
The objective of the final part is to provide an overall investment recommendation based on the analysis
conducted in parts 1 & 2. You will need to prepare a well-written report titled “
Investment Recommendation”.
Unlike Parts 1 and 2, you are not gathering data in this section of the report. Instead, you need to
support your points with a comprehensive explanation incorporating sound reasoning. While the main
focus of your investment recommendation should be on the financial indicators, you should also
consider other non-financial factors in your overall analysis, including the overall strategic direction of
the company and industry trends that was examined in part 1 of your project.
Instructions
You need to address all the following topics:
1. Inform your readers how part 3 objective aligns with the project objective.
2. Identify 3-5 significant points that justify your recommendations.
3. You should not repeat the history of the company covered in part 1 (unless the history is going
to play a major role in your final recommendation).
4. You should not include all the calculations covered in part 2, rather focus on the most important
for your investment case.
5. You should amalgamate the most important information from parts 1 and 2 to provide the basis
for your conclusion. You should focus on both the strengths and weaknesses of the company
and then provide a final justification for deciding to invest (or not to invest) in the company you
have selected.
6. You should also discuss the limitations of your analysis. The ‘Financial Statement Analysis’
chapter in your textbook provides examples of limitations of financial statement analysis
(towards the end of the chapter).
Submit a report that is 2-3 pages long. References must be appropriately cited.
https://corporatefinanceinstitute.com/resources/knowledge/finance/dupont-analysis/
http://libguides.excelsior.edu.vlib.excelsior.edu/bus500
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