Part 2 (75 points) Financial Analysis This part covers the financial analysis of
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Question
Part 2 (75 points) Financial Analysis
This part covers the financial analysis of your calculated financial ratios (in word processor file and name it f322part2proj_lastname and initial). Please use complete sentences in analyzing the financial ratios.
Section 1 (10 points) Industry Analysis
(Source of information in FLITE - Standard and Poors Net Advantage) Stock report.
Write a brief analysis of the industry or sub-industry your company belongs to (this is an industry overview!):
4
Finc 322 Financial Analysis Project Browers
Name of the industry and/or sub-industry
Brief Description of the major products/services of the industry or sub-industry, size in terms of sales and profits, significant developments, and future outlook
List and briefly describe the five major competitors in the industry
Get analysts forecast on the future outlook (one year) for the industry (indicate source)
Section 2 (15 points) Business Analysis
Business Analysis (Source: Go to the companys homepage, go to the Investors Relations tab, and then go to the Stockholders Report.)
Write a brief business analysis of your company (please use complete sentences):
Indicate the industry classification. Include NAICS code.
Brief business historybeginning of the company, who started it, where it was started, what products were produced and how it grew to the current company size.
Products/services the firm produces today, contribution of each product in terms of sales and profit, where the products/services are sold, pace and size of the market.
The size of the firm in terms of revenues, number of employees, assets and market value and current competitiveness.
the current officers,
Two analysts forecast of the companys sales and profits next year (indicate source).
Section 3 (40 points) Financial Ratio Analysis
Copy the financial ratios for each group from excel file you have completed above to your word file. Copy and evaluate each ratio within each group. (Note: A good source of financial ratio definitions is in www.investopedia.com)
Evaluate the financial ratios. Compare each ratio to the industry ratio and S&P 500 ratio. Explain what the ratio measures and indicate if your company is doing better or worse than the industry and S&P 500, and why. Look at the student example posted in FerrisConnect to see how to write the analysis.
Make sure that you refer to the actual number when you evaluate and compare the ratios.
Example: Aapl (Source: cnbc.com 1/22/2013)
VALUATION
AAPL.O
Industry Average
Worse
Same
Better
S&P 500
Worse
Same
Better
Price/Earnings (TTM)
11.33
13.56
X
19.95
X
Price/Cash Flow
9.24
9.29
X
11.5
X
5
Explanation / Answer
1. Industry analysis: An industry is a group of firms that have similar technological structure of production and produce similar products and services.
Some of the industries for example: Food products, Beverages, Textiles, Wood and wood products Chemical etc.
The industries can be classified on the basis of the business cycle, i.e. classified according to their reactions to the phases of business cycle. They are classified into growth, cyclical, defensive and cyclical growth industry.
2. Business Analysis:
Business analysis speaks about the history of the firm, its products and revenues at present.
It was established in the year of 1897, with a view to produce a qualitative products to the customers.
GM is producing its range of products with various categories of based on customer requirements.
3. Financial Ratio Analysis:
Ratio is a mathematical number which establish a relation between two accounting figures.
Broadly ratios are devided inot 4 types
They are 1. Liquidity Ratios
2. Leverage Ratios
3. Turnover Ratios and
4. Profitable Ratios
Under liquidity ratio, it covers Current Ratio which speaks about a firms' current assets and liabilities.
Quick ratio speaks about relationship between absolute quick asstes to its current libilites.
leverage ratios speaks about a firms' ability to meet its long term obligations and payments.
Debt - Equity ratio, Owners funds to out siders funds ratios are eaxampler of it
3. Turnouver ratio speaks about the firms' ability to convert the process of production and converts into cash. Means how fast the firm is converting its raw material into finished goods and then sales, the lower the time the better the performance.
4. Profitability ratio speaks about the profit position of the firm. How much profit it is earning with comparitvely other comepetitiors.
Earnings Per Share and Dividend Per Shares disclose the profitability of the firm.