FINANCIAL RESEARCH PROJECT ON AMAZON: EXPLANATION & INSTRUCTIONS
OBJECTIVE:
The specific objective of this graded written research exercise is to prepare an "executive level financial report" to a potential investor. This report will involve the financial evaluation of a real, publicly-traded, company. It will require independent research (web-based and library), careful financial analysis, and the proper application of key financial theories and formulas.
SITUATION
You are a financial analyst with a large investment-banking firm. Your work involves preparing financial research reports and recommendations for clients of the firm. This project represents such a report.
YOUR SPECIFIC ASSIGNMENT
Your specific assignment is to research, analyze, and prepare a report for the clients on the actual financial performance of AMAZON. In addition to reviewing the traditional financial performance indicators, you are also to review AMAZON'S past and current stock performance. Your report includes three parts:
(1) A comprehensive review of AMAZON'S financial performance for the last 3 years. A DuPont analysis is also required. (See detailed description below)
(2) An evaluation of AMAZON'S stock performance for the last year.
(3) Finally, a specific recommendation, with supporting rationale, as to whether or not AMAZON'S recent trends in financial and stock performance are of sufficient financial strength to warrant entering into a long-term investment commitment.
To assist you in the task, the CFO has provided the following general guidance.
It is very important to comparatively evaluate AMAZON'S financial and stock performance trends against its Industry and/or principal competitors.
You should include all necessary and relevant financial performance and stock information, trends, and projections in supporting your recommendation. This information may include, financial ratio trends and industry comparisons, capital spending, stock growth, Beta values, credit rating service valuations, bond rating valuations, and management and investment reports - when these documents are available.
REPORT REQUIREMENTS - YOUR SPECIFIC ASSIGNMENT
Research and analyze the following information for AMAZON.
--Annual Balance Sheets for AMAZON for the last three years.
--The Income Statements and Statements of Cash Flows for AMAZON the last three years.
-- Annual reports, Form 10K Reports
--Industry norms
---Analysts' reports on performance
-- Management reports or press releases, investor conference calls
Using this information students will develop the evaluation of the financial performance for AMAZON.
1. Required Subheading: Background Information
Background and Industry (one short paragraph).
2. Required Subheading: Financial Performance Results
Select the most significant financial performance results for AMAZON: Compare Revenue, net income, cash flows, working capital, total assets for the last three years and other results for the company against the industry or main competitors. Present a table with this information in the report. Write about 1 page of analysis for these financial performance results.
3. Required Subheading: Financial Ratio Analysis
Evaluate financial ratios for AMAZON (the Mergent database available through the Library is a good source). Write about 1-2 pages of analysis of the ratio data. Compare the ratio results against the industry or main competitors.
4. Required Subheading : Return on Equity
Evaluate Return on Equity for the company for the last three years using the DuPont analysis. Compare the company's results to a major competitor. This involves taking the information from the Income statements and the Balance sheets to calculate the company's return on equity using the DuPont formula. Show your calculations! Write about 1 page of analysis of the results. Compare the results to main competitors. If the management of the company would like to improve its return on equity, what should the management do?
5. Required Subheading: Other Financial Indicators
Evaluate other significant financial performance indicators including: capital spending, stock growth, Beta values, credit rating service valuations (if possible), bond rating valuations (if possible), etc. Present an overall conclusion about the financial performance of the company during the last 3 years based on these indicators. Compare the results that you developed against the industry or main competitors. Summarize the results in 1 page by explaining the firm's financial strengths and weaknesses?
6. Required Subheading: Stock Performance
Collect and evaluate the data about stock performance of the assigned company for the last year. Compare the results against the industry or main competitors. Write about 1-2 pages of analysis of the results.
7. Required Subheading: Investment Recommendation
Develop a specific recommendation, with supporting rationale, as to whether or not the assigned company's recent trends in financial and stock performance, and projected performance, are of sufficient financial strength to warrant entering into a long-term investment commitment (write about 1 page)
PRESENTATION OF PAPER AND WRITING of the project grade):
Organization, Format and Presentation of Paper including the Introduction, Body, and Summary
Use of Tables, Figures and Other Graphics to Summarize and Support Analysis Presented in the paper
Logical and Smooth Flowing Transitions and Relationships among Sections of the Written Report
Research Sources and Significance of Research Information and Data, Use of APA Citation Methodology
The final report is to be an executive-level financial report, directed to the client. The report is about 6 - 8 double-spaced typewritten pages (not counting the tables and graphs).
Essential research data, financial calculations and other documentation that is necessary to support the recommendation should be referred to in summary form in the report and included in the report as attachments. All major references sources must be referenced.