Assignment: Financial Statement Analysis Project
This project is designed to get you to think like a shareholder activist. We will discuss the practices of shareholder activists in class. Here are the weekly report requirements for the project. Remember that the purpose is to assess the firm's "profitability, financial stability, and future prospects", to assess earnings and financial reporting quality, and to report on the quality of internal controls, with the goal of improving the governance and performance of the firm. Your final report will be made to the media and the investment community. Deadlines for submission will be given throughout the semester.
You will keep analysis in a word document and calculations in an excel spreadsheet. Both will be submitted at the end of the semester.
Company: WWE
Get the most recent financial statements for your firm. The statements should include data for three years (2015, 2016, 2017). Do not copy and paste information.
Company ticker symbol
Where is the company traded?
Current Share Price
Industry/Primary Business - What does this company do?
When was the company founded and when did it go public?
Examine analyst and auditor opinion
Look at the most recent DEF14a. Describe the corporate governance of this company. What is its ISS Governance Score (from Yahoo finance)?
Examine 8k documents. What kind of recent news filings do you see reported in the 8k?
Read the most recent MD&A. What material risks does the company face?
Highlight a couple of strengths, weaknesses, risks, or opportunities that the MD&A discussion emphasizes or that you find interesting.
Create a spreadsheet named "yourcompany.xls".
Go to the investor relations website of the company and locate its annual reports for 2017, 2016, and 2015. You will need these three years of data to get the balance sheet, income statement, statement of cash flows, and statement of changes in shareholders' equity (i.e., 3 years of data for your company). Most companies will have these in spreadsheets, posted on their investor relations page.
Do not obtain this data from capital IQ or Bloomberg. The reason for this is that we want to have the data that has been audited and which has been submitted to the SEC.
You will line up the data for 2017, 2016, and 2015 for each of these statements for everything except the statement of changes in shareholders' equity. (See Herbalife example).
Identify 3 publicly traded benchmark companies for which you can obtain full financial statement data, and explain how they were chosen. Are there any limitations to these benchmarks? Obtain the balance sheet, income statement, statement of cash flows, and statement of changes in shareholders' equity for the benchmarks. Create worksheets for the balance sheet, income statement, statement of cash flows, and statement of changes in shareholders' equity for each of the three benchmarks.
For the most recent 3 years, for your firm and the 3 benchmark companies, create common size financial statements for your company and the benchmarks. {Note: For this part of the exercise, please use the information provided in the firm's actual financial statements rather than the standardized numbers as prepared by Capital IQ, Bloomberg, or some other data provider.}
What are the most important categories of assets, liabilities, income, and cash flows? How do these categories change over time?
For the most recent 3 years, for your firm and the 3 benchmark companies, calculate 3 years of monthly stock price data for your company and the benchmarks. Calculate the Sharpe, Treynor, and Sortino ratios.
For the most recent 3 years, for your firm and the 3 benchmark companies, conduct an analysis of the determinants of ROE using the Dupont Analysis for your firm and the benchmarks.
(a) Calculate for all years and put in a table those ratios that the textbook lists for the category.
(b) Comment on and interpret any important or interesting changes across the years.
For the most recent 3 years, for your firm and the 3 benchmark companies, calculate 4 financial ratios from the following category: efficiencyand analyze.
(a) Calculate for all years and put in a table those ratios that the textbook lists for the category.
(b) Comment on and interpret any important or interesting changes across the years.
For the most recent 3 years, for your firm and the 3 benchmark companies, calculate 4 financial ratios from the following category:liquidity and analyze.
(a) Calculate for all years and put in a table those ratios that the textbook lists for the category.
(b) Comment on and interpret any important or interesting changes across the years.
For the most recent 3 years, for your firm and the 3 benchmark companies, obtain on and off balance sheet ratios related to capital structure.
(a) Calculate for all years and put in a table those ratios that the textbook lists for the category.
(b) Comment on and interpret any important or interesting changes across the years.
For the most recent 3 years, for your firm and the 3 benchmark companies, obtain 2 financial ratios related to solvency. What is the debt rated?
(a) Calculate for all years and put in a table those ratios that the textbook lists for the category.
(b) Comment on and interpret any important or interesting changes across the years.
For the most recent year, for your firm and the 3 benchmark companies, obtain 2 financial ratios related to intangibility and growth opportunities.
(a) Calculate for all years and put in a table those ratios that the textbook lists for the category.
(b) Comment on and interpret any important or interesting changes across the years.
Attempt to calculate Free cash flow to the firm and Free cash flow to equity as well. Do you see any link to stock market valuation?
Examine earnings and financial reporting quality of your company
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.