Choose a large publicly held company to investigate. Download, or otherwise immediately obtain, the complete annual report for this company. The best place to locate the annual report is the company's home website. The annual report will include financial statements with footnotes and any written materials such as a letter from the chairperson to the stockholders.
Choose either a large company that commonly has articles written about it or some company that has recently been generating publicity. You should of course choose a company you are interested in, as it will make the work much more enjoyable. You may think of selecting a company you have investments in or might be interested in seeking employment.
NOTE: Do not make the mistake in thinking you have everything just because you have annual report. Be sure you have the financial statements, the notes to the financial statements and the letter from the chairperson. If you are in doubt about what you have, please contact me and I will help you locate the annual report.
You will write a report on this company and its use of financial securities. The three major parts of this report will cover bonds, stocks, and derivatives. You must locate a company that uses at least two of these three pieces. Most companies will use all three. Again, if you are in doubt, please contact me and I will assist you in determining if this is the case for your company selection. AT A MINIMUM, THE COMPANY YOU SELECT MUST HAVE 2 OF THE 3 FINANCIAL SECURITIES (STOCK, BONDS, DERIVATIVES) WE WILL BE DISCUSSING IN THIS COURSE to write about in your paper.
Things to research and report on should include, but are not limited to:
1. Using the annual report to discuss the company's outstanding bonds; how many and what kind of bonds are outstanding; identify when they were issued, discuss the rating of these bonds and what that means, do a current valuation of the bonds or if there are many bonds, select a sample of these bonds and valuate them using the current rate of return in the market; what does the value tell you?
2. Discuss the data in your research that deals with stock (prices, volume, symbol, etc.); discuss the historical prices of these stocks; valuate the stock and compare it to the market price of the stock; explain the possible reasons for being undervalued or overvalued; complete an investor return on these stocks; how is the investor's return compared to some index (i.e. S&P 500);
3. Identify any futures, options and swaps that your company has utilized to hedge risk for the organization; discuss the opportunities the derivative securities markets might provide for this particular organization. How might managers use them to reduce risk to their organization?Provide an example of what the company is doing with the use of derivatives. Give enough explanation so that anyone reading your report can understand the organization and their use of derivatives.