Assignment:
Prepare a 3 to 4 page report on the financial analysis of these two companies. Perform the structured analysis steps 1-4 as laid out in Chapter Data Case, on pages 45-46 in the textbook. Analyze the performance of the stocks of the two case companies relative to the price/earnings ratios. Calculate these ratios for the past three years and tell why you think these differences have occurred, supporting your reasoning.
Data Case from 45-46 states:
1. Download the annual income statements, balance sheets, and cash flow statements for the four years from MarketWatch.com.
2. Find historical stock prices for each firm from Yahoo! Finance. Use the closing stock; calculate the firm’s market capitalization for each date to cover the last day of the month by the firm’s historic stock price.
3. For each of the four years statements compute:
a. Valuation Ratios
i. Price-earnings
ii. Market to Book Ratio
iii. Enterprise
b. Profitability Ratios
i. Operating Margin
ii. Net Profit
iii. Return on Equity
c. Financial Strength Ratios
i. Current Ratio
ii. Book Debt- Equity Ratio
iii. Market Debt- Equity Ratio
iv. Interest Coverage Ratio ( EBIT Divided by interest expense)
4. Obtain industry averages for each from firm from Reuters.com and compare.