Financial Statement Analysis
Learn how to measure the performance of companies by analyzing their financial statements. Show us that you have read and understood the required readings, links and attached files - quote them where appropriate.
Assignment:
You are the assistant to the CEO of a major company. Your CEO keeps an eye on the competition, and asks you to do the following. Using ratio analysis, compare two major competitors in the same industry.
Instructions:
Pick any two U.S. public companies in the same industry. Manufacturing companies are often the least complicated. Service companies more complicated and banks the most difficult. (WALMART & TARGET)
One of two companies can be the same company. We recommend that you use the company. Professor may provide a list of companies that you may choose from.
Select the 10 most important financial ratios for your two companies and calculate each for the last 2 fiscal years using Excel. Explain why you selected these ratios.
Create a comparison chart for these 10 ratios for 2 years for each company. Explain how you calculated each ratio. Explain what each ratio should mean to management.
There is an example posted in the file attached in Sample Answer. This compares Southwest Airlines and Jet Blue Airlines. The "Comparison of Ratios" worksheet shows comparison of ratios, however it does not include the required words about how the ratios were calculated. For example, ROE is defined as Net Income / Total Common Stockholder Equity. It does it include what the numbers mean for management. Please include both in your work.
The tabs or sheets for Income Statement, Balance Sheet and Cash Flow Statement were copied from SEC Interactive Data. Just click on "View Excel Document" to get Excel sheets for each.
We strongly recommend that you obtain data from the SEC web site "Interactive Data. Then you can copy and paste into Excel. If you use data from other web sites, it may not allow excel to calculate ratios.
Create a single Excel file for your entire assignment. Spend time to understand what you are trying to do and simplify your format, your calculations and approach. Think about which ratios are important and WHY? Please tell us why you picked each ratio.
You may also obtain financial information and the companies' latest annual reports or the web directly from MSN Money or Yahoo Finance or Morningstar. However, it may be necessary to enter the numbers by hand into excel to allow Excel to calculate ratios. For additional information, look for the SEC Form10-K link from one of the MSN Money, or Morningstar, or Yahoo Finance financial sites. Please be aware that some financial sites may omit some numbers rather than change the standard format.
You should calculate, and comment upon, all 10 financial ratios for the last 2 fiscal years.
All calculations should be shown, and all answers should be thoroughly explained.
It is useful to compare financial ratios for a company with financial ratios of its industry. Industry financial ratios can be found on Morningstar.com, Yahoo.
We recommend against using banksFinance and MSN Money.
What can you tell from your analysis? What are the strengths and weaknesses of each company? Which is the stronger competitor? Give your reasons.
Attachment:- Sample-.rar