Overview
Use Exhibit 1.2 in the Wahlen text to review the steps to complete this project: (The image is posted below)
[Image unavailable: Exhibit 1.2.jpg]
The six steps above were discussed in Week 3, Chapter 1.
Step 1: Identify Economic Characteristics and Competitive Dynamics in the Industry – Economic characteristics and competitive dynamics influence the strategies companies will employ.
- Describe Your Company and its industry, and complete one of the tools described in Chapter 1 for assessing industry economic characteristics. Your analysis must discuss the economic characteristics and competitive dynamics of the industry while analyzing the financial statements for Your Company.
- Porter's Five Forces Framework
- Value Chain Analysis
- Economic Attributes Framework
- Compare the financial statement ratios for Your Company to industry ratios (see Appendix D[1]) and assess how Your Company's performance compares to the industry. Include the industry ratios used in your analysis in your report and cite the source(s) for the ratios.
Step 2: Identify Company Strategies – Review the annual reports for the most recent two years and any other published items on the company’s website to identify your company’s strategies. Review recent news and conduct research to familiarize yourself with Your Company's strategies. Discuss the company's strategies in your report. Cite the sources you use to support your comments and conclusions. Use the financial data for the last 2 years for this step. (2023 and 2022)
Step 3: Assess the Quality of the Financial Statements – Review the quality of the financial statements as discussed in Whalen Chapter 1 and:
- Identify what potential areas on Your Company’s financial statements could compromise the quality of their financial statements. Explain.
- Discuss your assessment of the quality of Your Company's financial statements based on the research and analyses you have completed.
Step 4: Analyze Profitability, Liquidity, Risk, Growth, and Leverage – Analyze the following for Your Company using the ratios and risk analyses you completed in your YC Assignments.
- Profitability
- Liquidity
- Risk
- Growth and
- Leverage
Refer to the Rubric for Assessment of Your Company Analysis and Evaluation to ensure that your analysis and discussion includes, at a minimum, all ratios in the grading criteria. Provide a summary of the ratios in each category for the last three (3) years for Your Company in the report. Discuss what the ratios tell about Your Company’s profitability, liquidity, risk, and growth, and leverage, and its current value. Your analysis must be in your own words.
Step 5: Project Future Financial Statements – Use the "Shortcut Approach" to prepare projected financial statements for Your Company. Project the next three years of financial statements (Balance Sheets, Income Statements, and Statement of Cash Flows) for Your Company.
- For the Income Statements, determine a growth factor to use based on the last three years of growth in the revenue – state the growth rate used and justify using the rate.
- For sales (and other income items, if any) use growth rate fir sakes (and other income items, if any) over the most recent three-year period as determined above.
- For expenses, use common-size income statement percentages for the most recent year to calculate expenses.
- For the Balance Sheets, post the annual change from the increase or decrease in net income (loss) to retained earnings, and allocate the change across the assets, or liabilities including debt, (or both); whichever most closely aligns with Your Company’s strategies.
- For the Statements of Cash Flows, use the common-size Statement of Cash Flows percentages for the most recent year to calculate operating, investing, and financing cash flow activities. Adjust activities in accordance with Your Company's strategies discussed in Step 2 above.
- All subtotals in the projected financial statements should be calculated.
- Finally, discuss what the projected financial statements show regarding Your Company’s future profitability, liquidity, risk, growth and leverage. Your analysis must be in your own words.
Step 6: Value the Firm – Using the analyses from steps 1-5 above and the simple firm valuations methods discussed in Whalen Chapter 1, assess whether Your Company is overvalued, or undervalued. Discuss the current stock price and the PE ratio in your valuation analysis. Provide justification for your determination. Show in your discussion that you have thought through and connected the results reported in steps 1-5 above.
Submission Requirements:
Prepare a written business report using the six section headings outlined below to present your findings form Step 1 through Step 6. Refer to the Rubric for Assessment of Your Company Analysis and Evaluation to ensure that your Business Report meets all of the grading criteria. Use the following headings for the six sections of the report:
- Economic Characteristics and Competitive Dynamics in the Industry
- Company Strategies
- Quality of the Financial Statements
- Profitability, Liquidity, Risk, Growth, and Leverage
- Projected Financial Statements
- Firm Valuation
The report must be typed, professionally presented, and saved and submitted as a Microsoft Word document. The maximum length for the writtenpart of the report (exclusive of summary financial data) is four (4) full-length single-spaced pages using Times New Roman-12 font with 1-inch margins all around.
All financial statements and related schedules in the report should be in good form. DO NOT cut and paste entire YC Assignment spreadsheets into the report. Provide only the relevant sections of a spreadsheet within the report. Appropriately modify, title, and insert any relevant sections from your YC Excel spreadsheets in the report.
NO USE OF AI. IF YOU USE ANY OUTSIDE SOURCES, IMAGES, FORMULAS, NUMBERS FROM THE FSAP TEMPLATE, MAKE SURE TO CITE THE SOURCES IN THE APPENDIX OF THE PAPER. THE PAPER MUST BE 4 SINGLE SPACE PAGES. POST ANY REFERENCES AT THE END.