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Your assignment calls for you to calculate certain financial ratios and to compare these ratios with the competitor’s ratios or industry average ratios to evaluate the firm’s profitability and liquidity performance. Second part of the assignment requires you to value the bonds that chosen company and the competitor company are planning to issue.
Suppose you have been hired by a large financial institution as a financial analyst. One of your first job assignments is to prepare a report and present the analysis of the financial condition of a company.
Choose a non-financial company that you would like to analyze, and obtain its financial statements. Now, select another company (preferably a competitor) from the same industry, and obtain its financial statements too. Students can obtain latest financial statements for two years (2015 & 2016) from IBISWorld database (available via the library link in the student portal) or from the internet (http://www.finance.yahoo.com).
Your task is to analyse the last two years performance of the selected company and present your findings in the form of a report, which will introduce the company to start with and cover financial performance analysis in a logical cohesive format. Your report should include the following analysis using ratios:
o Comment on the liquidity of the company using Current Ratio and Quick Ratio. What can they say about the liquidity of the company?
o Calculate the firm’s net profit margin, Return on Assets (ROA) and Return on Equity (ROE) and comment on the profitability. Which components of your company’s ROE are superior, and which are inferior (use DuPont analysis)?
o In addition, you are told that your selected company has requested a loan. On the basis of the Capital Structure ratios for the chosen company along with the industry averages and company’s recent financial statements, evaluate and recommend appropriate action on the loan request.
o Comment on any long term and short-term sources of finance that your example company has used in last two years. Was there any change?
Calculate, analyze and interpret the ratios and the other data with reference to the theoretical concepts introduced in this subject to evaluate the company’s operations and performance. How well does your selected company compare to its ind