Financial Analysis

 

Overview
You have just started an internship at Workshire Bathaway (or “WB”), a large and very successful conglomerate in New York. You cannot believe your good fortune at working and learning at such a prestigious firm, and in fact have the opportunity to work directly with its President and CEO Ms. Wren Baker.
In order to assess your understanding of financial reporting and financial analysis Ms. Baker has tasked you with identifying a company that WB may want to purchase. Given the almost unlimited resources of WB it does not matter how big the potential target is, what industry it is in, whether it is public or private, where it is located globally, etc.
Seeing the perplexed look on your face, Ms. Baker has provided some more specific instructions below. To make an investment recommendation Ms. Baker asks that you select two similar companies for analysis, use data from public sources, prepare an extensive financial analysis, then communicate the results of your analysis in a detailed written report, and highlight the results in a short presentation. The goal is to provide an investment recommendation to Ms. Baker. Ms. Baker notes that this project will build your critical thinking, software usage, and communication skills.

Part 1:
A written report that includes the following:
A. Company profile: An overview of the companies that includes a description of the business operations, the industry in which they operate, their products, their markets, and competitors. This is very important to provide Ms. Baker with an understanding of the potential business purchase.
B. Company news: summarize at least 1 major event that have affected each company or their industry over the past two years.
C. Financial statement analysis: prepare and analyze condensed, trend and common size financial statements for each company.
D. Ratio analysis: prepare a comprehensive analysis of financial ratios for the companies focused on its profitability, efficiency, liquidity, and solvency. Where applicable compare to industry or competitor information and norms.
E. Research summary: Answer the following question in written form: Which of these two companies do you recommend WB to purchase? Prepare a written summary of your analysis and supported investment recommendation.

Part 2:
Which of these two companies do you recommend WB to purchase? Prepare an audio presentation (5 minutes or less) highlighting information from your written report that supports your investment recommendation.You need to record your presentation (audio only)

Key deliverables and timelines
Step 1:
You must select a pair of two companies for this project. For example, you can choose Pair #2 which includes PRB and PTR. However, it is not allowed to mix and match, i.e. choosing BTI and SNE are not allowed. You are encouraged to research potential companies before identifying company or companies they would like to analyze for this project.

Pair Company A Company B
1 America Movil AMX Vodafone Group VOD
2 Petroleo Brasileiro S.A. PBR PetroChina Co. Limited PTR
3 Sony SNE Koninklijke Philips N.V. PHG
4 Toyota Motor Corp TM Tata Motors TTM
5 British American Tobacco BTI Altria Group, Inc. MO
6 Banco Santander, S.A. SAN PNC Financial Services Group PNC
7 BHP Group BHP Rio Tinto RIO
8 ABB Ltd ABB General Electric Company GE
9 Ball Corp BLL Amcor AMCR
10 Diageo Plc DEO Constellation Brands STZ
11 Union Pacific Corp UNP Canadian National Railway CNI
12 Johnson & Johnson JNJ Novartis AG NVS
13 Capri Holdings CPRI V.F. Corp VFC

Step 2:
You are strongly urged to use spreadsheet software for purposes of the financial statement and ratio analysis (the quantitative items described in C and D above).

Detailed instructions (with suggested length):
A. Company profile (2 pages):
a. Review the corporate website of each company, which often provides general and investor relations information. Recognize that this information may be biased in favour of the company.
b. Review the annual reports (financial statements and management discussion and analysis), interim filings, and prospectuses, material change reports, and information circulars (as available).
Summarize your research in a 1 – 3-page written report on your companies –industry, products, and markets. This should be a professionally written paper with introductory and concluding paragraphs. Appropriately cite all sources.

B. Company news (1 page):
a. For each of your company, identify and summarize at least 1 major event that have affected the company or its industry over the two years. Discuss how this event is expected to impact the company’s operations and financial performance and ratios. Consider factors such as commodity prices, exchange rates, regulatory changes, acquisitions, changes in competitive landscape, changes in government regulation or consumer trends, etc.
b. It is important to not rely entirely on the company to identify these news items. In fact, you are unlikely to find this in any of the company’s reporting.
c. Ensure the items are legitimate ‘news’ – dividend announcements, analysts’ share price expectations, management conference call, company outlook announcements, etc. – these items are not news. Appropriately cite all sources.

C. Financial statement analysis (3 pages of quantitative analysis and 2 pages of written discussion):
a. For each of your company, collect at least three most recent years of financial statements which will provide at least 4 years of financial information.
b. Prepare condensed statements of financial position, statements of income and comprehensive income, and statements of cash flow. Use of spreadsheet software is strongly recommended.
c. Prepare trend analysis and common sized financial statements from the condensed statements.
d. Review the condensed, trend and common sized statement of financial position. For each of your company, comment on trends in the growth of assets, liabilities, shareholders’ equity and overall financial risk. Where available, compare the two companies.
e. Review the condensed, trend and common sized statement of income. For each of your company, comment on trends in revenue, expenses, income, and overall profitability. Where available, compare the two companies.
f. Review the condensed, trend and common sized statement of cash flows. For each of your company, comment on trends in the operating, investing and financing cash flows, and overall cash position. Where available, compare the two companies.
g. Write a summary of the overall financial ‘story’ reflected in the financial statements based on your analysis.

D. Ratio analysis (3 pages of quantitative analysis plus 2-page written report)
a. For each of your company, prepare an extensive multi-year ratio analysis based on the financial statement analysis. Use of spreadsheet software is strongly recommended. Do not use every possible ratio analysis. Rather, identify the ratios that are most important to the company.
b. For each calculated ratio, comment on whether the ratio is stronger or weaker, quicker or slower, more liquid or less liquid, more risks or less risky.
c. Where available, compare the financial ratios of the two companies.
d. Prepare written report discussing:
i. What the ratio analysis reveals about the companies – financial strength, profitability, risk, etc.
ii. The companies’ profitability, efficiency, liquidity, and solvency and noting whether these measures are improving or deteriorating, and the implications for a potential investor. What does this analysis suggest about future performance of the firms?
e. Discuss the impact of accounting rules on your financial ratios if applicable. You are not required to calculate the adjustment from one accounting rule to another. But, you need to discuss what kind of bias the differences in accounting rules may create for your financial ratios, if any.

E. Research summary (2 pages)
a. This written document should summarize your research in a clear and concise manner. b. As part of this document:
i. Indicate whether the overall profitability, efficiency, liquidity, and solvency of the companies are strong, average or weak. Comment on risks associated with the companies. Support your conclusions.
ii. Summarize current events and other items of importance. iii. Make a supported recommendation to Ms. Baker: indicate which of the two companies WB should invest in. Please include three to five significant points to justify your conclusion.

Presentation (audio only, up to 5 minutes): Please put in writing what must be said for the audio presentation on a separate word document
Which of these two companies do you recommend WB to purchase? Prepare an audio presentation that summarizes your research and analysis of the companies. No presentation slides are required. Use your research summary to organize your presentation.
Be convincing – should Ms. Baker invest in company A or company B? Does your research support your recommendation?
Focus on key financial information and ratios.
Focus on highlights of your research, not a broad summary.
Make it interesting, concise, and clear. And naturally Ms. Baker expects it to be professional.

Term Project Submission:
Your submission should include two files: a PDF file and an audio file. Prepare your PDF file with the following sections, in the order indicated:

1. Title page
2. Research summary (part E)
3. Tell me about the company (part A)
4. Company news (part B)
5. Financial statement analysis (part C)
6. Ratio analysis (part D)
7. Sources
8. Appendices (spreadsheet tables):
a. Financial statement analysis: condensed and common sized financial statements b. Ratio analysis

Section Weights (%)
A. Research summary 10
B. Tell me about the company 10
C. Financial statement analysis and discussion 25
D. Ratio analysis and discussion 25
Sources 2
Professional quality – coverage, presentation, grammar 3
Presentation 25
Total 100

 

 

Sample Solution

Since the presentation of the 1990 NHS and Community Care Act it is never again a possibility for human administrations and open area associations to work in seclusion. Convenient (1997,p.18) has contended against the presentation of market standards into territories that are by and large viewed as the duty of the state welfare framework, since this could hurt the individuals who most required the assistance. This converging of human administrations with open part associations has implied that an expanding number of human administration laborers are utilized in the private segment. Human Service associations are contained medicinal staff and others, for example, executives, cooks and cleaners utilized by the NHS or in private practice, the police and probation benefits, the jail administrations, social administrations, and to a constrained degree those working in training. This task will take a gander at a portion of the impacts of current arrangements on the hierarchical structures of wellbeing/social consideration and accomplice associations. There will be an assessment of issues of intensity and imbalance in associations and an investigation of the thought of organization working. The accomplishment of such approaches will be investigated through the encounters of individuals with emotional well-being issues. Association working is most particularly important to individuals with psychological well-being issues and the Government has guaranteed more prominent focus on this in the White Paper that turned out this year, Our Health, Our Care, Our Say.[1] Associations Social administrations and Health Care are what as known as human administration associations, in other words they are there to help individuals out of luck.. Individuals working in social administrations by and large do so on the grounds that they are spurred by a craving to see that individuals get the sort of assistance that they need in the midst of emergency. Human Services work in the general population and the private area. Which ever territory an individual picks they are bound to look for some kind of employment in the human administrations on the off chance that they have had some related knowledge either work positions or some other intentional job. In social work earlier network contribution is viewed as a benefit. Most social specialists work in the open area. Social Services used to be known as close to home social administrations since social specialists are frequently worried about people and the consideration they may require. Social work is both run of the mill, and untypical, of the human administrations as a rule, initially its point is only that, giving an administration that advantages other individuals, in the second example social laborers are bound to be associated with individuals on an individual premise and regularly for a delayed timeframe. This last isn’t generally the situation in different territories of the human administrations (Postle et al, 2002). A social laborer who works in emotional wellness may wind up appended to a clinic just as to social administrations. This implies between office working which is winding up progressively basic in the human administrations particularly as the authoritative and strategy prerequisites of the1990 Care in the Community Act have progressively centered around wellbeing and social consideration offices working cooperatively with administration clients. This is progressively regular since the Government order ofJuly of last year.[2] Parliament chooses what social work comprises of. This is on the grounds that the Government characterizes the rules that framework social laborers duties. This incorporates the individuals that social specialists have a duty towards, the way wherein such obligations ought to be embraced, and the authoritative structure that supports the expert routine with regards to social work (Brayne and Martin, 1995). Social laborers need to maintain the code of routine with regards to the General Social Care Council and are bound by the 1970 Social Services Act as it applies to nearby specialists. Since 1998 social specialists are bound by law to regard the inalienable rights and poise of each human individual. Social laborers additionally must be comfortable with the 1990 Community Care Act and resulting enactment. Neighborhood Authorities are bound by the Disability Discrimination Act and a social specialist working with individuals with psychological wellness troubles would likewise need to know the provisions of this Act and the Chronically Sick and Disabled Persons Act of 1970. These educate social laborers’ choices. These may include characterizing psychological well-being challenges and in what ways their needs may best be tended to. This is especially so for Approved Social Workers. The social specialist has an obligation to play out an appraisal of requirement for anybody in the neighborhood is characterized as having a handicap, including emotional wellness troubles, regardless of whether the or not the individual demands an administration. Progressing preparing and advancement for expert social laborers is a prerequisite of the activity. On the off chance that you work in handicaps, especially emotional well-being then some social laborers may represent considerable authority in psychological well-being and work towards turning into an Approved Social Worker. Social laborers work inside a system that is educated by human rights and social equity and they should know when the code of training inside which they complete their obligations, is in opposition to the qualities basic this structure. Inside social work it is commonly acknowledged that all individuals are of worth and are qualified for be dealt with fairly and accommodatingly. Social specialists who manage clients who have psychological wellness issues presently need to work intimately with the NHS and with Voluntary Organizations, for example, Mind. Organization Working The Griffiths Report (1988) which was appointed by the Government suggested that neighborhood specialists ought to be ’empowering agents’, who sorted out and coordinated network care. Nearby specialists would never again be the sole suppliers of consideration, however would have their own spending limits to buy care from the private and willful part. This progressed toward becoming law under the 1990 Act the terms of which brought about an expansion in the weight of consideration for the social work calling. The Act accentuated organization working in all territories and social laborers presently need to counsel with experts from varying backgrounds so as to sufficiently accommodate their customers needs. The presentation of new working practices and the need for a more prominent level of between expert working has implied that the self-governance that social laborers once appreciated has been progressively disintegrated (Challis, 1991). Molyneux’s (2001)[3] investigation into fruitful between expert working built up three zones that added to the achievement of such associations. Staff should have been completely dedicated to what they were doing and individual characteristics of versatility, adaptability and a readiness to impart to others were high on the motivation. Normal and positive correspondence between experts was viewed as endemic to great working connections and administration conveyance. This correspondence was improved (in the examination) by the affectation of week after week case gatherings which enabled experts to share learning and encounters (2001, p.3). Convenient (1993) has contended that so as to work effectively together associations need to discover ideal or win/win arrangements instead of have their exchanges end in inefficient clash. A noteworthy issue with between expert working in associations is that the two sides can end up cautious of their positions (See Handy, 1993 ch.12). This is especially the situation when individuals are approached to accomplish something that conflicts with their expert morals and convictions (see ch.15). In this manner a social laborer would not be content with arrangements that didn’t, in their view, serve to enable customers with psychological well-being challenges. The consideration and strengthening of this customer gathering is a focal element of the 2006 White Paper which guarantees continuous consideration for those with psychological well-being troubles as well as for their carers as well.[4] These contentions are supported by Laidler (1991) on the grounds that so as to be effective crosswise over expert limits individuals should be certain of their own proficient job so as to have the option to step outside their expert independence and work effectively with others. It helps in between expert working if all individuals from the group are especially centered around the necessities of the administration client. Thusly individuals reach ‘proficient adulthood’. As indicated by Norman (1999) psychological wellness experts working inside groups were hesitant to obey choices taken by others since it undermined their very own proficient judgment. It doesn’t improve the situation when the Government focuses on the requirement for between expert working and afterward sets separate execution targets, as opposed to coordinated gathering ones. Hudson (2001) keeps up that since government has been worried to organize decision and present challenge in open administrations this has left experts with sentiment of frailty and an absence of confidence in authoritative foundation. It would be a pitiless incongruity if, having accomplished the sacred goal of neighborhood coordinated working, the administration, with Sedgefield’s nearby MP at its head, presently sets up measures that outcome in its disassembling (Hudson 2005 no page number).[5] Simultaneously Government anticipates that social consideration and wellbeing experts should work intently and cooperatively with administration clients. In social administrations there is very much an emphais on urging the client to take part in choices with respect to their consideration. In the NHS in any case, numerous experts still work with the possibility that the patient does as the expert lets them know. This makes it hard for social specialists who are urged to reduce the power differential among themselves and administration clients, this implies participating in hostile to harsh practice for example available language, and doing what they can to enable people. Social Services and Mind Psyche is a philanthropy that works for those with emotional wellness issues. The philanthropy focuses to the way that the correct sort of social consideration can go far to easing the pressure that emotional well-being troubles may bring, and which are frequently disregarded. As of not long ago psychological well-being clients gotten just a modest quantity of social consideration

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