US public firms in the same industry

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You are the CFO of a major company. Your CEO keeps an eye on the competition, and asks you to do the
following analyses:
Instructions:
You will be assigned a pair of US public firms in the same industry. The firm names are Home Depot and Lowes. These two firms are comparable in terms of
size and other operating characteristics.
A) Select at least 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. (a sample project in Excel
file will be posted to the classroom early in the semester for your reference.) Create a comparison
chart for these ratios for 2 years for each company. Explain how you calculated each
ratio. Explain what each ratio should mean to management. Using ratio analysis, compare two
major competitors in the same industry.
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 Finance and MSN Money.
There is an example posted in the file attached for your reference. The “Compare”
worksheet shows comparison of ratios, however it does not include the required words
about how the ratios were calculated nor does it include what the numbers mean for
management.
You will note that the W and C worksheets are used to calculate average balance sheet
numbers. These are useful when there are large year to year changes on the balance sheet.
If 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 or may not allow excel to
calculate ratios. The company website usually lists Excel file of its annual report.
Create a single Excel file for your calculations, and cut and paste relevant pages to your Word
and/or PPT file. You need to submit this Excel File, together with the final report. 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?
You may obtain financial information and the companies’ latest annual reports on 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.
What can you tell from your analysis? What are the strengths and weaknesses of each
company? Which is the stronger competitor? Give your reasons.
B) Describe any industry specific accounting problems and practices. Tabulate and compare
the accounting methods chosen by your firms in their most recent financial statements.
How do these choices affect the ability to make comparisons among firms? Compare the
most important financial ratios for your set of firms. How is this comparison affected by
your firms’ accounting choices? What do these ratios suggest about firm strategies within
the industry? If you were making stock recommendations, would you recommend
buy/hold/sell on any of these firms? Why, or why not?
You should support your analytical inferences with figures/computations, making valid or
reasonable assumptions as necessary. Your analysis should explore (in depth) the risks,
accounting and/or market returns, strengths, opportunities, uncertainties, threats, etc., that face the
company.
C). 3 files to be submitted by the last day of the class.
a. 15-page Word file: the final report, including tables, graphs and references.
b. 10-slides PPT file: summary of the project
c. A single Excel file for ratio computations and industry comparison.

Sample Solution

ooking at legislation in the abstract) and regulatory ‘dexterity’ (looking at legislation in detail). Framing involves ‘the social construction of reality’. It is an issue ‘which invites interpretation’ and ‘is likely to differ substantially depending on the interests of those involved’ . This underpins a key issue with fracking in the UK; regulatory ‘domain’ and regulatory ‘dexterity’ are ways in which the Government can ‘frame’ fracking issues in a way that promotes their aims, often at the expense of due process, the health of the environment and the health of the British public, as will be exemplified throughout this essay.

When applying arguments of regulatory ‘dexterity’, the Government places emphasis on the market-transforming potential of a new supply of shale gas . These arguments are used to promote fracking as a positive innovation that has different end products and new benefits compared with traditional gas production . The focus of the Government is to eliminate regulation that inhibits its development of fracking. It can therefore be argued that in doing so, the Government is not ensuring that fracking is adequately regulated as the focus is placed on speeding up the fracking process, rather than guaranteeing the protection of the environment and population’s health from the risks of fracking.

The Government has decided to leave much of the substantive rules as they are while making new provisions for implementation . An important example of ‘regulatory dexterity’ is the Finance Act 2014. This Act results in an effective tax rate of 30% as the new onshore allowance exempts a portion of profits from the supplementary charge . Before this Act, profits from oil and gas extraction were taxed at a total rate of 62% . This tax reduction provides clear motivation for industries that can consequently make a higher profit from the fracking industry. This is concerning as it encourages companies to rush to start fracking.

The Government has introduced two pieces of secondary legislation in order to streamline the planning procedure . This demonstrates the insufficient level and quality of regulation in England concerning fracking as the ‘new’ regulations being introduced make it easier to frack and have not been given the appropriate level of scrutiny . This demonstrates the urgency felt by the Government to reform certain aspects of regulation that cover fracking. It also suggests that ‘regulatory dexterity’ often leads to requirements of due process not being fulfilled and a manipulative use of delegated legislation that allows changes to go almost unnoticed.

The Government uses regulatory ‘domain’ in order to create an environment in Britain where it is easier for fracking to commence. The Government claims the general regulations that are already in existence, found in The Petroleum Act 1998 for example, are broad enough to cover fracking so new and specific regulations are not necessary. The lack of data around fracking means that the Government cannot be sure that these regulati

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