In this project, you will present a report to a potential investor that will persuade them to invest money in a company.You will prepare a report that summarizes the financial position of the company as outlined in the instructions below.Additionally, you will include a PowerPoint presentation that you would use in a meeting with investors to illustrate the desirability of investing in this company.
The complete report is due at the end of the course, however, there are due dates for specific sections noted throughout the course.Please make sure to upload assignments to the dropbox prior to the deadlines for submission.Use separate files for Word documents and the PowerPoint presentation.
Here are the specific instructions for the format of the annual report project.
In this project, you will write and present an in-depth analysis of the company you choose.I have provided a list in D2L of companies you might consider for your project.If you choose a company that is not already on the list you are required to submit that company to your instructor for approval.For my online classes “present” means you will provide a PowerPoint presentation of your report. This is an application of what you will have learned from class lectures, homework assignments, and your own research. Each student will electronically submit a written report in the appropriate D2L dropbox.
The maximum point value of this project is 70 points. Late submissions will not be accepted.
Your report should be typed, with one-inch margins all around.Double-space all of the report except charts and tables.Please use proper grammar, spelling, and punctuation.When using pronouns to refer to your company, please use “it” or “its,” not “they” or “their.”Your final report should be closely proofread, since poorly written or typed reports will affect your grade.You may use charts and tables to summarize data when appropriate; otherwise, use sentences and paragraphs for narratives and comments. (I do not specify a length requirement, but Sections 2-7 should take from 6-10 pages to cover adequately.)
Selecting a Company and Gathering Initial Information
It is very important that you obtain an electronic copy of your company’s latest forms 10-K and DEF 14-A from the Securities and Exchange web by the second week of class.Submit these to the dropbox by the requested date!
Chapter 14 of your textbook provides valuable information that is pertinent to the preparation of your report.Please read this chapter early in the semester (chapter 14 is only available in the ebook).We will briefly cover some of the ratio information contained in Chapter 14 in other chapters, but there is other information in it that will be helpful to you.You are expected to incorporate a minimum of six financial ratio for your company, using the ratios to compare your company’s performance to one of its competitors.
Note that the dollar figures in the financial statements of your annual reports will be presented in either thousands or millions.If your dollar amounts are listed in thousands, add 3 zeroes to get the actual amount.If your dollar amounts are in millions, add 6 zeroes. When asked to present amounts in your report, please use the actual amounts, in order to get an idea of the true size of your company.
The report should contain the following information in the specified order.
Section 1 - Cover Page
Include the name of the firm, your name, and the due date of the report.
Section 2 - Introductory Section
A. Company name, industry, internet address of the company, SIC code (or NAICS code), major products or services, names of at least two competitors, stock exchange on which the company’s stock is listed, ticker symbol, and name of outside auditors.
B. Brief history of the company.
C. Brief summary of products or services provided by the company and a description of the company’s target market.What do you think the outlook is for these products or services? Why do you think so?
D. Strengths and weaknesses of the internal environment in the areas of corporate structure, corporate climate, and corporate resources. This section should contain a short paragraph for each strength and weakness noted (minimum of two strengths and two weaknesses).
E. Opportunities and threats in the external environment, in the areas of the industry environment and its macro environment. This section should contain a short paragraph for each opportunity and threat noted (minimum of two opportunities and two threats).
Section 3- Results of Operations
A. List the net sales for the current year and past year.By what percentage have sales increased or decreased in each of the last two fiscal years?
B. List the net income or net loss for the current year and past year.Is your company profitable?
C. Did the current year’s net income increase or decrease since the prior year? By how much? What caused the change?
D. What do you expect the company’s future earnings to do?Why?
E. Did the company report any special, unusual, or otherwise nonroutine items in either current or prior year net income? If so, explain the item(s).
F. Executive compensation — list the total compensation for each of the top five most highly compensated executives of the corporation for the past 3 years (consider creating a table to present the executive compensation by year for the top executives). In light of the company’s performance during that same time period, do you think the amount of compensation was reasonable?Why or why not?This information is contained in the company’s latest DEF 14A filing with the Securities and Exchange Commission.
Section 4 - Assets
A. Inventories:Describe cost flow assumption(s) used by company. You should be able to find this information in the accounting policies note to the financial statements.
B. Property, Plant, and Equipment:Identify the method or methods of depreciation used by your company. You should be able to locate this information in the accounting polices note to the financial statements.
C. List the long-term asset and the current asset totals for the 2 years presented in your company’s annual report.Does your company have more long-term assets than current assets?(Note -- for our purposes, anything not a current asset is a long-term asset.)Is it growing in terms of increases in long-term assets?
D. If there have been major purchases, has your company financed them through debt, equity, or internally?
E. Which of the following is the company’s largest asset category: accounts receivable, inventory, or land? What is the amount of that asset category?
F. If the company has any intangible assets, what kind are they?
G. Did the company report any contingent liabilities (“contingencies”)? If so, briefly explain.
Section 5 - Capital Structure
A.List the total liabilities and the total stockholders’ equity for each year presented in your balance sheet (no detailed information, please). Which are greater, liabilities or equity?Comment on how the mix of liabilities and equity relates to your company.For this comment, look at all of the years that are presented in your annual report—there should be at least five years presented in summary form.Are liabilities and/or stockholders’ equity growing or shrinking?How has this relationship changed over time?
1.List the types and number of shares of authorized and outstanding common stock for the current year and previous year.
2.Does the company’s common stock have a par value? If so, what was it?
3.Does the company have any preferred stock authorized? If so, how many shares were authorized and outstanding?
4.Does the company have any treasury stock?If so, list the number of shares presented for the current year.
5.List the stock market prices shown in the annual report.This information should cover at least each quarter for the past 2 years (consider creating a table to present the stock price by quarter for two years).
6.Did the company pay cash dividends during the current year? If so, how much were they?
7.If the company paid cash dividends, what percentage of net income were the cash dividends? If the company did not pay cash dividends, why do you think it did not?
Section 6 - Cash Flows
List the total amounts for operating, investing, and financing cash flows for each of the past three years.Then comment on each of the following:
A.Operating cash flows:Have the operating cash flows been positive? Have they increased or decreased over the past three years? Are the operating cash flows sufficient to meet cash requirements, or must your company obtain cash from financing in order to meet its cash requirements? You should explain why cash flows from operations are more or less than net income.
B.Investing cash flows:Have the investing cash flows been positive or negative over the past three years?What does this tell you about your company?Discuss the specific sources and uses of cash in this area.
C.Financing cash flows:Have the financing cash flows been positive or negative over the past three years?How has the company been financing activities?Has your company issued new stock, obtained new debt, or retired debt?Did your company pay dividends?
Section 7 - Ratios, Summary & Conclusions
Calculate the following ratios for you company and a competitor for two years.Present your calculations in a table.
Working Capital = Current Assets - Current Liabilities
Current Ratio = Current Assets ÷ Current Liabilities
Inventory Turnover Ratio = Cost of Goods Sold ÷ Average Inventory
Debt-to-Equity Ratio = Total Liabilities ÷ Stockholders' Equity
Net Margin (Profit Margin) Ratio = Net Income ÷ Net Sales
Gross Profit Ratio = Gross Profit ÷ Net Sales
Asset Turnover Ratio = Net Sales ÷ Average Total Assets
Return on Equity = Net Income ÷ Average Total Stockholders' Equity
Stock market ratios:
Earnings per Share = Net Earnings ÷ Average number of outstanding common shares
Price/Earnings (P/E) Ratio = Market Price Per Share ÷ Earnings Per Share
Your ratio analysis should include one or two paragraphs discussing the performance of your company vs. the competitor as shown by the 10 ratios; discuss trends and meanings.
Summarize your analysis of the firm and comment as to whether or not it is a company in which you would invest.Why or why not?The summary and recommendations should be a minimum of three paragraphs detailing your overall evaluation of the company.
Do not shortchange this section.Your summary and conclusions are the most important part of the report!Be thorough!
Section 8 - References
List the references used in preparing your report.
Section 9 - Secondary Stock Market Activity
Include as an exhibit to your report the daily stock prices for the 60 days preceding the date of your report.Comment on stock prices.In addition to listing the stock prices for 60-days, create a graph to visually display the stock prices.
The project will count for 15% of your overall course grade.
You should go into the dropbox and view the grading rubrics I will be using to grade your project.Ensure you thoroughly cover each area in your report for full credit (address each question in the instructions).
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