The

Corporate Analysis Project (CAP) provides you with the opportunity to analyze corporate performance using financial and other information reported primarily by the firms. Your focus will be on analyzing two multi-national companies operating in the same industry. Organizations do not manage income statements and balance sheets; they manage markets and products and distribution channels and people, to name just a few areas of management decision making. However, the results of business strategy and managerial decisions are reflected on the financial statements of the organization, and the financial statements are often referred to as the language of business. Managers involved in decision making need to be able to understand and utilize financial information reported by the managers company, its business partners, and the competition. By learning how management decisions are reflected in the financial statements of the firm, the potential impacts of decision making can be better understood. The CAP is designed to: broaden your knowledge of the information contained in a firms financial reporting system, provide experience with analyzing financial statements, help you to recognize differences (and similarities) between US and international financial reporting, if any of your companies is non-US, give you in-depth knowledge of an industry and two important firms operating in that industry, and improve your ability to communicate complex financial information. Your choice of industry/companies is restricted to companies that are publicly traded and that make or retail products. Because of complexities in reporting requirements the following broad industries are not eligible for the CAP: governmental, utilities, and financial institutions. You also may not select the following companies: Ducati, Coca Cola, Pepsi, Apple Computer or Danone. You must submit your industry and company choice for approval, prior to beginning your CAP. The CAP is a team-based exercise. I do not recommend a divide and conquer strategy for the assignment. Due dates (please submit hard copies to Prof. Wisner): 8/28 General Assignment 9/4 Income Statement Analysis (draft) 9/20 Balance Sheet Analysis (draft) 10/4 Final project this will encompass the final versions of all project components

Corporate Analysis Project BA 505: Financial Accounting

Corporate Analysis Project BA 505; Fall 2012; Dr. Wisner

General Assignment Describe the firms that are the focus of your analysis: Describe the general nature of each firms business. Describe the management team (Chairman and CEO) of each firm. Where is the firm headquartered? What is each firms international footprint? What is their per-share price (in home currency and in USD) on August 23, 2012? What was the stocks high and low price during the past 52 weeks? Why did you select this industry and these firms for your CAP? You have a total of $100,000 to make an investment in one of these two companies. Which company would you invest in? Note: Page limit of 1 page. This memo should be written in a business context; do not use a Q and A format.

Corporate Analysis Project BA 505; Fall 2012; Dr. Wisner

 Note: Do not just report data. This analysis should include discussion about what factors drive revenues and costs in this industry or for these companies. Where outcomes change significantly year-over-year or are markedly different between companies, you should do some research to determine why the differences have occurred.

Income Statement Analysis For each company: Create a common-sized statement for each of the past three years (include both amounts and ratios for each line item on the statement). Create a chart of the following information for the most-current three-year period: Revenues Gross margin Earnings before Interest and Taxes Operating margin Net income Discuss the following: 1. Revenues a. What does this firm sell? Are there segments or categories of revenues reported? b. What is the increase in revenues for each firm over the past three years? Discuss this both in amount and percentage of the change. Discuss any possible reasons for a significant difference between the firms. c. What is the breakdown of revenues between geographic areas? Between segments? 2. Gross Margin a. How has the gross margin changed over the past three years? b. What is the breakdown of gross margin between geographic areas? Between segments? 3. How has the operating margin changed over the past three years? 4. What income statement items comprise the difference between Operating Margin and Net Income? Are they significant? 5. What is the statutory tax rate for corporations in your firms country? What effective tax rate was paid by each firm? Why do the effective rates differ from the statutory rates? 6. If Net Income differs from Other Comprehensive Income, discuss why. 7. How do the results of each firm compare to the industry average? 8. Include any other discussion relative to the income statement that you consider relevant.

Corporate Analysis Project BA 505; Fall 2012; Dr. Wisner

Balance Sheet Analysis For each company: Create a common-sized statement for each of the past three years (include both amounts and ratios for each line item on the statement). Focus on Assets What % of the firms assets is in cash or short-term securities? Describe the allowance for doubtful accounts ($$ and % of accounts receivable). Comment on the average age of the companys physical assets. How much has the company spent on capital expenditures in each of the past three years? Has the firm sold any capital assets? How much was received for the sale? How much was the gain or loss on the sale of these assets? What inventory valuation method is used by each firm? Does the firm face inventory risk? How much Goodwill is reported? What were the transactions that resulted in Goodwill being recorded? Focus on Debt What is the amount of current liabilities? How much long-term debt does the firm have? How much of that debt is in loans, and at what average interest rate? How much of the long-term debt is related to pension expenses? Does the firm report any contingent liabilities? If so, describe. Focus on Equity Preferred and common stock o How many shares of stock are issued / outstanding? o What is the average price paid per share of stock outstanding? o What is the market price of one share? Treasury Stock o How many shares of stock (and at what value) are in Treasury Stock? o What is the average price paid per share of Treasury Stock? o Has the company bought its own stock in the past three years? What amount in dividends did the firm pay in each of the past three years? Calculate and discuss the following financial information: Working capital: o Working capital balance and ratios (current and quick) o Inventory Days o Accounts Receivable Days o Accounts Payable Days o Cash Conversion Days o Working Capital Turnover
Corporate Analysis Project BA 505; Fall 2012; Dr. Wisner 4

 Note: Do not just report data. Discuss your findings in a business context.

o PP&E Turnover Return on Assets (show all components) Return on Shareholders Equity (show all components) Debt to Equity ratio Earnings per share Price-earnings ratio Dividend payout ratio

Corporate Analysis Project BA 505; Fall 2012; Dr. Wisner

Statement of Cash Flows Analysis For each company: Analyze the statements for the past three years. Focus on Operating Activities How much cash was generated (used) by operating activities? What adjustments were made to net income in the CFO section, and why? Comment on any significant adjustments. How did the following actions impact CFO? Comment on any significant changes. o Changes in inventory o Changes in accounts receivable o Changes in accounts payable Comment on any significant year-to-year changes in this section. Focus on Investing Activities How much cash was generated (used) by investing activities? Comment on any significant year-to-year changes in this section. Focus on Financing Activities How much cash was generated (used) by financing activities? Comment on any significant year-to-year changes in this section. General Calculate and discuss the following: o Free cash flow o Debt coverage ratio Note: Do not just report data. Discuss your findings in a business context.

Corporate Analysis Project BA 505; Fall 2012; Dr. Wisner