MG 670 Finance Term Project
Click Link Below To Buy:
Contact Us:
Hwcoursehelp@gmail.com
MG 670 Finance Term Project
Company : Costco and Walmart
MG 670 Finance Term Project Guidelines
There is a lot to be said for
valuing a company, it is no easy task. If you have yet to discover this
moneymaker, the satisfaction one gets from tearing apart a company’s financial
statements and analyzing it on a whole different level is great – especially if
you make or save yourself money for your efforts. In this project, you will
analyze the fundamental financial ratios. The ratios should be presented in a
simplified manner to make them easier to understand. Sure some of the ratios
have different varieties, but by the end you will understand the basic premise
and reasons for fundamental analysis.
|
You will work in groups of
three or four people for this project. You will be analyzing two public
traded companies within the same industry; as well, you will also evaluate
these companies against their industry standards for performance. To find the
data for your ratio analysis, you will need each company’s latest financial
figures. Finding these financial reports can done by searching the internet
through some of these sources, but not limited to:
Company Websites – Almost every public company has a website or
investor relations department. For the most current quarterly or annual
report you might want to check in these places first. Walt Disney is an
excellent example of a company that
|
|
uses the web to get
information out to shareholders and prospective investors. It takes no time
at all to find their investor relations section.
Securities and Exchange
Commission (SEC) – The information
posted in the electronic gathering, analysis and retrieval (EDGAR) database
includes the annual report (known as the 10–K), quarterly report (10–Q), and
a myriad of other forms that contain every type of financial data.
Yahoo! Finance – A touchstone for many individual investors, Yahoo!
Finance is a great resource for financial news, and lays out ratios and
performance data for individual companies.
Hoovers.com – A great site for company analysis; some of the
data requires a subscription.
|
For your financial analysis:
For each company, you want to calculate
three ratios in each other the following areas:
A)
Liquidity analysis
B)
Efficiency analysis
C)
Profitability analysis
D)
Leverage analysis
E) Market–value analysis (may
want to include a dividend ratios)
The above areas are covered in
Chapter 4 of this course.
For each company, you want to
perform an analysis on its’s growth and financial strength:
A)
Level of risk (standard deviation) for their stocks prices
B)
Systematic Risk: Beta
C) Correlation coefficient
(relationship between two variables)
The above areas are covered in
Chapter 7 of this course and your Statistics course. Detailed steps to follow
for this area is below:
1. Data retrieval and
computations. Since the data collection process may sound somewhat confusing, I
have illustrated some of the data collection process results for American Eagle
Outfitters (AEO) on a spreadsheet that is uploaded with this project. Please do
not use American Eagle Outfitters for purposes of your analysis. Note that no
formulas are included in the American Eagle Outfitters spreadsheet but I need
you to use Excel formulas or functions (and be sure I can see them) in the
Excel sheet that you submit. Values in parentheses, below, represent the values
assigned to each question for grading purposes. Include your spreadsheets and
formula spreadsheets in Section VIB of your written report.
a. You will use the two stocks
of your companies. You will need stocks for which at least four (4) years. If
your companies do not have 4 years of data, then select two other companies for
purposes of this assignment. Download the data into Excel. You should have 49
separate dates and monthly closing prices.
b. In this step, you will
compute the gain or loss for each “year” from price appreciation. To do so, use
this process. If the earliest date for which you have a price was June 1, 2008,
then you would compute the gain or loss due to price increase or decline for
the stock for the first year from June 1, 2008 to June 1, 2009. Your second
year would have been from July 1 2008 to July 1 2009, etc. Use Excel
formulas/functions to compute the gain/loss due to the stock price change for
each year. When you have done so, you will have 37 yearly gain or loss amounts.
c. Remembering that a second
way to profit on a stock is through dividends
will also need dividends per
share for the years. Those can be obtained from the bottom of each company’s
income statements. Your goal with respect to dividends is to get them aligned
with your gains/losses (computed in part b). To achieve that, on the same row
as each of those gains/losses, enter the dividend
3
amount for the
year in which the month of the year occurs. So for the above example, next to
the price gain or loss for the year ending June 1, 2009, write the 2009 dividend
amount. Note that many companies report dividends quarterly, so taking
dividends from the Income Statement is not entirely accurate but it is a close
enough approximation for our purposes. Again, refer to my AEO spreadsheet if
you need guidance.
d. Use Excel
to compute the total return in $ for each year for both stocks.
e. Write a
formula in Excel so that it computes annual rates of return for each stock for
each of the 37 years.
f. Use the
appropriate Excel functions to compute the mean and the standard deviation (SD)
of your rates of return for each of the two stocks. You will have a single mean
and a single SD covering the 37 yearly returns for each stock (so 2 means and 2
SDs). For full credit, I should be able to see all of your formulas/functions
in Excel.
g. Use the
appropriate Excel function to compute the correlation coefficient of the mean
returns between the 2 stocks. I should be able to see all of your
formulas/functions in Excel.
2. Once you
have done all of the foregoing, you will be in a position to answer the
following questions in the written part of the paper (Section in the “Set–Up
for written portion of the project”) which are based on the data/statistics
that you now have in front
of you.
a. Based solely on your calculations,
do you see evidence of the risk/return tradeoff? Explain how you can tell.
Don’t “force” the answer – report what you see in your calculations – but make
clear that you understand the RR tradeoff. (Section VIB)
b. Which type of risk does
diversification help to manage? Explain. (Section VIB)
c. Beta and standard deviation
are common measures of financial risk relative to stocks. Yet, each measures
risk in a way different from the other – each measures risk against a different
standard. Explain. (Section VIB)
d. You will not achieve full
diversification with only 2 stocks, but for purposes of this answer, consider a
portfolio of only these 2 stocks. If your goal is to have a diversified
portfolio consisting solely of these 2 stocks, based solely on your
calculations, are the two stocks that you chose for purposes of this analysis
good choices in a diversified portfolio? Why or why not? (Section VIIB)
e. Based solely on your
calculations, which of the two (2) stocks is riskier? How can you tell? What do
you mean by risk in this context? (Section VIIB)
4
Set–up for the written portion of the project
I. Table of Contents
II. Executive Summary
III. Each Company’s History &
Background
IV. The Purpose of this study
V. SWOT Analysis on each
company (Strengths, Weaknesses, Opportunities, & Threats)
VI. External Analysis
A. Financial Ratios
B. Growth/Financial strength (including
your spreadsheets and the formulas used in Excel)
VII. Results/Conclusions:
Overall summary of financial analyses
A. Financial Ratios
B.
Growth/Financial Strength
VIII. Recommendations: Based off your
analysis, if you were a manager of a corporation, which of the two company’s
would you persuade your firm to invest in? Why?
IX. References
APA style:
Your assignment should take the form of (a) a word document which addresses the
explanations and (b) an Excel spreadsheet that contains the data and
statistical analysis. You may insert pictures from various sources if you
believe that enhances your discussion (e.g. graphs form Yahoo Finance, or
whatever you feel helps to illustrate your findings). Please observe APA style
in all respects, including in text citations and the reference page.
Set–up for
the PowerPoint presentation of the project
- 12–minute group presentation
- 2 minutes for answering questions
- 10–12 slides that feature parts III through VIII from above
(minimal presented on Part III & V: History, Background, and SWOT analysis;
this is a finance project)
- Main points to each area above (no calculations needed);
major bullet points that you elaborate during the presentation
- Not too much literature on each slide and no reading
directly from your notes
- Every group
member must contribute to the presentation
No comments:
Post a Comment