In
this project, you will use your understanding of financial, as well as
managerial, accounting to prepare an analysis of the performance of two
competitors within the same industry. To prepare your analysis, you will use
Microsoft Excel and data from the internet. Then, you will communicate
the results of your analysis in a written report. Thus, this project will help you build your
critical thinking, technology, and communication skills.
Find
information on your company, and its competitor, at www.msn.com/money, following these
steps:
1.
In the search bar that reads Search stocks,
ETFs, & more type the name of your company. The “ticker,” a one to four letter identifier
(such as AAPL for Apple Inc.), along with your company’s name will begin to
appear.
2.
Select your company’s name. The latest stock quote along with the graph presenting
the stock price movement for your company will appear on your screen. In between the quote and graph is a menu bar
with the SUMMARY item
highlighted. Select the menu item ANALYSIS.
3.
Right below this menu bar is another menu bar,
click on Key Ratios if not already highlighted. After clicking on Key
Ratios, just below it there are several more options to click on
including Per Share Values, Growth Rates, Profitability, Valuation, Leverage
& Liquidity and Efficiency. Under each of these options there are
several ratios you will be looking at. For example, under the Efficiency option
you will find the asset turnover and inventory turnover ratios for your
specific company.
4.
By clicking on a specific ratio, for example Asset
Turnover which is located under the Efficiency tab, a graph will
appear and you will be able to compare your company’s ratio to the industry
ratio. For example, Amazon is in the diversified retailer industry, and they have
a lower asset turnover ratio compared to the industry average.
5.
To select a competitor for your company in the
same industry, under each ratio graph there is Compare button along with
some competitors listed to the right of the button. See screenshot below if
needed. By clicking on one of the competitors, another graph will appear
where you could compare your company’s ratio to the competitors. For example,
using Amazon as your company, click on the Efficiency tab, you can then click
on Asset Turnover ratio, under the asset turnover chart click on one of
the competitors (TGT or BBY for Amazon) than you will be able to compare
ratios. All competitors should be in the same industry as your company.
Please
enter on your spreadsheet, the following information for your company, and the
competitor selected, for the most recent 2 years.
A.
Using the
Financials option on the menu, and
then the Income Statement and Balance Sheet options which then appear
below the top menu:
a.
Total Current Assets
b.
Total Fixed Assets
c.
Intangibles
d.
Total Current Liabilities
e.
Long Term Debt
f.
Total Shareholder’s Equity
g.
Revenues
h.
Cost of Goods Sold
i.
Gross Profit (also referred to as Gross Margin)
j.
Operating Expenses
k.
Net Income (also referred to as Net Profit)
B. As mentioned above (or by
calculating from the financial statements for your companies), enter the
following financial ratios, for your company and its competitor for the past 2
years.
a.
Current
Ratio
b.
Leverage Ratio (financial leverage)
c.
Gross Profit (Gross Margin on the site)
d.
Return on Equity
e.
Return on Assets
f.
Return on Sales (Operating Margin)
g.
Asset Turnover
h.
Inventory Turnover
C. Analyze the
profitability of your two companies:
a. Which company showed the greatest improvement
(or least decrease) in profitability as measured by ROA?
b. Which company showed the greatest improvement
(or least decrease) in profitability as measured by ROE?
c. Are your answers for (a) and (b) different?
d. If yes, why?
D. Analyze the
productivity of your two companies:
a. Which company showed the greatest improvement
(or least decrease) in productivity as measured by Asset Turnover?
b. Based on the available information what would
you say was the biggest cause of this increase (or lesser amount of decrease)
in productivity?
E.
Estimate Cost Structure of the 2
companies. Use the ratio of current
assets to total assets as an estimate of the cost structure.
i.
Which
company has a higher fixed cost structure?
j.
In this exercise, do you think that the current
ratio is a reasonable representation of the relative cost structure of your two
companies? Hint: This would depend on the nature of the
non-current assets of your companies.
k.
Is the year-to-year change over the past 2 years,
in the same direction for the 2 companies?
l. Given
the relative cost structures of the two companies, and the change in sales for
the 2 companies, what would you have expected for the change in Gross
Profit? An increase? Decrease?
Why?
Please submit your completed Spreadsheet
using the Assignment function in Blackboard.
Spreadsheets will
be graded based on the accuracy of your computations, proper use of formulas,
and professional appearance. Late or incompletely submitted assignments will be
penalized by 10% per business day.