BJECTIVE The specific objective of this graded written research exercise is to prepare an "executive level financial report" to the Chief Financial Officer (CFO) of a mythical company in which you are employed as a financial analyst. This report will pertain to the financial evaluation of a real, publicly-traded, company. It will require independent research (web-based or library), careful financial analysis, and the proper application of key financial theories and formulas. The company that is to be analyzed for this project will be selected by the student. SITUATION You are a financial analyst with the mythical High Technology Corporation ("HTC"). HTC is an established manufacturer of a line of electronic components, which services an international market. HTC is currently a new fully-integrated wireless communication service for world-wide use. A competitive technical and economic product evaluation has determined that THE COMPANY THAT IS TO BE ANALYZED (a real publicly-traded company) is the best potential candidate for a long-term commitment. THE COMPANY (COMPANY SELECTED BY THE STUDENT) is offering a competitively favorable deal. However, based on some serious general concerns about the fallout of companies in the industry in general, the CEO has asked your CFO to conduct a financial analysis of THE COMPANY to determine if it is prudent to commit to this company's communication system. The cost of cutting over to the new communications system is significant and any interruption in support during the next few years would adversely affect HTC's performance and profit. Specifically, the question is: will THE COMPANY be financially viable over the next two to three years? YOUR SPECIFIC ASSIGNMENT Your specific assignment is to research, analyze, and prepare a report for the CFO on the actual financial performance of THE COMPANY. In addition to reviewing the traditional financial performance indicators, you are also to review THE COMPANYS past and current stock performance. Your report includes three parts: (1) An evaluation of THE COMPANYS financial performance for the last three years. DuPont analysis and analysis of significant financial performance results are required for the last three years. (2) An evaluation of THE COMPANYS stock performance for the last one year. (3) Finally, a specific recommendation, with supporting rationale, as to whether or not THE COMPANYS recent trend in financial and stock performance is of sufficient financial strength to warrant entering into a long-term commitment. To assist you in your task, the CFO has provided the following general guidance. Since it is recognized that the industry is undergoing a major contraction, it is very important to comparatively evaluate THE COMPANYS financial and stock performance trends against its Industry. You may wish to include all necessary and relevant financial performance and stock information, trends, and projections in supporting your recommendation. These factors may include, financial ratio trends and industry comparatives, capital spending, stock growth, Beta values, credit rating service valuations, bond rating valuations, and management and investment reports - when these documents are available. REPORT REQUIREMENTS YOUR SPECIFIC ASSIGNMENT Research and analyze the following information for THE COMPANY: --Annual Balance Sheets for THE COMPANY for the last three years. --The Income Statements for THE COMPANY the last three years. -- Annual reports, 10K or 10Q------ --Industry norms ----------- ---Analysts reports on performance -- Management reports or press releases Using this information the students have to develop evaluation of the financial performance for THE COMPANY. (Totally 85% of the assignment grade) -1Background and Industry (one short paragraph). -2Select of most significant financial performance results for the company: Compare Revenue, net income, working capital, total assets for the last three years and other results of your choice of the company against the industry or main competitor. Present the table with this information in your report. Write about 1 page of the analysis of these financial performance results. (15% of the project grade) -3Find financial ratios for the company and its major competitor in the Internet. Write about 1-2 pages of analysis of the ratio results you received. (15% of the project grade). Compare the ratio results against the industry or main competitor. Write about 1 page on your analysis of the ratios. -4- Evaluate Return on Equity for the company for the last three years using the DuPont analysis. (10% of the project grade). Compare the companys results to a major competitor. Taking the information from the Income statements and the Balance sheets, calculate the companys return on equity using the DuPont technique for the company for three years. Show your calculation! Write about 1 page of analysis of the results that you received. Compare the results to main competitor. If the management of the company would like to improve their return on equity, what should the management of these companies do? -5- Evaluate other areas of financial analysis: capital spending, stock growth, Beta values, credit rating service valuations (if possible), bond rating valuations (if possible), etc. Make an overall conclusion about financial performance of the company during the last years. Compare the results that you received against the industry or main competitor. Summarize the results that you received in 1 page. What are the firms financial strengths and weaknesses? (10% of the project grade) -6- Collect and evaluate the data about stock performance of the assigned company's for the last one year. Compare the results that you received against the industry or main competitor. Write about 1-2 pages of analysis of the stock results you received. (20% of the project grade). -7- Develop a specific recommendation, with supporting rationale, as to whether or not the assigned company's recent trend in financial and stock performance is of sufficient financial strength to warrant entering into a long-term commitment (about 1 page) (15% of the project grade)