Financial Analysis Project for company name ---Saputo

Project Requirements and Instructions Sheet

Objective

In accordance with the Knowledge, Skills and Abilities objectives of the course, you are required to evaluate the financial performance of a publicly traded and write a 10 page (excluding appendix and other supporting documents) report on your findings. This event will help participants develop the ability to understand, analyze, and make decisions based on financial information—these skills are essential to every professional business career.

Description

You will be analyzing your company’s annual report (10-K filing), which serves as a “résumé” of a corporation. Much of the information provided in corporate annual reports and in the 10-K is dictated by Generally Accepted Accounting Principles (GAAP) and by the Securities and Exchange Commission (SEC). Specifically, GAAP requires annual reports to disclose four financial statements: a Balance Sheet, a Statement of Cash Flows, an Income Statement and a Statement of Retained Earnings.

Therefore, the main responsibility of this project is to draw conclusions from the data that has been gathered, determine the relevant position of each of the corporations in all of the analyses performed, and do so in a way that is understandable to others. Therefore, you must prepare a prospectus of not more than ten (10) pages, excluding the title page that describes your analysis and recommendations.

A prospectus is a short description of the analysis and must include the following sections:

1. Executive Summary

2. Horizontal Analysis

3. Vertical Analysis

4. Ratio Analysis

5. Conclusions/Recommendations

You are free to obtain your company’s financial data from other sources in the library or the company’s website. However, the data may be different and you may not find the congruent information and results.

Learning Outcomes

In addition to developing and demonstrating specific knowledge through the development of a financial analysis to business and/or financial professionals (judges), the participants will develop or reinforce the following areas in relation to financial analysis, accounting principles, and the analysis of corporate financial statements:

• Demonstrating knowledge of corporate financial statements

• Interpreting financial statements, organizing thoughts and making recommendations

• Applying Generally Accepted Accounting Principles (GAAP) to corporate finances

• Evaluating the performance of your own corporation, or your competitors

• Examining financial statements to decide whether to extend credit to a particular corporation

• Choosing between alternatives for an organization’s investment portfolio

• Analyzing business opportunities from a financial standpoint

• Selecting your personal investments

• Preparing effective written communications

• Organizing and communicating ideas and recommendations effectively

Requirements

All of the information used to conduct an analysis and develop the report for this event is public information available in the corporations’ 10-K filing or in their annual report on their Website. Therefore, to ensure you are working with the same financial information, the public financial statements to be used for this event must also be INCLUDED IN THE APPENDIX.

Approximately 10 pages double-spaced pages excluding appendix for calculations (12 point type) of narrative which should include the following (with appropriate headings and subheadings for readability):

Research Objective Explain in a paragraph or two what the project is about. Also give a brief detail of how you will go about doing the project and what are your expectations and the usefulness of your findings. (Approximately ½ page).

SECTION 1: EXECUTIVE SUMMARY

This section provides a brief overview of your company. You are not limited but, at a minimum, should provide the following information for both companies:

• Official name of the corporation

• Location of the corporate headquarters & company Internet address

• The state in which the company is incorporated

• Industry description and leading competitor

• Stock symbol of the corporation and the exchange on which it is traded

• Fiscal year-end of the corporation

• Date of the 10-K filing according to the financial statements provided

• The company’s independent accountant/auditor

• The primary products(s) and/or services (s) of the corporation

(Approximately 1 page).

SECTION 2: HORIZONTAL ANALYSIS

Horizontal Analysis is used as a tool to evaluate data and trends over time. Most financial statements will have at least three years of data on their Income Statement and two years worth of data on their Balance Sheet. Horizontal Analysis is used to do intra-company analysis and expresses information as a percentage change. This analysis must be compared and contrast to a similar analysis with the companies leading competitor.

The calculations used to determine the answers for the horizontal analysis must be included in the appendix.

For EACH of the two corporations complete a horizontal analysis for the last two years in order to determine the trend in the data over time. The analysis must include the following:

• Revenue

• Gross Profit

• Net Income

• Income from Continuing Operations

• Net Cash from Operating Activities

• Assets

Which Company is experiencing the most growth?

Where is the growth coming from?

Graph your results in order to demonstrate the trend.

SECTION 3: VERTICAL ANALYSIS (COMMON-SIZE ANALYSIS)

Vertical/Common-size analysis expresses items in a financial statement as a percentage of a single or base amount. This allows analysis of two or more corporations of varying sizes. This analysis must be compared and contrast to a similar analysis with the companies leading competitor.

The calculations used to determine the answers for the vertical analysis must be included in the appendix.

I. For an Income Statement, items are usually expressed as a percentage of revenue. Perform vertical analysis in relation to revenue for the following items in the Income Statement for the current year for each of the two corporations.

Current Year

Revenue 100%

COGS

Operating Expense

Interest Expense

Income Tax Expense

Net Income

II. For a Balance Sheet, vertical analysis is performed by expressing amounts as a percentage of total assets. These percentages are then compared to percentages calculated for another corporation (inter-company analysis). Perform common-size analysis of the following for each of the two corporations.

Current Year

Current Assets

Property, Plant and Equipment

All Other Assets

TOTAL ASSETS 100%

Current Liabilities

Total Liabilities

Stockholder’s Equity

Based on this analysis, what conclusions can be drawn about the two companies?

SECTION 4: RATIO ANALYSIS

Compute the ratios for the following categories:

• Liquidity

• Asset Management

• Debt Management

• Profitability

• Market or Valuation

You must calculate the ratio for the most current year. Present, in chart or graph format, each ratio for each of the corporations. For example:

Category: Short-Term Liquidity

Ratio Company 1 Company 2

Current Ratio 1.1 1.4

The calculations used to determine the answers for the ratio analysis must be included in the appendix.

For each ratio, comment on:

What is the relative position of each of the corporations?

What is being measured?

What does it mean?

At the end of each category/section, comment on:

As a category, what is being measured?

Who are the users of this information?

PARTICIPANT INSTRUCTIONS

SECTION 5: CONCLUSIONS/RECOMMENDATIONS

Draw conclusions from the data that was gathered in Sections 2 - 4, and determine the relevant position of your corporation in all of the analyses. The conclusions/recommendations must address the following as a comparison between the two companies. The thoughtfulness of the analysis will be the most important factor in the evaluation of this section.

1. What are the overall strengths and weaknesses of your selected corporation?

2. What recommendation would you make to current and potential private or organizational investors in your corporation?

3. What recommendation would you make to lenders regarding the credit-worthiness of your corporation?

APPENDIX FOR CALCULATIONS

While the written prospectus only needs to show answers, the calculations used to arrive at the answers must be shown in an appendix.

.In the appendix, provide the following data: (No page limit for the appendix).

The most recent years of actual size balance sheets, income statements, and cash flow statements for your firm obtained from.

Financial ratios: Interpret all of the following ratios for each year using your two years of financial statements and ratios: Use 2-year Averages or Annual (TTM) if 2-year Averages are not given.

I – Liquidity

1. Current Ratio

2. Quick Ratio

II – Asset Management

3. Inventory Turnover

4. Days sales Outstanding

5. Fixed Asset Turnover

6. Total Asset Turnover

III. – Debt Management

5. Debt Ratio

Times interest earned ratio

IV – Profitability

Gross Profit

Return on Total Assets

Return on Equity

V – Market or Valuation

Price/Earnings Ratio

Market/Book Ratio

Horizontal & Vertical Analysis Calculations

A bibliography. Every source from which you obtained a thought, idea, or other bit of information included in your paper should be properly referenced. Use a bibliography page (not included in the page requirement) combined with citations in the body of the paper which reference those bibliographic sources, using numbered super- or subscripts, or footnotes, whichever you find to be most efficient. Any style is acceptable—just be sure that anyone reading your paper will be able to find that source without any problem. (Be sure to include page numbers in written material and complete Internet addresses for websites.) A minimum of four sources is necessary. Be sure to include the Brigham text and yahoo.marketguide.com as two of these. A word of caution: If you take another’s ideas, thoughts, or information verbatim (or essentially so), the source must be in quotation marks as well as cited—anything else is plagiarism.