FINANCIAL STATEMENT ANALYSIS ASSIGNMENT Project Overview The purpose of this assignment is to help you learn how to analyze the financial prospects of a company from its annual report. Annual reports are usually available from the company, an investment broker or other website. Your assignment is to pretend that you are a financial services firm and, as a team, analyze a set of companies and develop an investment plan for a client. You should focus on the general financial health of the company and pretend you are doing a very simple initial analysis of the company. The companies you will analyze are as follows: Heavy Equipment Companies: Caterpillar, Cummins, John Deere (Deere and Company) Commercial Airlines: American Airlines, Delta Air Lines, Southwest Airlines IT/Cloud Services: Citrix Systems, F5, Fortinet, Zscaler Online Real Estate Brokers: Opendoor, Redfin, Zillow Following your analysis, you will choose one company from each industry in which to invest. You will then assign a percentage of the available investment funds to each company so that the total sums to 100%. Your team's financial analysis should support your team's investment decision. For example, your team might decide on the following portfolio: Cummins (15%), Delta Air Lines (10%), F5 (40%), and Opendoor (35%) Analysis On the due date, you must submit a concise, written financial statement analysis report supporting your investment decision. It will be graded according to the supplied rubric. Late projects will not be accepted. You must investigate and seek alternate sources of information to support your recommendations (and properly acknowledge the sources) and supplement the information contained in the annual reports. The financial statements provide supporting information, but you must go beyond the statements. For example, what are business analysts saying about the prospects of the company? What does a SWOT analysis indicate? What does a PEST or PESTEL analysis indicate? (If you are not familiar with these types of analyses, you can easily look them up.) The paper is not about submitting the financial statements of the companies, nor "copying" the information already stated in the companies' annual reports. Your analysis must also include ratio analysis and/or trend analysis. Use the key relationships identified in your textbook as a guide. Choose five ratios that you think are the most useful for analyzing the companies in a particular industry, making sure toaddress liquidity, solvency, and profitability. After calculating the ratios, you must interpret them. Just use common sense and state what you believe the data are saying. Remember to use the notes included with the financial statements and any narrative provided by management. You should compare the companies' ratios to industry averages if this information is available. Annual Reports Note that financial information offered by Yahoo! Finance, Hoover's, and other financial sites is NOT a substitute for an annual report. Another way to find a company's financial information is to use the website for the Securities and Exchange Commission (sec.gov). Once at that site, under "FILINGS" in the upper menu bar, select "Company Filings Search". You may then enter the name of a company or its ticker symbol to find its company filings. One report available through the SEC that is similar to an annual report is known as a Form 10-K. It is this form that you will want to access. The Management Discussion and Analysis and Notes to the Financial Statements will be just as valuable as the financial statements when you interpret the ratios your team has calculated. REQUIREMENTS I expect a concise report. Brevity is crucial in the business world. Decide what is important to say and leave out the rest. Add an appendix page that clearly explains the computations of your five ratios in a manner that can be traced to the annual reports. There should be a separate section of your report for each industry. Start with a very brief introduction describing significant details of the industry. Then discuss each of the five ratios that you chose for the analysis of your companies. Do not regurgitate the textbook definition of the ratio but describe what the ratio means to you given your studies and comparisons. In addition to explaining the construction of the ratio, make sure you provide an interpretation of the ratio. For example: "Company A has a Current Ratio of 2.0. This indicates a healthy liquidity position because it has twice as many current assets to pay current liabilities as they come due. A ratio of 2.0 is a standard benchmark for liquidity. In addition, Company A's ratio of 2.0 is greater than that of its primary competitor, Company B, whose ratio is 1.2." Last, grade the company's financial health (A, B, C, D, or F) and support your grade with a one paragraph summary. Remember, you have to convince me that your evaluation is reasonable. You will be graded on the content of the analysis, your analytical skills, and your ability to communicate effectively.Useful USF Library Databases Business Insights: Essentials (Gale) Business Insights: Essentials is the improved version of Business & Company Resource Center, including all the same functionality and detailed information, as well as enhanced content and updated interface. It provides company profiles, company brand information, rankings, investment reports (including SWOT reports), company histories, chronologies, and industry news and information. Key Business Ratios Key business ratios will assess how a business is doing. it compares one firm's strengths and weaknesses against competing businesses or the entire industry. Comparing changes in a business' ratios over time can highlight improvements in performance or problem areas that require attention. Calculating key business ratios that identify key relationships between financial data allows monitoring of the state of a business. Fourteen key business ratios cover all critical areas of business performance. Ratios are arranged by Standard Industrial Classification (SIC) Codes -- a four-digit number that classifies business establishments by defining the industries in which they do business. Mergent Online Mergent online provides U.S. and international company data ranging from comprehensive information on companies that is downloadable in PDF, Word, or Excel to one-page profiles of over 10,000 U.S. companies. Provides data including business description, history, property, subsidiaries, officers and directors, long-term debt and capital stock. Financial statements are presented in "as-reported" form and in native currencies, maintaining the full integrity of this critical information. For companies based around the world, users can search by company name or ticker symbol, or searching across all global boundaries to find companies that match specific financial and/or textual search criteria. SEC Filings Online (EDGAR) "EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, performs automated collection, validation, indexing, acceptance, and forwarding of submissions by companies and others who are required by law to file forms with the U.S. Securities and Exchange Commission (SEC)"--Important information about EDGAR file.\f