Financial Statement Analysis

Study the financial statements and other information for two public companies that belong to the same industry (eg General Motors and Ford) and are listed on an American Stock Exchange (Nasdaq, NYSE, American Stock Exchange) and compare them. The analysis will cover various aspects of the two companies-, and be comparable. The companies you choose must not have a negative net worth (ie assets should exceed liabilities) and must be profitable, at least for most years.

Answer the following questions:

Analysis of shares and index in the stock market. Show the market prices and percentage annual percentage changes of the shares of the two companies, in a table or graph (separately for each company and the S&P500 index) for the last five years. Compare the two companies and the index for significant changes and try to explain significant changes in the prices of the two shares as well as the overall index. For this purpose, use news, reports, and announcements, which have been published, and concern each company and the market in general.

Performance of share prices and the general index for the last five years. Calculate and present the average annual return for the share prices of the two companies as well as the general index over the five years, and make comparisons and comments. For this purpose, use the value of money formula FV=PV(1+r), where you will calculate the return (r) for each variable.

Analysis of return on equity (net income /capital) for each company and comparison between them in a table, for the last five years, with comments. Explain why the performance is high or low. What factors affect the equity ratio? Explain!

Analysis of funding sources of the two companies in the last five years. Describe the funding sources of the two companies, how did the company finance its assets five years ago, and how they are today (loans, bonds, shares, profits, etc.) Compare and comment!

Calculate the debt ratio of each company (total liabilities / total assets), for the last five years, in a table, and make comparisons and comments. Explain whether the debt ratio is increasing or decreasing over five years and whether each company can service its debt or is in trouble

Calculate the Price/Earnings ratio (Price per Share / Earnings per Share) for the two companies for the last five years, in a table. Compare and comment. Why they are high or low? Could a company have a high Price-to-Earning ratio without particularly good prospects for the future?

Analysis of sales (Sales) and earnings from operations (EBITDA, earnings before interest, taxes, and depreciation) for the last five years, in a table or graph. Plot the two quantities in a graph or table, where the two variables will start at 100. That is, the base year will be the first year of the five years. Investigate whether there is any relationship between the two variables over time, i.e. whether they move together or not, and explain why.

Analysis of profits from operations (income statement) and cash from operations (Net operating cash flow from the cash flow statement) for each company for the last five years. Plot the two variables in a graph or table, where they will both start at 100. That is, the base year will be the first year of the five years. Investigate whether there is any relationship between the two variables over time, i.e. whether they move together or not, and explain why?