Hi Ruchi,

I need help with the attached assignment. It's due in about a week. Thanks

1) The paper should be written in APA style Research Paper format. This is the link that explains the research paper format. http://www.lib.jjay.cuny.edu/research/apastyle1.pdf 2) How to add footnotes and endnotes in Word 2016 for Mac https://support.office.com/en-us/article/Add-footnotes-and-endnotes-in-Word-2016-for-Macba7bc132-0408-4a30-951f-e9f91af67523 3) How to add footnotes and endnotes in Microsoft Word https://www.youtube.com/watch?v=i29xEGR-jwc http://www.computerhope.com/jargon/f/footnote.htm 4) This link is a good source about prevention of plagiarism, citation styles, bibliography, and footnotes. http://www.plagiarism.org/citing-sources/overview/ 5) This is the link to the material that explains how to work with footnotes and endnotes. http://www.refworks.com/rwathens/help/Creating_a_Paper_and_Formatting_the_Footnote_or_Bibliograp hy.htm GRADING RUBRIC FOR RESEARCH PROJECT FINC 330 Students: Failing, undeserving of credit F Category FINANCIAL ANALYSIS OF THE ASSIGNED COMPANY 1. Financial statements analysis of the assigned company Virtually no effort to develop financial statements analysis of the assigned company; not worthy of credit. Passing, but below standard D-, D, D+ Description of Evaluation Satisfactory, meets essential requirements Related Grade C-, C, C+ Superior Work and clearly above average Work of Distinction B-, B, B+ A-, A, A+ Input Grade Only a superficial effort to develop financial statements analysis of the assigned company The project contains some financial statements analysis of the assigned company, but should be considerably more developed Good effort is made to develop financial statements analysis of the assigned company Excellent and very thorough development and articulation of financial statements analysis of the assigned company Points Weight Score #N/A 15.00% #N/A 2. Financial ratio trends analysis of the assigned company and industry comparatives. 3. DuPont analysis of the assigned company. Compare with main competitor. Virtually no effort to develop financial ratio trends analysis of the assigned company and industry comparatives; not worthy of credit Virtually no effort to develop DuPont analysis of the assigned company not worthy of credit Minimal effort to develop financial ratio trends analysis of the assigned company and industry comparatives. Minimal effort to develop DuPont analysis of the assigned company. Some effort made to develop financial ratio trends analysis of the assigned company and industry comparatives, however the result are not explained and analyzed. Some effort made to develop DuPont analysis of the assigned company, however the result are not explained and analyzed. Good effort to develop financial ratio trends analysis of the assigned company and industry comparatives, the result are well explained and analyzed Excellent and successful effort to implement financial ratio trends analysis of the assigned company and industry comparatives; very clear linkages between financial retio results and investment decisions and recommendations; #N/A 15.00% #N/A Good effort to develop DuPont analysis of the assigned company, the result are well explained and analyzed Excellent and successful effort to implement DuPont analysis of the assigned company very clear linkages between DuPont analysis and investment decisions and recommendations; #N/A 10.00% #N/A 4. Other areas of financial analysis: capital spending, stock growth, Beta values, credit rating service valuations, bond rating valuations, etc. 5. The evaluation of the assigned company's stock performance for the period three years. 6. The student developed 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. Minimal effort to develop analysis of the areas of financial analysis: capital spending, stock growth, Beta values, credit rating service valuations, bond rating valuations Some effort made to analize other areas of financial analysis: capital spending, stock growth, Beta values, credit rating service valuations, bond rating valuationsbut gaps are obvious Very good effort to analyze other areas of financial performance: capital spending, stock growth, Beta values, credit rating service valuations, bond rating valuations Outstanding effort to to analyze other areas of financial analysis: capital spending, stock growth, Beta values, credit rating service valuations, bond rating valuations #N/A 10.00% #N/A No effort to develop the evaluation of the assigned company's stock performance for the period three years. Some effort made to develop evaluation of the assigned company's stock performance for the period three years, but analysis is very short and limited Good effort made to develop the evaluation of the assigned company's stock performance for the period three years, however the result are not explained and analyzed. Good effort made to develop the evaluation of the assigned company's stock performance for the period three years, the result are well explained and analyzed Excellent and accurate evaluation of the assigned company's stock performance for the period three years; very clear linkages between stock performance results and investment decisions and recommendations; #N/A 20.00% #N/A Little or no effort to explain linkages between the assigned company's financial and stock performance to warrant entering into a long-term commitment Some effort made to explain relationships of the assigned company's financial and stock performance to warrant entering into a longterm commitment, the analysis is poor and incomplete. Some effort made to explain relationships the assigned company's financial and stock performance to warrant entering into a longterm commitment, but there are significant gaps in the analysis Very good effort made to explain relationships the assigned company's recent trend in financial and stock performance to recommend entering into a long-term commitment. There are no significant gaps in the analysis Outstanding and very thorough effort to explain relationships the assigned company's recent trend in financial and stock performance. The results are sufficient to warrant entering into a longterm commitment. #N/A 15.00% #N/A Virtually no effort to develop the analyziz of the other areas of financial analysis: capital spending, stock growth, Beta values, credit rating service valuations, bond rating valuations; unworthy of much credit PRESENTATION OF PAPER AND WRITING 7. Organization, Format and Presentation of Paper including Introduction, Body, and Summary 8. Use of Tables, Figures and Other Graphics to Summarize and Support Analysis Presented in the Paper There appears to be no logical organization of the paper's contents Presentation has numerous blemishes and there may be a general lack of organization Paper has some blemishes in presentation and may have some weaknesses in organization Paper is neatly presented without major blemishes and is generally wellorganized Paper is extremely neat and has no blemishes; its organization is outstanding and very easily followed #N/A 4.00% #N/A Use of tables, figures and other graphics in support of paper is unworthy of credit Tables, figures and other graphics do not provide much support for the paper; they may have inadequate labels; and numbering sequence is inadequate Tables, figures and other graphics provide marginal support for the paper; some labels may be incomplete; there may be some problems with the numbering sequence Tables, figures and other graphics are descriptive and provide solid support for the paper; they are properly labeled and numbered Tables, figures and other graphics are very descriptive and provide exceptionally strong support for the paper; there are no errors in labels or in the numbering sequence #N/A 3.00% #N/A Very effective transitions are used throughout the written analysis #N/A 3.00% #N/A Excellent and successful effort to identify and use appropriate and professional research sources including Library Search Engines, Websites, S&P, SEC, stock exchanges, Morningstar, NYSE, Competitors, 10K Report, analyst reports, news releases, articles, etc.; appropriate and accurate documentation #N/A 5.00% #N/A 9. Logical and Smooth Flowing Transitions and No effort made to provide Paper makes minimal Some transitions used in Good transitions used in Relationships Among appropriate transitions use of transitions paper most sections Sections of the Written Report RESEARCH APPROACH AND USE OF APPROPRIATE PROFESSIONAL SOURCES OF INFORMATION AND DATA 10. Research Sources and Significance of Research Information and Data, Use of APA Citation Methodology, use of double spaced, with oneinch margins, and use 12point Times New Roman font. No obvious effort to use professional and supporting research sources Little effort made to use appropriate professional and supporting research sources which may be accompanied by inadequate documentation Some effort to identify and use appropriate and professional and supporting research sources with some documentation Good effort to identify and use appropriate and professional and supporting research sources; appropriate and professional use of APA documentation, use of double spaced, with one-inch margins, and use 12-point Times New Roman font. Total 11. Individualized Comments About Research Paper 100.00% Grade on Paper #N/A 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 Apache Corp (a real publicly-traded company) is the best potential candidate for a long-term commitment. Apache Corp 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 Apache Corp 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 primary question is: will Apache Corp 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 Apache Corp. In addition to reviewing the traditional financial performance indicators, you are also to review THE COMPANY'S past and current stock performance. Your report includes three parts: (1) An evaluation of THE COMPANY'S financial performance for the last three years. (See detailed description below) (2) An evaluation of THE COMPANY'S stock performance for the last one year. (See detailed description below) (3) Finally, a specific recommendation, with supporting rationale, as to whether or not THE COMPANY'S 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 COMPANY'S financial and stock performance trends against its Industry or major competitor. SUGGESTED WEBSITES www.marketwatch.com -To find the information for your company you need to type the stock symbol in the Search window to get into the company's page. www.morningstar.com - To find the information for your company you need to type the stock symbol in the Quotes window to get into the company's page. www.money.cnn.com -To find the information for your company you need to type the stock symbol in the Search window to get into the company's page. www.finance.yahoo.com - To find the information for your company you need to type the stock symbol in the Search window to get into the company's page. www.nyse.com - Click on Data, then click on Stocks (under Quotes), and type the name of the company or the stock symbol in the window \"Keyword or symbol\" to get into the company's page. www.nasdaq.com - To find the information for your company you need to type the stock symbol in the Search window to get into the company's page. YOUR SPECIFIC ASSIGNMENT Using the information from the websites the students have to develop evaluation of the financial and stock performance for Apache Corp. (Totally 85% of the assignment grade) -1Background and Industry (one short paragraph). -2Analysis of the most significant financial performance results. (15% of the project grade) Select of most significant financial performance results for the company. Create a table that contains the THE COMPANY'S financial performance results for the last three years and for the major competitor or industry for the last year: Revenue, net income, working capital, and other financial performance results of your choice. Present the table with this information in your report. Write about 1 page of the trend analysis of these financial performance results. -3 Financial ratio analysis. (15% of the project grade) Find financial ratios for the company for the last 1-3 years and its major competitor for the last year in the Internet. Present the ratios as the table(s) in your project. Write about 2 pages of analysis of the ratio results that you found. Compare the ratio results against the industry or main competitor. In your analysis you should answer the following questions: How liquid is the company? How is the company financing its assets? Is management generating a substantial profit on the company's assets? -4- Evaluate Return on Equity for the company for the last three years using the DuPont analysis. (10% of the project grade) Taking the information from the Income statements and the Balance sheets, calculate the company's net profit margin, total assets turnover equity multiplier, and return on equity using the DuPont formula for the company for three years. Show your calculation! ROE = Net profit margin x Total assets turnover x Equity multiplier = Net income/Sales x Sales/Total assets x Total assets/Common equity You can use Revenue instead of Sales. b. Compare the results to main competitor. For the major competitor you can use ratios from the Internet or calculate them for the last year. Write about 1 page of analysis of the results that you received. In your report please answer the question: 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, Beta values, credit rating service valuations (if possible), bond rating valuations (if possible), etc. (10% of the project grade) 1) Find the data for capital spending. How much did THE COMPANY spend on research, development, and engineering in the most recent year? How did this compare with the previous year? 2) Find the current beta for the company and its major competitor in the Internet. Present beta results as the table in your project. Write about 0.5 page of analysis of beta values that you found. Compare the beta values against the main competitor. In your report please answer the question: How risky the company is? -6- Collect and evaluate the data about stock performance of the assigned company's for the last one year. (20% of the project grade). 1) Find the market ratios for the company for the last 1-3 years and its major competitor for the last year in the Internet. Present the market ratios as the table(s) in your project. Write about 1 page of analysis of the market ratio results that you found. Compare the market ratio results against the industry or main competitor. In your report please answer the question: Are the common stockholders receiving an adequate return on their investment? -2) Analysis of the historical stock prices trend for the last year. Collect and evaluate the data about stock prices of the assigned company's for the last one year for the company and its major competitor. Create the chart(s) using the stock price chart tools on the websites or Excel. Present the chart(s) in your project. Write about 0.5 page of analysis the historic stock prices trend for the last year. 3) Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on THE COMPANY stock. Note that you will need the risk-free rate and the market return. Show this information in your project. To get the current yield on 10-year Treasury securities go to Finance!Yahoo's at www.finance.yahoo.com -click on Market Data - Bonds. You will use the current yield on 10-year Treasury securities as the riskfree rate to estimate the required rate of return on stocks. Show this information in your project. To get the market return go to money.cnn.com , Click on Market, then click on S&P 500.You will use 52weeks change for S&P500 listed as \"Year-to-Date\" percentage change. Show this information in your project. Calculate the required return on THE COMPANY stock using the Capital Asset Pricing Model (CAPM) Security Market Line. Please show your work. Find on the Internet the 52-weeks change of the stock price. Compare the required return on the stock calculated using CAPM against it's historical return over the last 52 weeks, found on the Internet. Is there a difference between these returns? Is THE COMPANY'S stock overvalued, undervalued, or properly valued? Why? Explain your answer. -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). PRESENTATION OF PAPER AND WRITING (15%) of the project grade): -Organization, Format and Presentation of Paper including the Title page, Introduction, Body, and Summary (4% of the project grade) Use of Tables, Figures and Other Graphics to Summarize and Support Analysis Presented in the Paper (3% of the project grade) Logical and Smooth Flowing Transitions and Relationships among Sections of the Written Report (3% of the project grade) Research Sources and Significance of Research Information and Data, Use of APA Citation Methodology (5% of the project grade) Your final report is to be an executive-level financial report, directed to the CFO. This report should be about 8-10 double-spaced typewritten pages (without tables and graphs). Include suitable comparative, quantitative and qualitative analyses and conclude with a specific and supported recommendation on the projected financial viability of THE COMPANY THAT IS TO BE ANALYZED FOR THIS PROJECT (COMPANY SELECTED BY INSTRUCTOR) for the next several years. Essential research data, financial calculations and other documentation as necessary to support your recommendation should be referred to in summary form in your report and attached in detail as enclosures. All major sources should be referenced. There is no set limit to the size of the enclosures, but it is recommended that only essential enclosures be attached. You should use references and bibliography to identify any remaining supporting documents you wish to include. Format of the Research Project: The Data Exercise must be posted to the LEO Student Assignments as a Attachments are limited to a maximum two files in doc, docx., xls. xlsx., or rtf. formats. OTHER FORMATS ARE NOT ACCEPTABLE, will not be reviewed or graded. Please note that hand-written and scanned works, pdf. files, jpg. files, as well as files posted in google drive, will not be accepted or graded. The paper should be written in APA style Research Paper format. Please note that Use of APA Citation Methodology is required for the assignment. All works must be Word processed. Handwritten and scanned work will not be accepted and graded. Running Head: FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. Financial Analysis of United Natural Foods, Inc. FINC 330 Prof. Tom Scheller May 1, 2014 1 FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 2 As long as there are grocery stores there will be food distributors, and United Natural Foods, Inc (UNFI) is a growing force in the food distribution industry. Multiple regional food distributors dating back to the early to mid-1970's merged in 1996 to form UNFI (UNFI, n.d.). UNFI and other food distributors maintain warehouses of food goods and the logistical networks to get these goods delivered to their customers. UNFI is unique in the respect that they focus on, as their name indicates, natural and organic food. With the rising awareness of what we are eating, the natural and organic food industry is expected to have a compounded annual growth rate of 14% through 2018 (Research, 2013). This sector of the food distribution industry should continue to see growth as consumers become more health conscious, and UNFI is positioned for growth. The viability of UNFI as a partner in future business ventures with High Technology Corp (HTC) is presented in this report. Financial Statement Indicators The financial statements of UNFI, as with all companies, provide a great deal of information about their past performance and provide insights into future performance and cash flow (Brooks, 2013). To accurately determine the strength of the performance of UNFI, the company is being benchmarked against a competitor in the food distribution industry, Sysco. Sysco had its initial public offering in 1970 and has been a major food distributor since its beginning (Sysco, n.d.). Benchmarking UNFI with Sysco highlights the strengths and weaknesses of UNFI. The performance of UNFI is represented in the some of the key financial performance indicators in Table A1 and Table A2 in Appendix A shows the trends of these performance indicators. FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 3 Examining these numbers with the percentile changes over the last three years, we have a more complete picture of the performance of UNFI. It is obvious that UNFI is a much smaller company than Sysco, but the percentile changes in these financial indicators tell a strong story. The revenue, or overall sales, of UNFI has had more than twice the growth of Sysco. The net income, which represents how efficiently the operations of each company are performing, is again a strong number for UNFI. While net income for UNFI has gone up 18.60%, it has decreased for Sysco, indicating that UNFI is operating more efficiently than Sysco. Net working capital indicates the ability for each company to pay their bills and meet current liabilities. While the number for UNFI is impressive, it is also excessive (Brooks, 2013). The current working capital ratio of 9.75% for UNFI indicates that they are not using their assets to their full ability by reinvesting them, or they have too much inventory. As indicated in Appendix C Table C1, in 2013 UNFI had a full 40.59% of its assets tied up in inventory, important for a food distributor, but high compared to the 18.92% carried by Sysco. While Sysco is better in this area, they also have a working capital ratio of 4.83% which indicates they also could be putting their assets to better use. A positive is that the change in net working capital is negative for both companies indicating that they are working on correcting this issue. Total assets versus total liabilities for UNFI show they are well leveraged and are not a financial risk with a ratio of .34% compared to Sysco at .59%, again reflecting that they could be using their assets more wisely. The total owners' equity has seen growth in both companies, but over twice as much for UNFI than Sysco, reflecting a higher growth in the value of UNFI for the stockholders. Operating cash flow is an indicator of the funds generated from normal business operations (Brooks, 2013). This number saw a FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 4 large decrease from 2012 to 2013 for UNFI after a large increase from 2011 to 2012. This inconsistency may indicate some issues management needs to work out in maintaining stable business operations. Finally, earnings per share indicate that UNFI has been very profitable for its shareholders. With an increase of 16.27% over the last three years they have outperformed Sysco which has seen a -7.30% decrease over the same period resulting in a net loss for their shareholders. Overall, the selected financial indicators show that UNFI is doing well in growing their profits and maintaining reasonable liabilities resulting in increased owners' equity, strong shareholder returns, and positive numbers for cooperative business ventures. Financial Ratios and Common Sized Comparison Another evaluation of UNFI is in their financial ratios which can be used to again directly compare with the performance of Sysco. The financial ratios, presented in Appendix B, represent the relationships of different accounts within the financial statements and serve as performance indicators (Brooks, 2013). Also included in Appendix C are common sized balance sheet and income statement ratios for the last three years. Market value ratios measure the market value of the company or whether the price of the stock seems fair in comparison to its performance. The P/E ratio is strong for both companies, but UNFI is stronger. This strength indicates that investors are willing to pay $29.98 per $1 in current earnings which means that investors see UNFI having a higher growth potential. Also, the price to book value for both companies indicates the market for shares in these companies is strong. FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 5 The asset management ratios indicate that UNFI has a very strong performance. The receivables are being collected 18.81 times per year, so it is only taking their customers an average of 19.4 days to pay for goods delivered compared to 25.3 days for Sysco. Also, as shown in Appendix C Table C1, the percent of accounts receivable of total assets is lower for UNFI than Sysco representing less cash pending from customers. Again, in total asset turnover, UNFI is performing better than Sysco indicating that UNFI is generating more revenue per dollar of assets (Brooks, 2013). The liquidity ratios represent the ability of each company to pay for short-term debt (Brooks, 2013). Both companies have high current ratios, especially UNFI, indicating that they may have too much capital in current assets. This ratio, along with net working capital discussed earlier, is another indicator that UNFI management may not be using all of their assets wisely. It should be mentioned that companies in the food distribution industry would carry high but revolving inventories, which are included in the current ratio. The quick ratio, which removes inventories, indicates that both companies still have enough assets to cover current liabilities (for UNFI 1.04 times). The cash ratio is still positive indicating that enough cash is on hand to pay for current liabilities. Profitability ratios measure the ability to turn sales into profits. While the profitability margins are lower for UNFI, it should be kept in mind that UNFI is a much younger company and still establishing themselves. Looking at Appendix C Table C2, the net earnings for UNFI are a lower percentage of revenue, mostly due to operating expenses in 2011 and 2012. But also, in each of these years, operating expenses have decreased helping the net earnings to increase each year indicating improvement. During FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 6 this same, the profitability ratios for Sysco are much stronger, but the percentage of net earnings to revenue has been going down. The solvency ratios indicate that UNFI has resources to use more debt to finance further growth. UNFI is currently only paying $.39 per dollar of assets for debt financing and has enough its interest obligations covered 31 times by its earnings. While this relatively young company does not want to go into excessive debt, it seems that further growth could easily be financed. All of these ratios indicate strengths and weaknesses for UNFI, but overall they provide a picture of a strong company that will see growth in years to come. The area UNFI seemingly has issues is in its inventory management. When evaluated more closely for the quarter ending January 2014, UNFI has an inventory/revenue ratio of .46 and inventory turnover rate of 1.80 (United, 2014). The inventory/revenue ratio is down from the previous quarter's value of .52 indicating either a reduction in inventory or an increase in revenue for the quarter (United, 2014). This decrease indicates that even though they carry a high dollar value of inventory, it moves quickly and it is turning into revenue. UNFI is a young company but shows signs of financial strength suitable for long-term investment and business ventures. Stock Performance As seen in Appendix D, UNFI is a stock holding that has seen significant growth in the last three years. A company's stock price is a gauge of the health of the company, and the stock price of UNFI is an indicator of a company in very good health. Some of the stock price is also a perception by investors that the future of the company is a bright one, and the current perception by investors is a positive one. Also, of course, the value of FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 7 the stock is also based on earnings for the company which is growing in the case of UNFI. Comparing the stock of the two companies, we can see in Appendix D that the current selling price for UNFI stock is increasing at a much quicker pace than Sysco. Again, some of this growth may be attributed to the increased consumer awareness of healthy eating and organic foods. Over the past three years Sysco has seen a year-to-year growth rate of .70%, while during that same time UNFI has seen a growth rate of 1.71%. The number of stores which specialize in organic foods or are increasing their shelf space dedicated to organic foods is on the rise across the country (Paul, n.d.). This trend means increasing sales, improving asset management, and increasing revenue will lead to a continued increase in stock prices indicating stability for future joint business ventures. Additional Financial Indicators Other signs that UNFI can experience continued growth is the increase in capital spending in 2013 of $37.9 million (Shamber, 2013). This increase represents expansions in the distribution and warehouse network for UNFI increasing their market outreach. Also, the beta value for UNFI stock is .62 which, according to Brooks (2013), makes this a less risky investment. The beta for Sysco is .74 which is also considered safe, but considering UNFI is a younger company, it is relevant that they have a better beta value than Sysco. Two other ratios that should be considered in the evaluation of UNFI for this business venture is their enterprise value/revenue ratio and enterprise value/EBITDA ratio. Enterprise value is the theoretical takeover price, and this values the company in terms of debt that would need to be paid by the new owners if a company was sold (Investopedia, 2012). These ratios can compare companies that are in different market capitalization categories such as UNFI (mid-cap) and Sysco (large-cap). The enterprise FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 8 value/revenue ratio for UNFI is .56 and for Sysco it is .53 indicating that UNFI is in good financial health compared to Sysco. On the other hand, the enterprise value/EBITDA value for UNFI is 14.51 versus 9.92 for Sysco; this value means that it would take 14.51 years to pay off the acquisition of UNFI, as long as EBITA does not change. While this number is higher, it is not enough to deter consideration of future business dealings with UNFI. Again, looking at the financial health and market attitude towards UNFI, they are a good company with which to partner on future business. DuPont Analysis For a more in-depth performance breakdown, a DuPont analysis is presented: Return on equity = (net income/sales) x (sales/total assets) x (total assets/total equity) United Natural Foods, Inc.: 2013 = (107854/6064355) x (6064355/1729908) x (1729908/1099146) = .0178 x 3.5056 x 1.5739 = .0982 or 9.82% 2012 = (91342/5236021) x (5236021/1493946) x (149946/978716) = .0174 x 3.5048 x 1.5265 = .0933 or 9.33% 2011 = (76673/4530015) x (4530015/1400988) x (1400988/869667) = .0169 x 3.2334 x 1.6109 = .0882 or 8.82% Sysco Corp.: 2013 = (992427/44411233) x (44411233/12663947) x (12663947/5191810) = .0223 x 3.5069 x 2.4392 FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 9 = .1912 or 19.12% 2012 = (1121585/42380939) x (42380939/12137207) x (12137207/4685040) = .0265 x 3.4918 x 2.5906 = .2394 or 23.94% 2011 = (1152030/39323489) x (39323489/11385555) x (11385555/4705242) = .0293 x 3.4538 x 2.4198 = .2448 or 24.48% This analysis shows that UNFI has seen an increase on ROE, whereas Sysco has seen a decrease. When this analysis is broken down, the findings indicate that while UNFI has seen its net profit margin go up slightly, Sysco has seen their net profit margins decrease. This increase can be seen as a growing efficiency by UNFI to move revenue to net income which can be seen as a positive sign for future management decisions. In the second part of the equation, asset management efficiency has gone up for both companies, but more for UNFI. Most of this growth occurred from 2011 to 2012 but continued slightly in 2013 indicating again that UNFI is improving on their asset management, getting more of its earnings to their shareholders. The final part of the equation is the financial leveraging of each company which can be seen as the company's efficiency to use debt to finance their operations. Each company has had their number go up and down, yet Sysco is using more debt to finance their operations. As discussed earlier, UNFI has considerable capacity to use more debt to finance capital spending and other operating activities. This analysis is positive for the association of HTC and UNFI. Clearly the management team at UNFI understands how to utilize their assets and grow their business. With the capacity UNFI has to use more debt in their operations, they FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 10 could finance significant growth for their company within their industry. This is growth that HTC could help UNFI realize and on which they can also capitalize. Recommendations UNFI is a company that is young, on the rise, and worthy of a long-term business commitment with HTC. Beginning with their financial indicators, UNFI shows significant growth across the board. They must improve on their net working capital, but even this indicates that they have room to finance more growth than what they are currently experiencing. With double digit percentile increases in revenue, net income, total owners' equity, and earnings/share, it is evident that UNFI is serving a market that growing across the nation. The financial ratio comparison and common sized reports indicate again that UNFI is a viable corporate partner. In other industries one might see a decrease in cost of sales, but in the food industry, especially organic and natural foods, this is unlikely to happen as pricing will be influenced by uncontrollable factors such as weather. A positive sign is that even though cost of sales have gone up, so has net earnings, meaning that UNFI is finding ways to improve other parts of their operation to bring more value to the stockholders. This increased value is evidenced by the increasing price of UNFI stock over the past three years. The health of UNFI stock also helps with getting better interest rates for future borrowing as many creditors look to this information for lending guidance. This reduced interest rate will further increase net returns which put UNFI in an encouraging cycle of growth. UNFI is a company serving a growing market in a country that is waking up to the advantages of a healthier lifestyle. Based on this analysis, a joint business venture between UNFI and HTC would benefit both companies FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 11 References Brooks, R.M., (2013). Financial management: core concepts (Second Edition). Upper Saddle River: Prentice Hall. Investopedia. (2012, November 15). Using enterprise value to compare companies. Retrieved April 25, 2014, from http://www.forbes.com/sites/investopedia/2012/11/15/using-enterprise-value-tocompare-companies/ Libby, R. T. (2013, June 5). SYSCO Corp: Form 10-K. Retrieved April 5, 2014, from http://investors.sysco.com/financial-information/default.aspx Monea, M., & Guta, A. (2011). The relevance of the performance indicators in economic and financial diagnosis. Annals of the University of Petrosani Economics, 11(4), 207-214. Paul, P. (n.d.). America's healthiest grocery stores: 10 standout grocery store chains. Retrieved April 25, 2014, from http://www.health.com/health/gallery/0%2C %2C20307195%2C00.html Research and markets: United States organic food market report 2013-2018. (2013, February 1). Retrieved April 24, 2014, from http://finance.yahoo.comews/research-markets-united-states-organic194700637.html Shamber, M. B. (2013, October 1). United States Securities and Exchange Commission Form 10-K. Retrieved April 1, 2014, from http://phx.corporateir.net/phoenix.zhtml?c=93228&p=irol-reportsannual FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 12 Sysco: About Sysco. (n.d.). Retrieved April 5, 2014, from http://www.sysco.com/aboutsysco.html UNFI: History. (n.d.). Retrieved April 19, 2014, from https://www.unfi.com/Company/Pages/UNFIHistory.aspx United Natural Foods Inc (UNFI) inventory turnover. (2014, January). Retrieved April 13, 2014, from http://www.gurufocus.com/term/InventoryTurnover/UNFI/Inventory %252BTurnover/United%252BNatural%252BFoods%25252C%252BInc FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 13 Appendix A: Financial Statement Indicators Table A1 FINANCIAL STATEMENT INDICATORS (IN THOUSANDS $) UNITED NATURAL FOODS, INC. SYSCO CORP. 2013 2012 2011 2013 2012 2011 REVENUE 6,064,355 5,236,021 4,530,015 44,411,233 42,380,939 39,323,489 NET INCOME 107,854 91,342 76,673 992,427 1,121,585 1,152,030 NET WORKING CAPITAL 725,951 612,700 381,071 5,191,810 4,685,040 4,705,242 CHANGE IN NWC 113,251 231,629 194,190 526,740 751,625 2,638,182 TOTAL ASSETS 1,729,908 1,493,946 1.400,988 12,663,947 12,137,207 11,385,555 TOTAL LIABILITIES 630,762 515,230 531,321 7,472,137 7,452,167 6,680,313 TOTAL OWNERS EQUITY 1,099,146 978,716 869,667 5,191,810 4,685,040 4,705,242 OPERATING CASH FLOW 44,331 66,244 49,844 1,511,594 1,404,180 1,901,518 EARNINGS/SHARE (BASIC) 2.19 1.87 1.62 1.68 1.91 1.96 Table A2 PERCENT CHANGE FROM 2011-2013 UNITED NATURAL REVENUE NET INCOME NET WORKING CAPITAL CHANGE IN NWC TOTAL ASSETS TOTAL LIABILITIES TOTAL OWNERS EQUITY OPERATING CASH FLOW EARNINGS/SHARE (BASIC) FOODS, INC 15.70% 18.60% 39.63% -15.91% 11.22% 9.70% 12.42% -.09% 16.27% (Libby, 2013) & (Shamber, 2013) Appendix B: Basic Financial Ratios SYSCO CORP. 6.28% -7.08% 5.19% -50.72% 5.47% 5.91% 5.19% 18.15% -7.30% FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 14 BASIC FINANCIAL RATIO COMPARISON WITH COMPETITOR (%) UNITED NATURAL FOODS, INC (UNFI) SYSCO CORP (SYY) 29.98 .49 2.71 21.16 .45 3.86 18.81 3.76 14.44 3.59 2.80 1.04 .03 1.66 1.02 .11 1.78 6.69 10.38 2.23 8.02 20.10 .36 31.00 .59 13.00 MARKET VALUE RATIOS: P/E CURRENT PRICE TO SALES PRICE TO BOOK ASSET MANAGEMENT RATIOS: RECEIVABLES TURNOVER TOTAL ASSET TURNOVER LIQUIDITY: CURRENT QUICK CASH PROFITABILITY: PROFIT MARGIN RETURN ON ASSETS RETURN ON EQUITY SOLVENCY: DEBT TIMES INTEREST EARNED (Libby, 2013), (Shamber, 2013) & (Yahoo Finance) Running Head: United Natural Foods, Inc 15 Appendix C: Common Sized Financial Reports Table C1 Balance Sheets and Common-Size Balance Sheets ($ in thousands) Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 UNFI Percent Sysco Percent UNFI Percent Sysco Percent UNFI Percent Sysco Percent 11,111 339,590 702,161 23,822 38,534 1,115,218 338,594 276,096 1,729,908 0.64% 19.63% 40.59% 1.38% 2.23% 64.47% 19.57% 15.96% 100.00% 412,285 3,183,114 2,396,188 136,211 79,629 6,207,427 3,978,071 2,478,449 12,663,947 3.26% 25.14% 18.92% 1.08% 0.63% 49.02% 31.41% 19.57% 100.00% 16,112 305,117 578,555 25,353 21,654 946,861 278,455 268,630 1,493,946 1.08% 20.42% 38.73% 1.70% 1.45% 63.38% 18.64% 17.98% 100.00% 688,867 2,966,624 2,178,830 134,503 115,984 6,084,808 3,883,750 2,126,414 12,094,972 5.70% 24.53% 18.01% 1.11% 0.96% 50.31% 32.11% 17.58% 100.00% 16,867 257,116 514,506 22,023 33,980 844,492 285,151 271,345 1,400,988 1.20% 18.35% 36.72% 1.57% 2.43% 60.28% 20.35% 19.37% 100.00% 639,765 2,898,283 2,073,766 0 121,068 5,732,882 3,512,389 2,140,284 11,385,555 5.62% 25.46% 18.21% 0.00% 1.06% 50.35% 30.85% 18.80% 100.00% 283851 114416 232495 630,762 45.00% 18.14% 36.86% 100.00% 2463494 1285788 3722855 7,472,137 32.97% 17.21% 49.82% 100.00% 242179 91982 181069 515,230 47.00% 17.85% 35.14% 100.00% 2209469 1214110 3986353 7,409,932 29.82% 16.38% 53.80% 100.00% 217074 246347 67900 531,321 40.86% 46.37% 12.78% 100.00% 2183417 1391658 3105238 6,680,313 32.68% 20.83% 46.48% 100.00% 493 380109 0.03% 21.97% 765175 1059624 6.04% 8.37% 490 364598 0.03% 24.41% 765175 939179 6.33% 7.77% 485 345036 0.03% 24.63% 765175 887754 6.72% 7.80% Retained earnings 719675 41.60% 8512786 67.22% 611821 40.95% 8175230 67.59% 520534 37.15% 7681669 67.47% Comprehensive loss and Treasury Stock -1131 -0.07% -5145775 -40.63% 1807 0.12% -5194544 -42.95% 3612 0.26% -4629356 -40.66% 1099146 63.54% 5191810 41.00% 978716 65.51% 4685040 38.74% 869667 62.08% 4705242 41.33% 1,729,908 100.00% 12,663,947 100.00% 1,493,946 100.00% 12,094,972 100.00% 1,400,988 100.00% 11,385,555 100.00% Assets Current Assets: Cash and cash equiv. Accounts receivable Inventories Deferred income taxes Prepaid expenses Total Current Assets: Property & equipment Total other assets Total Assets Liabilities & Owners Equity Liabilities: Accounts payable Current liabilities Long-term liabilities Total liabilities: Owners Equity Common stock Paid in capital Total Stockholders Equity Total Liabilities and stockholders equity FINANCIAL ANALYSIS OF UNITED NATURAL FOODS, INC. 16 Table C2 Income Statements and Common-Size Income Statements ($ in thousands) Fiscal Year 2013 Revenue Cost of sales Operating expenses Operating income (EBIT) Total other expenses Taxable income Taxes Net Earnings Fiscal Year 2012 Fiscal Year 2011 UNFI 6,064,355 5,039,279 839,582 Percent 100.00% 83.10% 13.84% Sysco 44,411,233 36,543,642 6,209,113 Percent 100.00% 82.28% 13.98% UNFI 5,236,021 4,320,018 760,845 Percent 100.00% 82.51% 14.53% Sysco 42,380,939 34,704,362 5,785,945 Percent 100.00% 81.89% 13.65% 185,582 3.06% 1,658,478 3.73% 155,158 2.96% 1,890,632 4.46% 11,378 174,116 66,262 107,854 (Libby, 2013) & (Shamber, 2013) 0.19% 2.87% 1.09% 1.78% 111,023 1,547,455 555,028 992,427 0.25% 3.48% 1.25% 2.23% 4,375 150,783 59,441 91,342 0.08% 2.88% 1.14% 1.74% 106,630 1,784,002 662,417 1,121,585 0.25% 4.21% 1.56% 2.65% UNFI 4,530,015 3,705,205 695,129 Percent 100.00% 81.79% 15.34% Sysco 39,323,489 31,928,777 5,463,210 Percent 100.00% 81.20% 13.89% 129,681 2.86% 1,931,502 4.91% 3,246 126,435 49,762 76,673 0.07% 2.79% 1.10% 1.69% 104,048 1,827,454 675,424 1,152,030 0.26% 4.65% 1.72% 2.93% Running Head: United Natural Foods, Inc Appendix D: Historical Stock Prices (Yahoo Finance) 17 Running head: FINANCIAL ANALYSIS Financial Analysis: Apache Corporation Name of Student Name of Professor Course Name Date Submitted FINANCIAL ANALYSIS Background and Industry Apache Corporation is a United States based petroleum and gas exploration company. The company belongs to petroleum industry. The company was founded in 1954 by Truman Anderson, Charles Arnao and Raymond Plank. The headquarters to the company are located at Houston, Texas, United States. John J. Christmann IV is the Chief Executive Officer (CEO) of the company. It is ranked at number 388 in Fortune 500. The company produced more than 522 thousand barrels of oil per day during the fiscal year 2016. The company had more than 3,700 employees as of December 2016. The stock of company is traded at New York Stock Exchange and its ticker symbol is APA. It is also component of S&P 500. Most Significant Financial Results Most Significant financial Performance Results Apache Corporation ConocoPhillips 2016 2015 2014 2016 Net Revenue $ 5,354 $ 6,889 $ 11,472 $ 24,360 Net Income $ (1,405) $ (10,352) $ (8,360) $ (3,615) Working Capital $ 1,398 $ 1,911 $ 2,751 $ 1,700 Operating Margin $ (1,682) $ (12,169) $ (6,830) $ (4,304) Earnings per Share $ (3.62) $ (28.70) $ (17.32) $ (2.91) The net revenue of the company has shown a decreasing trend. The primary reason for decrease in the revenue of the company is the step downfall in the price of petroleum products during last two years. The net revenue of the company was $11,472 during the fiscal year 2014.During the fiscal year 2015 the revenue decreased by $4,583 million or 39.95% and stood at $6,889 million. Again during the fiscal year 2016 the revenue of the company decreased by $1,535 million or 22.28% and stood at $5,354 million. The revenue of ConocoPhillips, the major competitor of Apache Corporation stood significantly higher at $24,360 million. The net income of the company also showed a declining trend due to decrease in revenue. The net income for the fiscal year 2014 was -$8,360 which decreased by $1,992 million or FINANCIAL ANALYSIS 23.83% and stood at -$10,352 million. During the fiscal year 2016 the net income again showed negative numbers and the net income of the company stood at -$1,405 million. The net income of ConcoPhillips was -$3,615 million. It shows that although Apache Corporation was in loss but its loss was lesser than its competitor despite of low revenue. The working capital of the company increased during the period of observation. The net income of the fiscal year 2014 was $2,751 which decreased during the fiscal year 20165 by $840 million and stood at $1,911 million. During the fiscal year 2016 the working capital again decreased by $513 million and stood at $1,398 million. The working capital of ConocoPhillips was higher than Apache Corporation and stood at $1,700 million. Owing to decrease in the revenue the operating margin of the company also decreased. The operating margin was -$6,830 million during the fiscal year 2014 which increased to $12,169 million showing a decrease of $5,339 million or 78.17%. During the fiscal year 2016 the operating income showed a negative number of $1,682 million. The operating income of ConocoPhillips was significantly lower than that of Apache Corporation and stood at -$4,304 million. Due to severe losses the earnings per share of the company also showed negative numbers. The EPs of the Apache Corporation was -$17.32 during the fiscal year 2014 which increased to -$28.70 during the fiscal year 2015. The EPS during the fiscal year 2016 improved and stood at -$3.62. The EPS of ConocoPhillips was lower at -$2.91. Financial Ratio Analysis Ratio analysis is a tool to measure the financial performance and financial health of a company. The financial statements provide the result about the performance of the corporation during the year but it is less meaningful for the users. The ratio analysis makes observations in FINANCIAL ANALYSIS the financial statements by making comparisons among various numbers. Auerbach (2005) gave the opinion that \"the ratios are not only helpful in determining and checking the financial health of corporation but also enables the user in determining its financial potential.\" Liquidity Ratios Current Ratio: Current ratio measures the ability of the business to pay its current liabilities from its current assets. The ideal current ratio is 2. The current ratio of the Apache Corporation was 2.05 during the fiscal year 2015 which decreased during the fiscal year 2016 and stood at 1.76. It indicates that the ability of the company to pay its current liabilities from current assets has decreased. The ratio of ConocoPhillips was lower than Apache and stood at 1.25 which indicates a higher ability of Apache over its competitor. Quick Ratio: Quick ratio measures the ability of the business to pay its current liabilities from its current assets. The ideal current ratio is 1. The quick ratio of the Apache Corporation was 1.57 during the fiscal year 2015 which decreased during the fiscal year 2016 and stood at 1.40. It indicates that the ability of the company to pay its current liabilities from current assets has decreased. The ratio of ConocoPhillips was lower than Apache and stood at 1.02 which indicates a higher ability of Apache over its competitor. Financial Leverage Debt Ratio: This ratio makes a comparison between total liabilities of the company with total assets. The ratio of Apache was 0.50 during the fiscal year 2014 which increased to 0.63 and 0.66 during the fiscal years 2015 and 2016 respectively. It indicates that the debts of the company have increased during the period of analysis. The ratio of ConocoPhillips was 2.57 which was significantly higher than Apache and suggests that ConocoPhillips is in high debts as compared to Apache. FINANCIAL ANALYSIS Debt to Equity Ratio: This ratio makes a comparison between the debts and equity of the business. Brigham, E. F., & Ehrhardt, M. C. (2014), viewed \"a higher leverage will result in reduction in the performance of the company which can result in decrease in the value of company.\" The ratio of Apache was 0.99 during the fiscal year 2014 which increased to 1.69 and 1.93 during the fiscal years 2015 and 2016 respectively. It indicates that the debt of the company against each dollar of stockholder's equity has increased during the last three years. The ratio of ConocoPhillips stood significantly lower than Apache at 0.75. Asset Management Total Asset Turnover: This ratio measures the efficiency of the company in utilizing its total assets in generating revenue. The ratio was 0.22 during 2014 which decreased to 0.16 during the fiscal year 2015 and again increased during the fiscal year 2016 and stood at 0.22. The ratio of ConocoPhillips was 0.26 which indicates that ConocoPhillips has utilized its assets more efficiently in generating revenue as compared to Apache Corporation. Accounts Receivable Turnover: This ratio measures the ability of the company to collect its credit sales. There is no significant change in the ratio of Apache Corporation during the period of investigation as the ratio decreased from 4.61 during the fiscal year 2013 to 4.50 during the fiscal year 2015. The ratio of ConocoPhillips stood at 6.44 which suggest that ConocoPhillips was more efficient in recovering its credit sales as compared to Apache. Profitability Ratios Profit Margin: This ratio measures the revenue left with the company after paying all of its expenses. To calculate this ratio net income is divided by revenue. The ratio of the company was -72.87% during the fiscal year 2014 which increased to -150.27% during the fiscal year FINANCIAL ANALYSIS 2015. The ratio of company improved during the fiscal year 2016 and stood at-26.24%. The ratio of ConocoPhillips was higher at -14.84% as compared to Apache. Return on Total Assets: This ratio measures the ability of the company in utilizing its total assets to generate net income. The ratio of Apache was -14.22% which decreased during the fiscal year 2015 and stood at -25.42%. During the fiscal year 2016the ratio of the company improved and stood at -5.85%. The ratio of ConocoPhillips was higher than Apache at -3.86% which suggests that it has made more efficient utilization of assets for generating net income as compared to Apache Corporation. Name of Ratio Liquidity Ratios Current Ratio Quick Ratio Financial Leverage Debt Ratio Debt to Equity Ratio Apache Corporation Ratio Analysis Formula 2016 2015 2013 Current Assets/Current Liabilities Quick Assets/Current Liabilities 1.76 1.40 2.04 1.57 1.75 0.87 Total Liabilities/Total Assets Total Liabilities/Total Equity Total Assets/ 0.66 1.93 0.63 1.69 0.50 0.99 Financial Leverage Assets Management Total Asset Turnover Accounts Receivable Total Stockholder's Equity 2.93 2.69 1.99 Net Sales/Average Total Assets Net Credit Sales/ 0.22 0.16 0.22 Turnover Profitability Profit Margin Average Accounts Receivables 4.50 4.20 4.61 Net Income/Net Sales Net Income/ -26.2% -150.2% -72.87% Return on Total Assets Market Value Average Total Assets -5.85% -25.42% -14.22% $(3.62) $(28.70) $(17.32) -17.53 -1.56 -3.62 Net Income/ Earnings per Share Weighted Common Shares Outstanding Market Price per Share/Earnings per Price-Earnings Ratio Share FINANCIAL ANALYSIS Return on Equity Using DuPont Analysis Profit Margin*Total Asset DuPont Analysis Turnover*Financial Leverage 17.20% -64.54% -31.54% This analysis was developed by DuPont Corporation during 1920s. This analysis uses three essential elements to calculate return on equity and tells how the corporations can maximize the return to its shareholders. The three components of DuPont analysis are profit margin, total assets turnover and financial leverage. The return on equity using DuPont analysis during the fiscal year 2014 was -31.54% which decreased during the fiscal year 2015 and stood at -64.54%. During the fiscal year 2015 the ratio improved and stood at 17.20%. It indicates that the performance of the company has improved during the fiscal year 2015 and it has obtained higher returns from the investment of its stockholders. The results of DuPont analysis of ConocoPhillips were also not good. The ratio of ConocoPhillips stood at -9.67% which was higher than Apache. But both the companies have negative returns which indicate that they have not utilized their stockholder's wealth in an efficient manner. To improve the return on equity of the stockholders the corporations should make efficient use of its assets. They should discard old and non-performing assets and should acquire new and more efficient assets. The companies should increase their profitability by increasing their net income. To increase the net income the companies should reduce their operating expenses. The third measure of the analysis is financial leverage which should also be improved by the companies. To improve the financial leverage the companies should increase its assets without increasing the stockholder's equity. Other Areas of Financial Analysis Capital Spending FINANCIAL ANALYSIS The company has made significant expenditure on acquiring capital assets during the fiscal year 2014. The total outflow of cash on acquisition of capital assets was $8,608 million in 2014. During the fiscal year 2015 the expenditure decreased and stood at $4,208 million which indicates that the company lowered its capital expenditure. The capital spending during the fiscal year 2016 was again lower and stood at $1,610 million. It indicates that the capital spending of the company decreased during the period of analysis. Beta The beta is a measure of the strength of the stock. It measures the volatility of the stock in comparison to the market. Beta value below one is considered good and it suggests that the stock is less volatile to the fall or increase in the stock market whereas if the beta is higher than one it is the indication that the stock is more volatile than the market movements and will decline more or increase more with the decrease or increase in the market. The beta of Apache Corporation is 1.27 which suggests that the stock of company is more volatile to the market movements. The beta of ConocoPhillips stood higher than the beta of Apache Corporation at 1.35 which indicates that the stock of Conoco Phillips is more volatile than the stock of Apache. The high volatility of both the stock is due to various reasons. The prime reason is the decrease in the revenue of the companies due to sharp fall in the price of petroleum products all over the world. The beta of all the companies of petroleum industry is lower at present due to downfall in the industry. Stock Performance The stock performance of the Apache Corporation has not been good during the last one year. The stock was trading at the levels of $56.20 during April 2016. Since then the stock show mixed performance. The stock touched its lowest point of 48.78 during the month of August, 2016 and touched the highest of $67.35 during the month of December, 2016. Since then the FINANCIAL ANALYSIS stock has shown a decreasing trend. The stock again touched lower of 49.41 during the month of March, 2017. At present the stock is trading at $49.02 which is too close to its lowest price during one year. The reason behind poor performance of the stock is that the stock is slowdown in petroleum industry and the regular losses incurred by the company. The monthly stock performance of the stock is given hereunder: Date Open High Low Close Adj Close 4/3/2017 51.42 54.64 48.79 49.02 49.02 3/1/2017 53.04 54.06 49.05 51.39 51.14 2/1/2017 60.33 60.66 51.28 52.59 52.33 1/3/2017 64.71 64.92 59.10 59.82 59.52 12/1/201 6 11/1/2016 10/3/201 67.39 60.32 69.00 66.83 63.27 54.61 63.47 65.95 62.91 65.36 6 9/1/2016 8/1/2016 7/1/2016 6/1/2016 5/2/2016 4/22/201 63.73 49.35 51.82 55.76 56.49 54.61 65.81 66.00 53.83 58.34 59.02 59.59 59.39 48.53 48.05 51.00 51.38 50.08 59.48 63.87 49.70 52.50 55.67 57.14 58.95 63.05 49.06 51.83 54.71 56.15 6 55.27 58.06 53.29 54.40 53.46 Stock Growth 2016 2015 Stock Market Price Annual Growth Three Year Growth Annual Growth $ 63.47 42.73% -8.84% $ 44.47 -29.04% 2014 $ 62.67 -27.08% 2013 $ 85.94 FINANCIAL ANALYSIS The growth of price of stock showed negative trend during the fiscal years 2014 and 2015 and the growth showed negative numbers at 27.08% and 29.04% respectively. But during the fiscal year 2016 the price of the stock increased significantly and stood at $63.47, showing an increase of 42.73%. It suggests that the price of stock went down during the fiscal years 2014 and 2015 but has increased significantly during the fiscal year 2016. Three Year Growth The three year growth of the stock is -8.84%. It means that the price of stock have not increased significantly during the last three years and overall the stock has not provided good returns to its stockholders. Required Return Using CAPM To calculate the return on the stock it is imperative to calculate the market return and risk-free rate of return of the stock. The market return for one year at present is 12.11% (source: morningstar.com). The risk free rate of return is taken the return on 10-year treasury bonds. The return on 10 year treasury bonds at present is 2.23%. To calculate the return on equity using CAPM the following formula is used: Required Return = Risk-Free Rate of Return + Beta of Stock * (Market rate of return - Risk-Free Rate of Return. Risk-Free Rate of Return = 12.11% Beta of Stock = 1.27 Risk-Free Rate of Return = 2.23% Required Return = 2.23% + 1.27 * (12.11% - 2.23%) Required Return = 14.78% FINANCIAL ANALYSIS The required rate of return of Apache Corporation is 14.78% which is on higher side. Recommendation The above analysis suggests that the company is sustaining losses. Although the liquidity of the company is high but its leverage position is declining. The stock performance of the company had also not been good during last one year. Looking into the performance of the stock and profitability of the company it is estimated that the stock is not going to catch up in near future. The analyst section of finance.yahoo.com suggests that out of 34 analysts only two are giving a buy call and 20 are giving a hold call. The six of the analysts believe that the stock will underperform and 2 suggest selling the stock. Looking into the above analysis and analysts opinion it is suggested to keep away from the company and not to enter into long term commitment with it. FINANCIAL ANALYSIS References Auerbach, A. (2005). How to analyze your business using financial ratios. Business Builder. Zions Bank, Edward Love Foundation Brigham, E. F., & Ehrhardt, M. C. (2014). Financial management (14th ed.). Mason, OH: SouthWestern Cengage Learning. Beta of Apache Corporation. Retrieved from: http://finance.yahoo.com/quote/APA?ltr=1 Beta of ConocoPhillips. Retrieved from: Form 10(K) 2016 Apache Corporation Retrieved from: https://www.sec.gov/Archives/edgar/data/6769/000167337917000004/apa10-k2016.htm Historical Stock Price. Retrieved from: https://finance.yahoo.com/quote/COP/history?p=COP Ratios of ConcoPhillips. Retrieved from: https://finance.yahoo.com/quote/COP?ltr=1 http://financials.morningstar.com/ratios/r.html?t=COP®ion=usa&culture=en-US Required Rate of Return. Apache Corporation. Retrieved from: http://www.gurufocus.com/term/wacc/APA/Weighted%252BAverage%252BCost%252BOf %252BCapital%252B%252528WACC%252529/Apache%2BCorp http://finance.yahoo.com/quote/APA/analysts?p=APA Apache Corporation Statement of Consolidated Operations - USD ($) 12 Months Ende shares in Millions, $ in Millions Dec. 31, 2016 Dec. 31, 2015 Oil and gas production revenues: Oil and gas production revenues $5,367 $6,510 Other -34 98 Gain (loss) on divestiture 21 281 Total revenues and other 5,354 6,889 OPERATING EXPENSES: Lease operating expenses 1,494 1,854 Gathering and transportation 200 211 Taxes other than income 126 282 Exploration Expense 473 2,771 General and administrative 410 380 Depreciation, depletion, and amortization 2,618 3,300 Asset retirement obligation accretion 156 145 Impairments 1,103 9,472 Transaction, reorganization, and separation 39 132 Financing costs, net 417 511 Total operating expenses 7,036 19,058 LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES -1,682 -12,169 Current income tax provision 391 435 Deferred income tax benefit -833 -1,445 Net loss from continuing operations including noncontrolling interest -1,240 -11,159 Net income (loss) from discontinued operations, net of tax -33 492 NET LOSS INCLUDING NONCONTROLLING INTEREST -1,273 -10,667 Net income (loss) attributable to noncontrolling interest 132 -315 Net income (loss) attributable to common shareholders -1,405 -10,352 NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS: Net loss from continuing operations attributable to common shareholde -1,372 -10,844 Net income (loss) from discontinued operations -33 492 Net income (loss) attributable to common shareholders ($1,405) ($10,352) BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE: Basic and diluted net loss from continuing operations per share ($3.62) ($28.70) Basic and diluted net loss from discontinued operations per share -0.09 1.3 Basic and diluted net loss per share ($3.71) ($27.40) WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: Basic (in shares) 379 378 Diluted (in shares) 379 378 DIVIDENDS DECLARED PER COMMON SHARE $1.00 $1.00 Market Price of Stock $ 63.47 $ 44.47 12 Months Ended Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2012 $ $12,795 285 -1,608 11,472 $13,749 284 -182 13,851 $15,911 -399 48 15,560 2,238 273 577 2,499 453 4,526 154 7,102 67 413 18,302 -6,830 1,281 -1,799 -6,312 -1,707 -8,019 341 -8,360 10,158 181 2,479 273 678 2,357 434 67 130 16,757 -2,906 1,142 495 -4,543 -517 -5,060 343 -5,403 6,289 238 2,864 288 785 0 482 33 177 11,156 4,404 1,663 261 2,480 -192 2,288 44 56 2,188 -6,653 -1,707 ($8,360) -4,886 -517 -5,403 2,380 -192 2,188 ($17.32) -4.44 ($21.76) ($12.72) ($1.34) ($14.06) $6.02 ($0.49) $5.53 384 384 $1.00 384 384 $1.00 395 406 $0.80 62.67 $ 85.94 $ 78.50 Apache Corporation Consolidated Balance Sheet - USD ($) $ in Millions Dec. 31, 2016 Dec. 31, 2015 CURRENT ASSETS: Cash and cash equivalents $1,377 $1,467 Receivables, net of allowance 1,128 1,253 Inventories 476 570 Drilling advances 81 172 Prepaid assets and other 179 290 Assets held for sale 0 0 Deferred tax asset 0 0 Total current assets 3,241 3,752 Oil and gas, on the basis of successful efforts accounting: Proved properties 42,693 41,728 Unproved properties and properties under development 1,969 2,277 Gathering, transmission, and processing facilities 976 1,052 Other 1,111 1,093 Property and equipment, gross 46,749 46,150 Less: Accumulated depreciation, depletion, and amortization -27,882 -25,312 Property and equipment, net 18,867 20,838 OTHER ASSETS: Goodwill Deferred charges and other 411 910 Total assets 22,519 25,500 CURRENT LIABILITIES: Accounts payable 585 618 Other current liabilities 1,258 1,223 Current asset retirement obligation Derivative instruments Other current liabilities Total current liabilities 1,843 1,841 Long-term debt 8,544 8,716 DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES: Income taxes 1,710 2,529 Asset retirement obligation 2,432 2,562 Other 311 362 Total deferred cr