Objective: Familiarize students with the application of ratio and trend analysis.

This project allows you the opportunity to perform critical thinking, by addressing specific

financial trends and industry comparisons for a company of your choice. This project will be a

comparison$/$contrast paper that shows a demonstration of the application of financial analysis

and critical thinking in a large organization. You will be performing trend analysis and industry

comparisons on $3-4$ years$$ worth of financial statement data $($whatever tells the story$).$

Trend Analysis & Ratio Analysis

Ratio analysis uses percentage or decimal calculations of comparison to at least two different

sets of financial data. You are comparing how one relates $($compares$)$ to another. Decision

makers use ratios because they illuminate relationships between financial data taken from the

company's statements.

Although ratio analysis can be used to evaluate financial performance, the number, by itself,

does not reveal the entire story. To take the analysis to the next level, one must engage in

trend analysis. Trend analysis utilizes the aforementioned ratios and shows the changes in

those ratios, over time. Stakeholders can use trend analysis to not only compare "this year" to

"last year" for this company, but can compare each year to the industry as a whole and even to

the number one competitor for benchmarking purposes.

When you are setting up your paper, it would help to group your ratios and analysis together by

content area $($profitability$,$ debt management, asset utilization, liquidity, and market value

ratios$).$

Deliverables

Choose a publicly traded, publicly held, U$.$S$.$ company. This means you need to pick a company

that is public and has stock that trades on the exchange. You will use a variety of sites to find

your financial data. Start with either Yahoo! Finance site or www$.$reuters.com. These two sites

will allow you to capture at least one year of data for each of the two companies you are going

to review as well as the industry ratios you will need. You will need to acquire annual reports

for the company sites for years older than the most current year. You will need to review three

$-$ five years of financial information on this company, more years of data will produce a more

thorough analysis.

Specific areas of analysis are noting major ratio categories and identifying whether the trend is

up or down, whether that is good or bad, and why. Once the data are gathered, analyzed, and

trends revealed; the student will acquire the same information for a competitor within the

same industry. The same ratio and trend analysis will be gathered for the competitor. A

comparison will ensue, identifying specific strengths and weaknesses of various components of

the financial statements. Upon completion of the original company trend analysis and the

competitor's trend analysis, an analysis and trend comparison with the industry is required.

This will allow the student to demonstrate an understanding of financial ratios and what trends

are present between two different companies in one industry, as well as$,$ being able to

determine the position of the industry and be able to project future trends and how the

company being evaluated can budget for changes in the industry.

Further analysis into the company reveals how the company manages cash, inventory, working

capital, long$-$term debt, and other items in lieu of current market conditions.

So$,$ what is required?

Part I

$1.$ Your chosen company $($financial ratios and trend analysis$)$

a$.$ Using the data provided at the Yahoo! Finance site, use the ratios in

the textbook or other sources, and determine the status of your

chosen company based on those ratios. Compare performance year$-$

to$-$year and whether trends appear to be favorable or unfavorable.

Consider what the impact might be if those trends continue. The

ratios you will be reviewing are the same ratios; as you will find in

your textbook. Note that some of these ratios may not be applicable

to your company. Some ratios are specific to certain types of firms.

Not all firms carry significant accounts receivable as an example.

$2.$ A competitor in the same industry $($financial ratios and trend analysis$)$

a$.$ Using the data provided at the site, use the ratios in the textbook and

determine the status of your chosen competitor based on those

ratios. Also, identify any trends you notice and what the impact

might be if those trends continue.

$3.$ The industry as a whole; how does your chosen company compare and what

evaluations can you make $($predict$)$ for future financial success?

a$.$ Review industry data and determine where these two companies fit

within that industry. Are they leaders$/$followers$?$ What does the

future hold for this industry?