Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The attachement is my homework, please finish this carefully, thanks a lot! Corporate Finance R. Moy Spring 2017 The objective of this exercise is to

image text in transcribed

The attachement is my homework, please finish this carefully, thanks a lot!

image text in transcribed Corporate Finance R. Moy Spring 2017 The objective of this exercise is to allow you to use the tools we have learned from our textbook, and apply them to actual companies. You should discover that each industry is quite unique in regards to their financial operations. Following the outline below, you should begin your report with a brief introduction, describing what you are about to present. Then, discuss each of the five companies in turn, comparing the company to its own industry. Finally, you will want to provide a summary and a conclusion on what you learned from this analysis. You will be graded on these five components: 1) Company Overview 2) Data Selection (Five years of 10 ratios for each company) and discussion of the results. 3) Industry comparison of ratios for most recent year and discussion of the results. 4) Stock chart inclusion and discussion (Five years with a comparison with the industry ETF index and the S&P500 Index) 5) Conclusion (including comments on what you learned from this analysis) See below for a more detailed description of each section of the report. 1) First of all, answer why you are performing this analysis. Then, select 5 different publicly traded companies in the following industries: (1) a major manufacturing company, (2) a retailing firm, (3) a public utility, (4) a bank, and (5) a transportation firm. (This means that you will have a total of 5 companies you are analyzing in this section .... One in each industry). 2) From a preferred information source, such as Standard & Poor's Net Advantage1 http://stjohns.campusguides.com/content.php?pid=57953&sid=424188), Mergent Online (good for industry ratios) http://www.mergentonline.com.jerome.stjohns.edu:81/basicsearch.php ) for a 1 I included an example of an S&P Report on the Textiles, Apparel & Luxury Goods Industry Report on Blackboard: http://www.netadvantage.standardandpoors.com.jerome.stjohns.edu:81/NASApp/NetAd vantage/showIndustrySurvey.do?task=showIndustrySurvey&type=pdf&code=apf 1 video on how to use Mergent Online to create industry ratios go to https://www.youtube.com/watch?v=6dJ16pyUygo , Morningstar http://www.morningstar.com/ or the Bloomberg Terminal/FactSet in the Financial Information Lab (in Queens) or in the Accounting Lab (in Staten Island). Develop a five-year historical analysis of key measures you consider significant to appraise the effectiveness of management, the return to owners, and the position of the lenders. Make sure you cite your reference material. 3) Using at least 10 ratios per company, develop significant industry comparisons and comment on the relative position of your chosen company. Also, comment on some of the assumptions and choices you have to make on the selection of specific accounts and data to work the analytical techniques. Comment means I want you to discuss the results, not simply copy and paste the ratios and the analysis from another source. Make sure you cite your sources of information, as well as the date of the 5-year period you used for your anaiysis. Spreadsheet tables and graphs work well here to support your position. Stock price charts, line charts, and bar charts all are essential to an excellent presentation. 4) Include a 5-year chart comparing your company's stock price with its industry ETF index, as well as the S&P500. Describe what you see. Has the stock price been increasing, decreasing, or staying the same during this period? How has the company performed relative to its competitors (measured by the ETF)? What about to the overall market (measured by the S&P500)? For example, below is a chart of Nike using www.bigcharts.com. I first used this website https://www.etfchannel.com/symbolke/ to see which ETFs were holding NKE, and then I went through the top holders to find one that seemed to most match the industry. I used XLY (for Consumer Discretionary). In BigCharts, click on Advanced Chart, then at the left you will see how you can extend time to 5 years, and add any type of comparisons, such with major indexes (click on S&P500), or by adding your own (like I did, with the industry ETF), or even a direct competitor (such as Ford with GM). Right click on the image to copy and paste into your document (or copy and paste it you your desktop, then embed it into your document). 2 From the above chart, you can see that if you invested in Nike, you would have received a fairly nice return on the stock over the past 5 years. Plus, Nike has outperformed both its industry ETF, as well as the overall market. To take this analysis even further, let us compare Nike with Under Armour: 3 This shows that Nike was a good pick, but UnderArmour would have been a much better investment choice over this time frame. 5) Always write a conclusion. Did you learn anything from this project? 4 Executive Summary This financial analysis report specifically focuses on five global companies of five different sectors mainly manufacturing company, retailing firm, public utility, bank and transportation firm. General Electric, Home Depot Inc., Pacific Gas and Electric Company, JPMORGAN CHASE & CO. and Ford. After extensive review of all companies' overall financial performance and strategies, the results conclude which company is recommended for investment. The report includes an analysis of different financial ratios based on liquidity, activity, profitability, and coverage for the years of 2012, 2013, 2014, 2015 and 2016 reflecting each companies' financial performance and stability. All the various financial statements, including the financial ratios were carefully evaluated to draw final conclusions of both companies and provide a recommendation for investment, and are provided in the appendix section of this report for detailed reference. Companies Overview General Electric: is an American multinational conglomerate incorporated in New York. The company operates in all major manufacturing of Aviation, Power and oil equipment's, Automotive equipment's. It an 868th largest firm in the US by revenue and 14th most profitable company. Home Depot: At the time of this study, Home Depot, Inc. had delivered positive financial results in what was \"one of the most challenging retail environments in 20 years\" (Annual Report). Ranking among the best in retailing, Home Depot opened 203 new stores, created 40,000 new jobs, and made significant investments in technology, operations, and merchandising in 2002. With a steadily increasing market share of over 25%, Home Depot has maintained its title as #1 in home improvement retail industry (Home Depot and Annual Report). Pacific Gas and Electric Company (PG&E): is an investor-owned electric utility (IOU) with publicly traded stock that is headquartered in the Pacific Gas & Electric Building in San Francisco. JP Morgan Chase & Co.: JPMorgan Chase & Co. is a U.S. multinational banking and financial services holding company headquartered in New York City. It is the largest bank in the United States, the world's fifth largest bank by total assets, with total assets of US$2.424 trillion and also the world most valuable bank in the world. Ford: The Ford Motor Company (commonly referred to simply as Ford) is an American multinational automaker. The company sells automobiles and commercial vehicles under the Ford brand and most luxury cars under the Lincoln brand. Ford is the second-largest U.S.-based automaker (preceded by General Motors) and the fifth-largest in the world based on 2010 vehicle sales. Ratios Ratios Current Ratio Quick Ratio Financial Leverage Debt/Equity Asset Turnover (Average) Return on Assets % Financial Leverage (Average) General Electric 201 2 2.3 4 2.2 6 5.5 7 2.0 9 0.2 1 1.9 5 5.5 7 2013 2.53 2.42 5.03 1.86 0.22 1.95 5.03 201 4 2.5 3 2.4 2 5.0 6 1.7 4 0.2 3 2.3 3 5.0 6 201 5 1.6 1 2016 2.01 1.4 5.0 1 1.72 1.5 0.2 1 1.0 8 5.0 1 1.44 4.74 0.26 2.27 4.74 Free Cash Flow/Sales % 11. 39 11. 05 10.3 13.3 5 11. 78 11. 93 Free Cash Flow/Net Income 1.1 9 1.16 0.9 2 5.4 2 10. 72 2.0 5 201 4 1.3 6 0.2 8 4.2 9 1.8 1 2.0 7 15. 77 4.2 9 58. 09 8.1 8 1.0 7 201 5 1.3 6 0.3 3 6.7 4 3.3 1 2.1 4 16. 99 6.7 4 89. 64 8.8 9 1.1 2 201 4 1.0 8 0.4 2 3.8 2 0.9 6 201 5 0.9 2 0.3 5 3.8 2 0.9 7 0.2 7 1.4 2 Return on Equity % Home Depot 201 Ratios 2 2013 1.3 Current Ratio 4 1.42 0.3 Quick Ratio 4 0.31 2.3 Financial Leverage 1 3.24 0.5 Debt/Equity 3 1.17 1.8 Asset Turnover (Average) 3 1.93 11. Return on Assets % 11 13.2 2.3 Financial Leverage (Average) 1 3.24 25. 35.5 Return on Equity % 42 5 7.5 Free Cash Flow/Sales % 8 7.92 1.2 Free Cash Flow/Net Income 5 1.16 Pacific Gas and Electric Company 201 Ratios 2 2013 0.8 Current Ratio 2 0.8 0.4 Quick Ratio 3 0.41 4.0 Financial Leverage 1 3.88 0.9 Debt/Equity 6 0.89 0.2 Asset Turnover (Average) 9 0.29 Return on Assets % 1.6 1.51 0.3 2.4 8 11.3 7 -2.2 -0.24 2016 1.34 0.39 7.92 3.97 2.11 17.3 3 7.92 116. 06 8.95 1.09 2016 0.92 0.71 3.84 0.95 0.27 1.3 Financial Leverage (Average) Return on Equity % 4.0 1 6.4 8 1.7 Free Cash Flow/Sales % 2 0.3 Free Cash Flow/Net Income 1 JP Morgan Chase & Co 201 Ratios 2 1.3 Current Ratio 4 0.3 Quick Ratio 4 12. Financial Leverage 1 1.4 Debt/Equity 1 0.0 Asset Turnover (Average) 4 0.8 Return on Assets % 6 12. Financial Leverage (Average) 1 10. Return on Equity % 72 25. Free Cash Flow/Sales % 85 1.1 Free Cash Flow/Net Income 8 Ford 201 Ratios 2 1.9 Current Ratio 4 1.8 Quick Ratio 3 11. Financial Leverage 95 4.1 Debt/Equity 6 0.7 Asset Turnover (Average) 3 Return on Assets % 3.0 5.94 11.4 1 3.8 2 9.5 4 6.7 6 3.8 2 5.4 1 8.4 4 -9.23 -2.15 -0.8 -1.6 -1.86 201 4 1.3 6 0.2 8 12. 14 1.4 5 0.0 4 0.8 1 12. 14 9.7 5 38. 47 1.6 8 201 5 1.3 6 0.3 3 10. 62 201 4 2.0 1 201 5 2.1 2 2.0 2 7.8 5 3.1 4 0.6 9 3.4 3.88 2013 1.42 0.31 12.0 8 1.48 0.04 0.7 12.0 8 8.4 110. 87 6.04 2013 2.04 1.94 2.9 1.9 8.4 1 3.2 3 0.75 3.65 0.7 1.5 7.66 1.4 0.0 3 0.9 1 10. 62 10. 34 78. 54 3.0 1 3.84 4.92 2016 1.34 0.39 11.0 4 1.46 0.04 0.86 11.0 4 9.52 -2.68 -0.11 2016 1.16 1.01 7.46 2.86 0.68 3.19 Financial Leverage (Average) Return on Equity % Free Cash Flow/Sales % Free Cash Flow/Net Income 7 11. 95 36. 58 2.6 6 0.6 3 7.66 33.8 1 2.62 0.32 5 8.4 1 12. 45 4.8 9 5.7 2 7.8 5 27. 59 6 1.2 2 7.46 24.5 9 8.04 1.7

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Investment Analysis and Portfolio Management

Authors: Frank K. Reilly, Keith C. Brown, Sanford J. Leeds

11th Edition

1305262999, 1305262997, 035726164X, 978-1305262997

More Books

Students also viewed these Finance questions

Question

Explain the use of a time log.

Answered: 1 week ago