This is a 3 pages Finance paper, double-spaced analyzing a company's financial statement using the attached guidelines.

I am also attaching three examples of what the professor believes is a good paper.

Recommendation Johnson & Johnson (JNJ Executive Summary Johnson & Johnson (Code: JNJ) is a leading multinational pharmaceutical and healthcare company. It has been in business since 1886 and is a mature company with more than 125,000 employees. Organized into three business segments Consumer, Pharmaceutical and Medical Devices, the most growing segment by sales was the Pharmaceutical area with 14.9% over the last fiscal year. Sales in the US and Europe increased over the last year, which is evidence for well-developed regional strategies. Due to an extensive (R&D) effort of technological barriers and regulations, high industry barriers for potential competitors are clear. JNJ is a rock in the industry and offers stable revenue generation paired with a broad customer base, strong growth potential in the pharmaceutical segment as well as attractive dividend payments. As a result of my analysis of JNJs balance sheet, income statement and other industry reports, I recommend to buy Johnson & Johnson shares for investors seeking a long-term value investment. Market Performance Trading at $102.48 the stock price is closer to the 52 week high of $108.99 than to the 52 week low of $81.79. Compared to its competitors and the overall market, the company underperformed the market this year. Compared to the industry Price/Earnings (PE) ratio of 18.70, JNJs PE ratio is lower and expected to decline to 16.58 in 2015. A PEG ratio of 3.40 looks too high on the surface. However, taking into account the stable earnings and low growth rates as well as a solid dividend yield of 3% (dividend has been paid for a streak of 53 years), the high PEG ratio should no longer prevent us from potentially investing into the company. The current price to book ratio is 3.92, compared to a slightly higher industry average of 4.42. Due to its diversified business segment and overall strategy, JNJ has a beta of 0.63, whereas the industry is less sensitive to the overall market. Liquidity & Solvency With an acceptable current ratio of 2.51, JNJ indicates safe liquidity and the capability to pay its obligations. The Acid test of 1.9 is mainly driven by the high amount of marketable securities, which 1 Recommendation Johnson & Johnson (JNJ shows the large amount of money the company has access to and that will potentially be used for further acquisitions. Furthermore positive working capital ensures the payment of short-term liabilities. 129 days inventory can be considered a long, but common amount of time for this industry. Inventory turnover of 2.8, which increased over the last few years, is a slightly better number compared to its competitors. Overall this indicates an effective inventory control and receivables collection system of JNJ, resulting in a slightly above average liquidity. Although been affected by the increasing US-Dollar, the main message during the last 10-Q release press conference was that the company will still stay profitable. Stable growth prospects are supported by a long-term D/E of 0.20 compared to an industry average of 0.49 and a total D/E of 0.28, which is also remarkably lower than the industry average of 0.59. JNJs ability to pay interest on outstanding debt is another indicator of its financial strength. An above average Interest Coverage Ratio of 38.38 supports this statement. Profitability & Return In the future, the company is expected to stay profitable and healthy. Its Gross Margin of 74.50 is below industry average, but the company was able to reduce the 'cogs' over the last years as well as their selling, marketing and administrative expenses at a rate of 1%. This leads to a higher gross margin and revenue. Net profit margin, proofing JNJs efficiency and cost control, has been stable over the last 10 years with an average of 21.36% and has outperformed the industry. EPS have been within a range of 5.7-3.49 in the last 10 years and they are expected to be around 6.15 this year, even though the company has reported a decrease in sales for the last quarter. Return on Assets for 2014 was 12.44%, which is higher than 80% of the drug manufacturing industry. Another ratio demonstrating JNJs efficiency in generating earnings from the equity provided is the Return on Equity of currently 17% (2015 numbers) and of 22.70% in 2014 as well as an above industry average ROI of 17.20%, which has been stable over the past years. Equity and Growth An Equity-to-Asset ratio of currently 0.54 suggests a healthy capital structure. Additionally, JNJ also has an excess of equity over debt. Last year the company purchased up to $5.0 billion of common stock and 2 Recommendation Johnson & Johnson (JNJ recently published plans to repurchase shares up to $10 billion. Over the past years the company strongly invested into the pharmaceutical segment in order to develop new drugs (e.g. against Ebola). In the last quarter though, former bestsellers couldnt keep up with the expected forecasts and therefore the recent repurchase program is used to keep investors happy. Sales are expected to grow longer term by 4.6% and JNJ has had a growth rate around 5% over the past years, proving a positive and stable growth strategy. Compared to its peers (Merck, Pfizer etc.), JNJ is the only company being able to increase revenue and net earnings over the last 3 years, supporting the growth prospects. To ensure continuous growth, JNJ invested 11% of yearly sales into R&D for the last five years and plans on continuing that way. Especially the pharmaceutical segment offers a potential earnings boost with 10 expected new blockbusters by 2019 including outstanding demand potential. Risk JNJ faces multiple risk factors due to its huge network of businesses. Active in over 60 countries and with nearly 55% of total revenue generated by sales outside the US, the company faces major currency risk. The increasing Dollar has had a significant negative effect on revenues (-7.4%) and earnings not only in the third quarter of 2015, but also over the last year. However, for an internationally interacting company it is not uncommon to be hit by currency effects and one should not be distracted from the positive growth numbers of the last years. Due to the JNJs business, the company faces multiple legal risks and is exposed to a high risk of litigations dealing with consumer or patent rights. A high rate of acquisitions in contrast to organic growth bears the risk of integration into the company. Federal regulations by the FDA and the Health Care Reform have significant impact on the companys business. Nevertheless the company is one of only three stocks in the US rated \"AAA\" by S&P, Moods and Fitch. 3 Marriott International, Inc. Executive Summary: Marriott International stock is a good buy for investors with a high level or risk tolerance who are seeking the potential for substantial future returns. It is not, however, a good option for investors with a lower level of risk tolerance who are looking for stability. This recommendation is based upon careful review of the firm's ratios and risk factors, as well as consideration of the just announced merger between Marriott International and Starwood hotels. It is risky because it seems to have some liquidity issues, mostly resulting from spending large sums of money to repurchase treasury stock. However, because of why it spent this money, its ability to cover its interest, and the potential provided by the merger, there is a lot of upside potential. Stock Data: At the time of this writing, the current price of Marriott International (ticker MAR) is $73.71, approximately mid-way between the 52-week high of $85.00 and low of $63.95. Company Information: Marriott International began in 1927 as an A&W Root beer stand. In 1957, the company expanded into the hotel industry by opening its first hotel in Arlington, Virginia. Since then the company has been known worldwide for expansion and innovation in the industry. It is a very mature company that still prides itself on this culture of innovation and growth. Ratios - Liquidity and Solvency: The firm's current ratio is 0.5, which is below the industry average of 0.9. The firm's acid test ratio is 0.4, also below the industry average of 0.6. Together, these ratios indicate that the firm is less able than its competitors to cover its current liabilities with its current assets, with or without including inventory. This is because the firm spent a lot of money purchasing treasury stock. It also has a much longer collection period than the industry at 29 days compared with the average of 18.4 days. This means that Marriott has more trouble than others collecting payment for the services it provides. Marriott's total debt to equity ratio is -4.1, because it has negative equity. It has negative equity because it has bought back a substantial amount of its stock at prices higher than it sold them for. This is probably either because the firm thought the shares were underpriced or because it was preparing for its merger with Starwood. Its times interest earned ratio is, however, higher than the average at 9.5 versus 5.7. This indicates that the company is better able to cover its interest expenses than other similar firms. Ratios - Return and Operating Performance: Marriott's return on assets is promising at 13.9%, more than double the industry average of 5.0%. However, its return on equity is deeply concerning at first glance at -32.4% compared to the industry average of 8.9%. But upon further investigation, it appears that the reason for this is that Marriott has bought back huge amounts of its own stock over the past several years. Again, this is probably be because it was preparing for a merger with Starwood. Net profit margin is slightly below the average at 6.0% versus 8.1%, but gross profit margin is significantly below the average at 14.6% versus 48.7% which is worrisome. Operating profit margin is slightly above the average at 9.47% versus 7.99%. This suggests that a disproportionate amount of its expenses are non-operating. Market Measures: Marriott's price to earnings ratio is below the average at 23.8 compared to 28.9. This suggests that the stock is probably more reasonably priced compared to its earnings than other similar firms. Its dividend payout ratio is 29.0%, well below the industry average of 51.0%. This means that Marriott is more interested in reinvestment within the firm and future growth than other firms in the industry. This is supported by Marriott's merger with Starwood to become the largest hotel company in the world, as well as its overall high growth rate. The firm's price to book ratio is -4.26 because of its out-of-the-ordinary, negative equity situation. Its dividend yield is just about at the industry level at 1.4% versus 1.7%. Growth and Merger: Even though it is a very mature firm, Marriot has a very large growth rate of 27.53%. Marriott also just announced a deal for a merger with Starwood Hotels which will cost the company $12.2 billion and make Marriott the largest hotel chain in the world. This is a very expensive and risky move, but the company believes this increase in size will allow for further growth and market penetration, as well as allow the company to streamline processes, cut down on expenses, and improve service. Its PEG ratio is 1.37, slightly below the average. Risk, Credit, and Insider Trading: Marriott International faces many of the same risks as other firms in its industry, such as potential losses resulting from continued economic issues in countries outside the United States such as in Europe. There is also potential default risk from owners of the individual franchises under the company umbrella, as well as exchange rate risk from doing business in foreign currencies. There is additional risk provided by new and recently launched brands, such as EDITION, AC Hotels, and Protea Hotels, which have not yet been around long enough to be declared a success. Currently, however, Marriott's biggest risk factor is its merger with Starwood, a multibillion dollar endeavor which could either do great things for the firm and its ability to expand while providing a large amount of potential future upside for investors, or prove to be a very expensive loss for the company and investors alike. As of its last update, Marriott has a bond rating of BBB, meaning its credit isn't bad but could certainly be better, and has an analyst rating of \"Buy\". Company insiders are currently both buying and selling in comparable amounts which does not seem concerning. Bottom Line: The apparent issues with this stock (poor liquidity and negative equity) are the result of the company repurchasing large amounts of its own stock at prices higher than it originally sold them for. This was to prepare for the merger with Starwood, which provides a lot of upside potential for the company and makes the stock a good buy for risk tolerant investors. FINA 756 2/24/2016 Bojangles' (stock symbol: BOJA) The company I analyzed is Bojangles' Famous Chicken n' Biscuits. Bojangles' is a fast food chain in the restaurant industry and has its headquarters in Charlotte, NC. Bojangles' was founded in 1977 and had its initial public offering in May, 2015. Its stock symbol is BOJA. On the day of this analysis, the price of one share of BOJA is $14.68. The 52 week low is $13.39 and the 52 week high is $28.45. Liquidity BOJA's current ratio (.53) is slightly less than the industry (.55). The difference is not enough to be worried as an investor because they have plenty of money to cover their current liabilities. Though it is definitely not a sign of financial strength relative to BOJA's competitors. Capital Structure and Solvency BOJA's total debt to equity ratio (153.65) is 15% higher than the industry (133.10). This fact is not surprising, as Bojangles' is less developed than many of its competitors. As a regional company looking to expand, it makes sense that they would have a larger amount of debt. Return on Investment BOJA's return on equity (18.48%) is substantially lower than the industry (24.8%). This is definitely an area of concern. Why invest your money in a stock that has an 18.48% when you can invest in a stock with a 24.8% return? Rhetorical question. However, the lower return on equity can be explained by the fact that the BOJA had its initial public offering less than a year ago giving caution to investors. Operating Performance BOJA's net profit margin (.07) is slightly less than the industry (.08). As an analyst, this is a key metric for me, so it is concerning that BOJA has a lower margin. Perhaps this could be explained by the fact that Bojangles' is keeping its prices low to attract new customers and get them hooked on the delicious food. Market Measures BOJA's price to earnings ratio (20.68) is significantly less than the industry (38.6). This is a strong positive indicator for Bojangles' stock. I would caution other investors to take this figure with a grain of salt and approach carefully as this stock is still new and unproven. BOJA's price to book ratio (3.27) is extremely higher than the industry (-57.5). This is another strong positive indicator and makes BOJA stock look more attractive than its competitors. The large, negative number for the industry tells us that competitors are overvaluing their assets and are due for a correction. An investor can sleep comfortably knowing that this is a much lesser risk for Bojangles'. BOJA does not pay a dividend, while they industry average for dividend yield is 2.53%. This is a turn off for me, as a highly risk averse investor, because dividends are a sign of maturity and stability. The fact that Bojangles' does not pay a dividend is not necessarily a bad thing, because once again, the company is less developed than its competitors and had its initial public offering less than a year ago. Not having a dividend aligns with their strategy for growth. They are choosing to reinvest the excess capital versus pay a dividend. PEG Ratio BOJA's PEG ratio (1.13) is a lot less than the industry (1.64). This compensates for the fact that Bojangles' has a lower price to earnings ratio than the industry. This tells us that Bojangles' has much more growth in store for the company than its competitors. Buying stock based on anticipated growth is risky, which is why I would not recommend highly risk averse investors to buy the stock based on Bojangles' low PEG ratio. On the other hand, more risk means more reward in most cases. Five Year Growth Rate BOJA's five year growth rate is 14.76%. This is an outstanding amount of growth, but just like the PEG ratio, it is dangerous/risky to place a bet only taking the growth rate into consideration. Any of Porter's 5 forces can cause this growth rate to become less. Risk Factors One risk factor associated with BOJA is a decline in demand. An ever-growing trend in the United States is living a healthy lifestyle. Americans are becoming more health-conscious when it comes to their diet. Bojangles' has very few 'healthy' options and for that reason, I think it is probable that it will see a drop in demand over the next years and decades. Insider Trading Per Bojanges' most recent Form 4, a director sold a substantial amount of stock. Prior to that transaction, there was not much inside trading activity. This signals a lack of faith or confidence by the director who sold the 6,000 shares. Conclusion Overall, Bojangles' financial ratios do not meet the industry norms. For this reason, my recommendation is to sell BOJA stock, rather than buy. This recommendation is particularly geared towards investors like myself who are highly risk averse. Requirements: 1. Pick a Company - Any company except one of the following: Google, Microsoft, AOL, Target, Nike, Apple, Under Armour, Krafts Foods, Net Flix, Starbucks, Chipotle Mexican Grille, Wal-Mart, Boeing, E-bay, Macy's, Coca Cola, Cisco, Nordstroms, Pfizer, Bank America, and Proctor and Gamble 2. Make a recommendation of either to buy or sell. (May want to qualify recommendation with a statement about what type of investor the stock would be suited,) 3. Double space, not more than three pages. 4. Attach a copy of the balance sheets, income statements, statement of change and change in stockholders equity. 5. Feel free to stop by my office or email me if you would like for me to review a rough draft, or to answer any questions. 6. Start early enough to have time to edit your paper. Recommendations: 1. Don't waste paper telling me what statements you reviewed. 2. Don't explain what the purpose of the ratio, etc. is. Instead tell me what the number is and why it is significant or not to the individual company. 3. If possible explain why the ratio is out of line and what if any thing is being done. What is the implication of the difference? 4. Compare to other companies or the industry. Explain difference, not just note differences. 5. Key issues that will impact the company. 6. Sub heading are very effective. 7. Executive summary at the beginning. Include recommendation at the start. 8. Highlight in BOLD the various ratios and key items. Required items to be INCLUDED in written report. Company name Industry Stock symbol Stock price on date of recommendation 52week low and high At least one Liquidity ratio* At least one Capital structure & solvency ratio* At least one Return on investment ratio* At least one Operating performance ratio* Price to earnings ratio* Price to book ratio* Dividend yield* PEG ratio* Five year growth rate Bond rating if available Analyst ratings Risk Factors Insider trading Student's recommendation. *Needs to be compared to industry ratio. Use the list above as a \"Check List\" to see if all information is included. Below are various other items that you may want to consider including in your report. Optional 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. Are all earnings reoccurring? What if any is unusual? Earnings compared to cash flow. What is company doing to insure stainable future earnings? Limited explanation of the company's history and products. Instead how long has it been in business? Is it a mature company or start-up? What is unique about the product? How easy or hard is it for others to enter the market? Consider doing a projection of the next few years. What is the company's level of intangibles? Any concerns? Is deferred tax more a liability or equity? Dividend payment is generally a good sign. Is the company repurchasing stock, if so then a good sign? If not no comment. Any issue relate to comprehensive income? Any foreign exchange issues? Any pension concerns? Are operating leases reasonable or should they be capitalized for our analysis