This is your second interview with a prestigious brokerage firm for a job as an equity analyst. You survived the morning interviews with the department manager and the Vice President of Equity. Everything has gone well. They want to test your ability as an analyst. You are seated in a room with a computer and a list with the names of two companies Ford(ticker F) and Microsoft (ticker MSFT). You have 90 minutes to complete the following tasks:

1. Download the annual income statements, balance sheets, and cashflow statements for the last four fiscal years1 from Wharton Research Data Services: https://wrds-web.wharton.upenn.edu/wrds/index.cfm (Username and Password are case sensitive.) Username: fin33110 Password: Niano102s

To access these statements, select Compustat. Once there, scroll down and click on Tools in the left navigational menu. There you will find a series of Financial Statements. Select Complete Financial Statements (XLS). Enter company code (ticker) in the code lookup. Click Submit Query. Wait a moment. When your output is complete. Click on the link to open the output file. Repeat these steps for Data and Ratios (XLS)

2. Find historical stock prices for each firm from Yahoo! Finance (http://finance.yahoo.com). Enter your stock symbol, click Historical Prices in the left column, and enter the proper date range to cover the last day of the month corresponding to the date of each financial statement. For each financial statement, use the same date for the start and end date. Use the closing stock prices (not the adjusted close). To calculate the firms market capitalization at each date, multiply the number of shares outstanding (see Common Shares Outstanding at Fiscal Yr End on the income statement) by the firms historic stock price.

3. For each of the four years of statements, compute or retrieve the following ratios for each firm. Ratios not given (N/A) should be computed:

Valuation Ratios:

Price-Earnings Ratio (for EPS use Diluted EPS Total)

Market-to-Book Ratio

Enterprise Value-to-EBITDA

(Enterprise Value is Market Value of Equity plus Debt minus Cash; for debt, include long-term and short-term debt; for cash, include marketable securities.)

Profitability Ratios:

Operating Margin (Use Operating Income after Depreciation: EBIT)

Net Profit Margin

Return on Equity

Financial Strength Ratios :

Current Ratio

Book Debt-Equity Ratio (Use Long-term debt and Book equity)

Market Debt-Equity Ratio (Use Long-term debt and Market equity)

Interest Coverage Ratio (EBIT Interest Expense)

4. Obtain industry averages for each firm from Reuters.com (http://www.reuters.com/finance/stocks). Enter the stock symbol on the top of the page in the Symbol lookup, click search, select the company from the list that appears, and then click the Financials tab. a. Compare each firms ratios to the available industry ratios for the most recent year. (Ignore the Company column as your calculations will be different.) b. Analyze the performance of each individual firms performance with respect to its industry. Identify any strengths or weaknesses you find in each firm.

5. Examine the industry market-to-book ratios to the one you calculated for each firm. Which, if any, of the two firms can be considered among growth firms within their industry and which, if any can be considered among value firms within their industry? Explain why.

6. Compare valuation ratios across the two firms. How do you interpret the difference between them? What explains the difference?

7. Consider the enterprise value of each firm for each of the four years. Show how the values of each firm have changed over the four-year time period.

8. Construct a portfolio consisting of only these two securities, describing the weight that you would allocate to each. Explain why