You were recently hired on as an equity analyst for a prestigious firm and theyve asked you to review some financial data for two of their major clients, Ford Co. and Microsoft. Youve been asked by your boss to type of a report briefing them of your findings to the following:

• Compute the following ratios for the last four fiscal years of both organizations:
  • Valuation Ratios:
    • Price-Earnings Ratio (for EPS use Diluted EPS Total)
    • Market-to-Book Ratio
    • Enterprise Value-to-EBITDA (for debt, include long-term and short-term debt; for chas, include marketable securities).
  • Profitability Ratios:
    • Operating Margin
    • Net Profit Margin
    • Return on Equity
  • Financial Strength Ratios:
    • Current Ratio
    • Book Debt-Equity Ratio
    • Market Debt-Equity Ratio
    • Interest Coverage Ratio (EBIT/Interest Expense)
• Compare each firms ratios to the available industry ratios for the most recent year. (see below for instructions on how to complete this step. Youll ignore the Company column as your calculations will be different).
• Analyze the performance of each firm versus the industry and comment on any trends in each individual firms performance. Identify any strengths and weaknesses you find in each firm.
• Examine the Market-to-Book ratios you calculated for each firm. Which, if any, of the two firms can be considered growth firms and which, if any, can be considered value firms?
• Compare the valuation ratios across the two firms and interpret the difference between them.
• Consider the enterprise value of each firm for each of the four years. How have the values of each firm changed over the time period?

Steps To Retrieve Data -

Retrieving Financial Statements for Ford and Microsoft:

1. Go to www.morningstar.com.
2. Enter the stock symbol in the search bar at the top right hand corner of the page. Stock symbol for Ford is (F) and for Microsoft it is (MSFT).
3. Once at the landing page of each company click Financials.
4. Download the excel file by clicking export.

Retrieving Historical Stock Price Data:

1. Go to Yahoo! Finance (finance.yahoo.com).
2. Enter your stock symbol in the Quote Lookup bar on the right-hand side of the screen.
3. Click on Historical Data
4. Enter the proper data range to cover the last day of the month corresponding to the date of each financial statement.
5. Use the closing stock price not the adjusted cost.

*Note: To calculate the firms market capitalization at each date, multiply the number of shares outstanding (see Basic on the income statement under Weighted Average Shares Outstanding '' by the firms historic stock price.