Financial Statements Overview PPT

Principles of Financial Management (BFIN 3321) Instructor: Jose F. Moreno, Ph.D. Financial Statement Analysis Report Your Report should be delivered in two files: (1) a PowerPoint Presentation File, and (2) a 10-minute presentation video Your Presentation should include:

1. Introduction (2 slides) This part should be a short description of the company you are going to analyze. You can mention the objective of the company, the industry, latest news and a brief history. The introduction should be no longer than two slides.

2. Financial Statements Overview (2 slides) Write a short summary of the main financial statements: Balance sheet, Income Statement for the last three years. Focus on the trends of net income, dividend payments, asset size and the market price of the share.

3. Ratio (Trend) Analysis (6 slides) This ratio analysis should include just a Trend analysis. It requires analyzing the ratios mentioned below for the company assigned during the last three years and compare them. For this analysis, you should interpret the performance of the company in the following categories: • Liquidity Ratios: Explain liquidity ratios, why they are important and what they mean. Calculate and compare the Current Ratio and the Quick Ratio and discuss implications for your company. • Efficiency Ratios: Explain asset management ratios, why they are important and what they mean. Calculate and compare the Inventory Turnover, the Day Sales Outstanding and the Total Asset Turnover Ratio and discuss implications for your company in comparison to itself. • Leverage Ratios: Explain debt management ratios, why they are important and what they mean. Calculate and compare the Total Debt to Total Assets Ratio and the EBITDA Coverage Ratio and discuss implications for your company in comparison to itself.

• Profitability Ratios: Explain profitability ratios, why they are important and what they mean. Calculate and compare the Profit Margin on Sales, Return on Total Assets and the Return on Equity and discuss implications for your company in comparison to itself. • Market Value Ratios: Explain market value ratios, why they are important and what they mean. Calculate and compare the Price/Earnings Ratio and the Market/Book Ratio and discuss implications for your company in comparison to itself.

4. Valuation (3 slides) In this section, you should include: the current stock price of your company, how has the stock performed relative to the market over the past six months? Use a chart to explain. Also, you have to calculate the value of your company by using the Dividend Discount Model:

1. Assumptions: a. Let’s assume at first that the firm’s dividend is expected to grow at the same rate as the last 5 years over time. If so, intrinsic value can be calculated using the Dividend Constant growth model.

b. Estimate the Price of the stock based on this model and say if the current price is undervalued or overvalued in comparison to your calculation.

c. Calculate the required rate of return of the company using the CAPM. (You will require current beta of the company, risk free rate (T-bill 90 days) and the expected return of the market (S&P500 average return in last five years).

5. Conclusion (2 slides) A summary of your ratio analysis about the company.

1. Try to answer the following questions: Do you think it is performing at optimum? Does this company improve their situation during last three years? Is it ahead of its competitor/industry? What changes would you recommend?

2. Based on your valuation, is this company overvalued or undervalued in comparison to the price you calculated? 6. Appendix and Bibliography (as much slides as you need) The appendix should include at least: (1) a copy of the financial statements of your company: the income statements, the balance sheets and the cash flow statement for the three most recent years. (2) your summary of calculations for the ratios. (3) Copy of the information from other sources. Bibliography should have a standardized APA format. You should include all other sources that you use in addition to your textbook. It is strongly recommended to have at least three sources to complement your analysis. Recommendations: • Mention all the sources of your tables or charts. • Number all your pages from the introduction onward.

• You have to get your Financial Statements from the Bloomberg Terminal or MERGENT Online. (You can find it on the UIW Library website). For your video presentation: • I recommend you use Zoom or Microsoft Teams. Also, narrated PowerPoint is accepted. • The time for the video presentation is 10 minutes (no less, no more). • It is highly recommended that all team members participate. • I strongly recommend practicing before to check times and slides. This presentation will be graded based on: • Content Organized as requested • Uniform and Clear Format • Depth of Analysis • Clear and Complete Conclusion • Presenters’ proficiency o Total 2 points 2 points 4 points 2 points 2 points 12 points

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