You are to assume you have been recently hired by The Company and have been assigned to a team that reports to the CEO of THE COMPANY. The head of your team is the CFO who is concerned about THE COMPANY’s current financial performance and comparison against major competitor.
Research Project
Ratio Analysis
OBJECTIVE
You are to assume you have been recently hired by The Company and have been assigned to a team that reports to the CEO of THE COMPANY. The head of your team is the CFO who is concerned about THE COMPANY’s current financial performance and comparison against major competitors in the industry and the impact that may have on the firm’s stock price. The CFO would like your team to provide insights that will help them to project future financial performance. Specifically, the primary question to answer is: will THE COMPANY be financially viable over the next two to three years, and which steps should be done to improve its financial stability?
THE COMPANY that is to be analyzed for this project is PepsiCo, Inc (PEP – stock ticker).
SUGGESTED WEBSITES
www.morningstar.com – To find the information for your company you need to type the stock symbol in the Quotes window to get into the company’s page.
www.marketwatch.com -To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.
www.Finviz.com
-1—Background and Industry – The paper should begin with a short introduction about background and industry, explains the purpose of the paper, and provides an overview of the contents that follow (one short paragraph).
-2— Common size analysis of the balance sheet (15% of the project grade).
Create a table that contains the most significant common size results of the balance sheet for the last 5 years for THE COMPANY and for the last year for the major competitor. Your analysis
should include but not limited to:
Cash & ST Investments / Total Assets
Total Liabilities / Total Assets
Common Equity / Total Assets
Total Shareholders’ Equity / Total Assets (if differ from Common Equity / Total Assets)
You can find these ratios in the Internet or calculate them. If you use published ratios you must indicate that and cite their source.
These ratios are available in www.marketwatch.com -To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page. Click
on Financial > Balance Sheet > click on View Ratios.
To present your findings, you will create the table(s) and/or graphs. You can use the bar graphs provided by www.marketwatch.com or create your own ones.
Present the tables and the graphs with this information in your report. Write about 1-2 pages of the analysis of the financial conditions, its stability, and trends. What important information does this analysis provide?
-3— Trend analysis (15% of the project grade)
Analyze the financial trends over the last 5 years of
Sale Growth,
COGS Growth,
Gross Income Growth,
Interest Expense Growth,
Net Income Growth,
Cash & Short Term Investments Growth
Assets – Total – Growth.
You can find these ratios in the Internet or calculate them. If you use published ratios you must indicate that and cite their source.
These growth rates are available in www.marketwatch.com -To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page. Click on Financial > Income Statement (or Balance Sheet) > click on View Ratios.
To present your findings, you will create the table(s) and/or graphs. You can use the bar graphs provided by www.marketwatch.com or create your own ones.
Write about 1-2 pages of the analysis of the financial conditions, its stability, and trends. What important information does this analysis provide?
-4— Financial ratio analysis. (20% of the project grade)
In this part of the project you will complete ratio analysis of THE COMPANY. Please remember that you are the financial analyst of THE COMPANY and should prepare the report to be read by the chairman (CEO) of THE COMPANY. The ratio analysis should be completed from the point
of view of THE COMPANY’s the management.
The chairman of THE COMPANY is especially concerned about the following groups of ratios:
Liquidity (current ratio, quick ratio)
Operating performance ratio (Days of Sales in Inventory, Days of Sales Outstanding,
Days of Payables Outstanding), Receivables Turnover, Inventory Turnover, Fixed Assets
Turnover, Total Assets Turnover)
Profitability ratios (Gross Profit Margin, Operating Profit Margin, Net Profit Margin)
Return on Investment ratios: (ROA, ROE)
These ratios are available on www.morningstar.com > Company’s page – under
Financials and under Operating Performance
You can find financial ratios for the company for the last 1-5 years in the Internet or calculate them. If you use published ratios you must indicate that and cite their source.
a) Present the ratios as the table(s) in your project. Create graphs for some ratios on your choice over three years to show trends.
b) Write 2 pages (or more) of analysis of the ratio results that you found. In your analysis you
should answer the following questions:
How liquid is the company?
Is management generating a substantial profit on the company’s assets?
If the management of the company would like to improve the company’s financial performance, what should the management of THE COMPANY do?
-5- Evaluate Return on Equity for the company for the last three years using the DuPont analysis. (15% of the project grade).
You can find these ratios in the Internet or calculate them. If you use published ratios you must indicate that and cite their source.
a. Find ROE, Net profit margin (listed as net margin), asset turnover, financial leverage for the last three years for your company. You also may use debt/equity ratio in your analysis. Present the ratios as the table(s) in your project.
b. Find ROE, Net profit margin (listed as net margin), asset turnover, financial leverage for the last year for its major peer competitor. You also may use debt/equity ratio of peer competitor in your analysis. Present the ratios as the table(s) in your project.
c. Has the company’s ROE changed over the last three years? What was the main factor that influenced this change?
d. Compare the ratios of you company to the peer competitor. If the management of the company would like to improve their return on equity, what should the management of the company do?
Write about 1 page of analysis to answer the questions (c) and (d).
-6- Develop a specific recommendation, with supporting rationale, as to whether the assigned company’s recent trends and results in financial performance is of sufficient financial strength,
will THE COMPANY be financially sustainable over the next two to three years, and which steps should be done to improve its financial stability? (about 1 page) (15% of the project grade).
-7- Reflection – the student should write a paragraph in their own words reflecting on specifically what they learned from the assignment and how they think they could apply what they learned in the workplace. (5% of the project grade)
PRESENTATION OF PAPER AND WRITING (15%) of the project grade):
• Organization, Format and Presentation of Paper including the Title page, Introduction, Body, and Summary. Each section of the paper must begin with sub-headings. Please use the sub-headings included in the assignment (4% of the project grade)
• Use of Tables, Figures and Other Graphics to Summarize and Support Analysis Presented in the Paper (3% of the project grade)
• Logical and Smooth Flowing Transitions and Relationships among Sections of the Written Report (3% of the project grade)
• Research Sources and Significance of Research Information and Data, Use of APA 7 Citation Methodology (5% of the project grade)
Type of service: Academic paper writing
