Apple Vs Microsoft
Project 1
Please read the attached documents and follow all directions. This is a group project. I am assigned to NUMBER 5.
I have provided all information that will help you complete the assignment.
The COMPANY IS APPLE VS MICROSOFT
i HAVE ALSO ATTACHED A SPREADSHEET SO YOU CAN ISE IT TO CALCULATE THE DIFFERENT RATIOS. ALL YOU DO IS INPUT THE NUMBERS FOR EXAMPALE IF THEY ARE ASKING HOW TO CALCULATE “ROE” GO TO RETAINED EARNING PUT THE NUMBERS IN TO GET THE CORRECT CALCULATION.
ALSO IF YOU CLICK ON THE FORMULAS TAB AND THEN CLICK ON PRECENDENTS IT WILL SHOW YOU WHICH CELLS ARE USED TO GET THAT RATIO. ” PAY ATTENTION TO THE ARROWS AND FUNCTIONS FORMULAS.
FINC 330 Project Descriptions
Research Project Part 1
This project is closely aligned with the Course Outcomes and Finance Program Objectives.
Completion of this project can be used as part of a portfolio to show potential employers the student is skilled at performing company valuations and financial statement analysis and can be included on the student’s resume.
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 (SELECTED BY INSTRUCTOR). 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 to be a company selected by instructor.
Alternatively, you can request approval of another publicly traded company. This request must be submitted before the end of the first week of the course. The request must include
· identification of the company by ticker symbol and name
· a reasonable and appropriate explanation of why you want to examine the alternative company
· the source of the analyst’s report that will be used in the analysis (which must be submitted to me)
· acknowledgement by you that all of the specific elements of the assignment (see below) will be prepared by you and included in the final research project report
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
– To find the information for your company you need click on Screener on the top of the screen, type the stock symbol in the Ticker window to get into the company’s page., and click on the company in the list.
www.money.cnn.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.finance.yahoo.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.nyse.com
– Click on Data, then click on Stocks (under Quotes), and type the name of the company or the stock symbol in the window “Keyword or symbol” to get into the company’s page.
www.nasdaq.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.
Company’s websites
YOUR SPECIFIC ASSIGNMENT
Using the information from the websites the students will develop evaluation of the financial performance for THE COMPANY (SELECTED BY INSTRUCTOR). (The evaluation portion will total 85% of the assignment grade)
-1—Background and Industry (one
short
paragraph).
-2— Common size analysis (15% of the project grade). You can find the common size financial statements for the company for the last 3-5 years on www.morningstar.com. Type the stock symbol in the Quotes window to get into the company’s page. Scroll down and click on All Financial Data. Switch View from “$” to “%”.
Create a table that contains the most significant common size financial performance results for the last 3-5 years for THE COMPANY and for the last year for the major competitor. Present the table with this information in your report.
Write about 1-2 pages of the analysis of the financial conditions, its stability, and trends.
-3— Trend analysis (15% of the project grade)
Analyze the financial trends over 5 years of Revenue, net income, and any other of the most significant financial performance results of your choice. To present your findings, you will use the table(s) and/or graphs. You can use the bar graphs provided by www.morningstar.com. Or create your own ones.
Write about 1-2 pages of the report of the results that you received. 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, and net working capital-to-sales ratio)
· Operating performance ratio (Days of Sales in Inventory, Days of Sales in Receivables), turnovers
· Profitability ratios (Gross Profit Margin, Operating Profit Margin, Net Profit Margin)
· Return on Investment ratios: (Basic Earning Power ratio, ROA, ROE)
You can find financial ratios for the company for the last 3-5 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).
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 – each group member should write their own experience (3-4 sentences) and what they learned by doing this 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 Citation Methodology (5% of the project grade)
For a Financial Analyst, there is nothing more boring and tedious than pages of plain text. Therefore, I
suggest utilizing what I call “visual aids” by either finding them online or creating them yourself in Excel.
For every important ratio/number (or category: i.e. Leverage, Liquidity, Profitability, etc, etc), create a
“visual aid” (chart/table/graph..see above example). You’ll want to cut/paste the Balance Sheet, CF
Statement and Income Statement as well. Try to include as many Industry Averages (or competitor data
if you can’t find Ind Avgs) as you can. Displaying multiple years’ worth of data will allow you to spot
trends. Then (in your text) point out any significant trends and any anomalies you see and attempt to
find an explanation. For example, why did Pepsi’s P/E ratio fall substantially during 2019 (see chart
above)? Something like this would be worthy of a little more research.
You should try to use visual aids generously and text only to explain any anomalies in the trends &
comparisons. Please do NOT tell me what I can plainly see (i.e. Balance Sheet/Income Statement
amounts that are clearly posted in your visual aid). Again, Financial Analysts will look for trends,
anomalies and deviations from Industry Averages or Competitors. Find these, then explain them
(where applicable, of course).
Remember, liberally use charts, tables, graphs, etc. (what I call visual aids) to display your findings. In
your text, discuss the numbers as they relate to:
1) Trends
2) Comparisons to Industry Averages/Competitors
3) Anomalies
If you follow this general approach for all your papers, you’ll be fine.
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
Price/Earnings Ratio Price/Book Ratio Earnings Per Share Dividends Per Share
Market Ratios
2017 2018 2019 2019 (Pepsi Co)
Grading Philosophy re Written Assignments (Discussions, Papers, etc)
Generally speaking (not as a firm policy, but as my usual modus operandi) re written assignments, I will
issue an initial grade on your first submission. I will make comments in a different color font, usually
red.
Then I will allow for your edited re-submission, so that you may possibly earn more points. Your edits
should be in another color font or highlighted somehow (so I can easily locate them). I will then re-
grade, based on your edits.
Again, this is not a policy that I do every time, rather it is a nicety that I extend much of the time.
Current: Current Assets
Current Liabilities
Quick (Acid-test): Current Assets (less inventories)
Current Liabilities
Debt-to-Equity: Total Debt (Liabilities)
Owners (Shareholders) Equity
Debt-to-Assets: Total Debt (Liabilities)
Total Assets
Interest Coverage: Earnings before EBIT
Times interest earned Interest Expense
Receivables Turnover: Annual Net Credit Sales
Receivables
Receivable Turnover in Days (RTD): 365
Average collection period Receivables Turnover
Inventory Turnover: COGS
Inventory
Inventory Turnover in Days (ITD): 365
Inventory Turnover
The number of times receivables
have been converted into cash
during the year.
Average # of days until receivables
are collected.
How much of the firms assets are
financed with debt.
COVERAGE RATIOS
Creditors (bondholders, lenders) like this to be low to provide a cushion
against losses, etc. Conversely, investors (shareholders), while seeing
increased risk in a high ratio, also like the higher ROE given the smaller
amount of equity.
An average vs. ending balance may be more appropriate to use for
inventory. COGS takes place over a time period vs. the static quality of
the balance sheet item (inventory).
How many times during the year was
our stock of inventory sold?
Average # of days inventory is held
before sold.
Ability to cover interest charges. Also
indicative of capacity to take on new debt.
Very important to creditors. Caveat: Does
not consider principal.
ACTIVITY RATIOS
Often better to use an average balance for receivables, given growth
and/or seasonal sales.
Ability to meet current debts with
current assets. Current: Usually 1
year or normal ops cycle.
LIQUIDITY RATIOS
Better, more conservative measure
of liquidity than above.
LEVERAGE RATIOS
Debt financing relative to Equity
financing.
* From an equity investors perspective, Preferred
Stock can represent debt vs.equity for the purposes
of calculating this ratio.
Payables Turnover: Annual Credit Purchases
Accounts Payable
Payables Turnover in Days (PTD): 365 Average age of Accounts Payable
Payables Turnover
Total Asset Turnover:
Net Sales
Total Assets
Net Profit Margin: Net Profit after Taxes
Net Sales
Return on Investment (ROI): Net Profit after Taxes
Return on Assets (ROA) Total Assets
Return on Equity (ROE): Net Profit after Taxes
Owners (Shareholders) Equity
How well the company is earning money
for its owners. Very important to
current/potential investors.
An average vs. ending balance may be more appropriate to use for AP.
Credit purchases take place over a time period vs. the static quality of
the balance sheet item (inventory).
How efficiently do our assets
generate sales?
Again, an average vs. ending balance may be more appropriate to use
for assets. Sales (Income Statement item) take place over a time
period vs. the static quality of the balance sheet item (assets).
PROFITABILITY RATIOS
Again, an average vs. ending balance may be more appropriate to use
for assets. Profit (Income Statement item) take place over a time
period vs. the static quality of the balance sheet item (assets).
How well do our assets generate
profit?
Net Income per dollar of sales. The
profitability of our sales.
UMUC provided business insight
1. Go to the resource center select Library
a.
2. Under “Research Guides” select “Business and Management”
a.
3. Select “Hoovers” under the research guides
a.
4. In the search bar select “companies” and type in your company name
a.
5. Select your company name from the options listed below once you hit the search icon
a.
6. Next step CLICK AWAY AND ENJOY!!
a.
>IS BS
0,000
0,000)
2
0,000
Op Revenue
00
,500)
1,200 1,400 term investments
(1,500) – 300 – 195 60,000 Other 45
– – 3,845 payable
300 900 350 – – 350 Other – 350 900 300 n (Current Assets / Current Liabilities)
1.33 4.00 )
– 0 – 0 = 1
= = = $(000s) Year 0 – $300 no discount = ($300.00) = = = = percent. The total assets to equity ratio for the firm is . Calculate Vintage’s return on equity.
= net profit margin X total asset turnover X total assets to equity ratio = 6.16%
ROE Current Ratio /Sales Ratio
EBIT Gross Profit Current Assets Shareholders Equity Net Work Cap $910,000 Long-term debt $300,000 $200,000 Retained Earnings Common Equity 1,500,000 $2,110,000 (30,000) 770,000 462,000 . The company’s earnings per share for the last year were $ . Calculate company’s P/E ratio.
per share/Earnings per share =$61.71/ $10.56 = , and the company’s book value per share was $ . Calculate market/book ratio.
55.18 25.33 million in common stock dividends. The company has million shares outstanding. Calculate the firm’s dividends per share ratio.
59.51 24.43 million. The company has million shares outstanding. What is the firm’s cash flow per share ratio?
are
114.58 53.08 million. The company has 0 million shares outstanding. What is the firm’s EPS?
million. The company has million shares outstanding. The company’s stock price at the end of last year was $ . What is the firm’s P/E ratio?
million. The company has million shares outstanding. What is the firm’s book value per share?
Shares Out . Black Dahlia Corp.’s total common equity is $ million. The company has million shares outstanding. What is the firm’s market-to-book ratio?
) = Price per share/BVPS
CE Shares Out 43.03 117.42 8.44 3.09 million. The company has 7.57 million shares outstanding. Crab Feast Corp.’s stock price at the end of last year was $ . What is the firm’s price-to-cash flow ratio?
64.55 100.14 7.57 4.87960
Sales
2
5
ASSETS
less COGS
(
9
20
1
201
3
Gross Profit
1
6
Current Assets
Other
5,000
Cash
1,200
1,
4
Total Revenue
165,000
Temporary Investments
Inventories
Selling & Dist Expense
Accounts receivable
Advertising
(5,000)
Prepaid expenses
PR
(2,000)
Other
Website
(
7
Total Current Assets
Gen & Admin Expense
Electricity
(1,500)
Fixed Assets
Insurance
(1,000)
Rent
(30,000)
Property, land and equipment
Payroll
(46,500)
Leasehold improvements
Equity and other long
–
Depreciation
(10,000)
Intangible assets
Less accumulated depreciation (Negative Value)
–
300
– 195
Financial Expenses
Bad Debts
Total Assets
Total Expenses
(105,000)
Other Assets
EBIT
Deferred income tax
Interest Expense
(4,500)
Charity/Goodwill
EBT
55,500
Taxes @ 21%
(11,655)
EAT
4
3,
8
Total Other Assets
Cash Dividends
40,000
TOTAL ASSETS
900
1,205
Increase in
Retained Earnings
LIABILITIES AND OWNER’S EQUITY
Current Liabilities
Accounts payable
350
Accrued wages and salaries
Accrued compensation
600
Short-term loans
Income taxes
Unearned revenue
Current portion of long-term debt
Total Current Liabilities
Long-Term Liabilities
Long-term debt
Other long-term debt
Total Long-Term Liabilities
Oner’s Equity
Owner’s investment
Accumulated retained earnings
Total Owner’s Equity
TOTAL LIABILITIES AND OWNER’S EQUITY
700
FINANCIAL RATIOS
Working Capital (Current Assets – Current Liabilities)
1,050
Current Ratio
1.33
4.00
Quick Ratio ((Current Assets – Inventories) / Current Liabilities)
Debt-to-Equity Ratio (Total Liabilities /
Shareholders Equity
– 0
1.00
Long Term Debt-to-Equity Ratio (Long Term Debt / Shareholders Equity)
Practice Excercise 1.3
Alpha Project:
$(000s)
Year 0
– $300 no discount
=
($300.00)
Year 1
$100(1/1.10) or $100*(1.10)^-1
$9
0.9
Year 2
$100(1/1.10)(1/1.10) or $100*(1.10)^-2
$82.64
Year 3
$400(1/1.10)(1/1.10)(1/1.10) or 100*(1.10)^-3
$300.53
Discounted net value
$174.08
Omega Project:
Year 1
$300(1/1.10)
$272.73
Year 2
$150(1/1.10)(1/1.10)
$123.97
Year 3
$50(1/1.10)(1/1.10)(1/1.10)
$3
7.57
Discounted net value
$134.26
HW1B (DuPont)
Bridge, Inc. has a total asset turnover of 0.90 and a net profit margin of
4.28
1.6
ROE
TAT
NPM
A/E
0.9 4.28 1.6
6.1632
HW1A Fin State
HW 1B Return on Investment
HW 1C Operating Perfromance
HW 1D Liquidity Ratios
Balance Sheet December 31, 20XX
Return on Assets
Basic Earning Power
Return on
Common Equity
Avg Day’s COGS
Days of Sales in Inventory
Avg Credit Sales/Day
Days of Sales in Rec
Acid-Test (Quick) Ratio
Net Work Cap
0.2190
0.3791
0.3080
-7671.2329
-65.1786
10,958.90
27.38
2.94
1.32
0.15
Cash and marketable securities
$100,000
Accounts payable
$200,000
HW 1A Financial Statements
Accounts receivable
$300,000
Notes payable
$50,000
IBT (EBT)
NI
Op After-Tax
CF
Inventories
$500,000
Accrued expenses
$60,000
800,000
1,200,000
770,000
462,000
$910,000
$
1,500,000
$600,000
592,000
Prepaid expenses
$10,000
Total current liabilities
$310,000
Total current assets
HW 1D Profitability Ratios
HW 1E Activity Ratios
HW 1E Leverage Ratios
Gross fixed assets
$1,600,000
Par value and paid-in-capital
Gross Profit Margin
Op Profit Margin
Net Profit Margin
Inventory Turnover
AR Turnover
Total Asset Turnover
Fixed Asset Turnover
Debt/Assets
Debt/Equity
Times Interest Earned
Less: accumulated depreciation
$400,000
$1,300,000
0.3000
0.2000
0.1155
5.6000
13.3333
1.8957
3.3333333333
0.2891
0.4067
26.6667
Net fixed assets
$1,200,000
Total assets
$2,110,000
Total liabilities and owner’s equity
Income Statement, Year of 20XX
Net sales (all credit)
4,000,000
Less: Cost of goods sold
(2,800,000)
Gross Profit 1,200,000
Selling and administrative expenses
(300,000)
Depreciation expense
(100,000)
EBIT 800,000
Interest expense
Earnings before taxes
Income taxes
(308,000)
Net income
HW 1F Market Value Ratios
1
All Star Corp.’s stock price at the end of last year was $
61.71
10.56
P/E ratio =
Price
5.84
Price
EPS
61.71 10.56
P/E Ratio
5.84
2
Symphony Corp.’s stock price at the end of last year was $
55.18
25.33
Round the answer to two decimal places.
Price EPS
BVPS
Market/Book
2.178
3
Last year, Holland Tulip Inc. paid
59.51
24.43
DPS = Common dividends paid/Number of Shares outstanding = $59.51 million /24.43 million shares outstanding = $
2.44
Com Div Pd
Shares Out
Div/Share
2.44
4
Serenade Corp.’s cash flow last year was $
114.58
53.08
CF Shares Out
CF/Sh
2.16
5
Yellow Iris Corp.’s net income last year was $
359.13
49.9
EPS = Net income/Number of shares outstanding =$359.13 million/49.90 million shares outstanding = $
7.20
NI Shares Out
EPS 359.13 49.9
7.20
6
Rose Water Corp.’s net income last year was $
330.01
69.45
49.66
P/E ratio = Price per share/Earnings per share
Price NI Shares Out
EPS 49.66 330.01 69.45
10.45
7
Cardamom Corp.’s total common equity is $
322.54
176.11
BVPS = Common equity/Number of Shares outstanding =$322.54 million/176.11 million shares outstanding = $
1.83
CE
BVPS 322.54 176.11
1.83
8
Black Dahlia Corp.’s stock price at the end of last year was $
43.03
117.42
8.44
Market/book ratio (
M/B
BVPS
Stock Price
13.91
M/B
3.09
9
Crab Feast Corp.’s cash flow last year was $
100.14
64.55
Price-to-cash flow ratio = Price per share /Cash flow per share
CF/Sh Stock Price CF Shares Out
13.2285336856
P/CF
4.87960