Report guidelines
Assumption The company you have
chosen has hired you as a financial consultant. You are presenting your analysis
of the company based on the financial information that you have obtained from
the annual report.
Assignment
Based on your analysis of the firm's financial
statements and any relevant supplementary information you can obtain about the
firm and its operating environment, identify areas in which the company is
performing well (strengths) and advise management of any problem areas
(weaknesses).
Include in your analysis an assessment of how the firm's
strengths and weaknesses affect its credit worthiness and investment potential.
The time period for the analysis should include five full years or four years
Plus interim statements for the most recent year. In addition to the financial
statements and other material in the annual and 10-K reports, you should review
relevant materials from the fist of supplementary reference sources.
Do not list 100's of ratios and flood the reader with numbers.
Assume that the audience of your report is an informed professional, but does
not know the details of your company. Present any unusual ratios, unexpected
trends over time for any ratios and your estimate as to whether the company's
financial performance reflects its announced strategy.
Outline
The following outline is provided for guidance, but the analysis
should be adjusted, as appropriate, to conform to the individual characteristics
of the firm.
Suggested Outline for the Financial Statement Analysis
I. Introduction
A. Objective of paper
B. Summary of findings
II. Firm, Industry, and Environment
A. Description of firm and its management
B. Discussion of competitive environment
C. Economic climate and outlook
D. Other factors, e.g. governmental regulations, labor relations, litigation
III. Evaluation of Financial Statements Use ratios and cash flow analysis.
A. Overview
B. Short-term liquidity
C. Capital structure and long-term solvency; Bond ratings and risk analysis;
z-score
D. Operating performance and efficiency
E. Market measures
IV. Outlook, Summary, and Conclusions
A. Outlook for performance, earnings projection (optional)
B. Investment potential and past performance. (Would you
recommend buy the stock ?)
C. Credit assessment
D. Summary and conclusions
V. Appendix and tables
VI. Footnotes
VII. Bibliography
Resources for a Financial Statement
Analysis
Annual report and 10K: SEC EDGAR Database,
Directories
1. Dun & Bradstreet Million Dollar Directory.
Directory of corporate officers and addresses for companies
with a net worth of $1,000,000 or more. Companion volume, Middle Market
Directory, lists companies with assets of $500,000 to $1,000,000.
2. Dun & Bradstreet Reference Book of Corporate Managements.
Contains lists of major corporations broken down
alphabetically. Under each is listings of principal officers and their titles,
chronology of occupations, affiliations education, and vital statistics.
3. Standard and Poor's Register of Corporations, Directors and
Executives.
Volume I alphabetically lists corporations, their addresses,
directors and executives, along with the corporations' major products. Volume 2
contains brief biographical sketches of the executives and directors; and Volume
3 is a geographical and industrial index to Volume 1.
Industry Information
Use these sources to understand the industry in which a
company competes by studying its past and current position as well as its
projected outlook.
1. Predicaasts F & S Index: United States Annual Edition; also
International Annual Edition & Europe Annual Edition. Lists of abstracts for
corporations and industries broken down by the company name and the Standard
Industrial Code.
2. http://www.investor.reuters.com/
Industry comparisons.
3. Accountants' index.
Index to the AICPA library; contains entries from accounting
related periodicals.
4. Standard and Poor's Industry Surveys.
Surveys of 69 major domestic industries divided among 33
segments. Each segment contains a basic analysis of the industry and a current
and future analysis. Volumes are indexed by company names and by industries.
Wall Street Journal Index, Barron's Index. 6. New York Times
Index.
Index of articles published in The New York Times.
Investment Sources
These sources contain useful investment and financial
information about particular companies and industries.
1. Standard and Poor's Corporation Descriptions.
Provides listings of corporations and discussion of their
capitalization, corporate background, bond description, stock data, earnings,
and finances.
2. Moody's Manuals.
Financial service which includes a brief history of each company,
describes its plants and products, and gives financial information. Much of the
information is from annual reports. The manuals have several divisions:
Industrial, OTC Industrials, Transportation, Bank and Finance, Public Utilities,
and Municipal Governments.
3. Value Line Investment Survey.
Financial service which includes company background and outlook,
a discussion of capital structure, the current position, ten-year earnings and
financial data, and investment information such as stock price, P/E ratio,
earnings and dividends yields, insider trades, and projections of stock
movements.
Financial Ratios
Important source of comparative statistical information
needed to determine company's relative position with its industry.
http://www.investor.reuters.com/
Ratios, research reports etc. (free registration)
Dun & Bradstreet's industry Norms and Key Business Ratios.
Robert Morris Associates Annual Statement Studies.
Troy's Almanac of Business and industrial Financial Ratios.
Standard and Poor's Analyst Handbook. |
