BUS 401 Week 1 Assignment 3 | ashford university
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- 27 Jul 2021
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BUS 401 Week 1 Assignment 3 | ashford university
Week 1 - Assignment 3
Section : Financial Statement Analysis [WLO: 5] [CLOs: 1, 2]
In order to determine if you can recommend buying or selling a
stock, you first must understand how the company has performed recently. Would
you want to invest in a company that has had negative earnings for the past 3
years? What about a company that has increased the amount of debt on its
balance sheet? Or, would you prefer to invest in a company that has had consistent
increases in revenues or net earnings over the past 3 years? As the equity
analyst, your first task would be to determine the evidence of patterns in the
recent financial performance. The financial analysis provides significant
insight into the company’s strengths and weaknesses.
To fully understand a company’s financial performance, you
cannot “evaluate performance using numbers alone. This level of analysis does
not involve an understanding of the cause of performance…an analyst must look
beyond the numbers” (Hickman et al., 2013, Section 11.3, para.
7). In the real world, an analyst spends extensive time and effort
researching the business strategy, operations, marketing, and other elements
that have contributed to this financial performance. For this class, you will
limit your investigation of the company to the historical financial analysis,
ratio and competitive analysis, and the valuation of the stock. This Week 1
assignment will become Section 1 of the Week 5 final project.
Prepare:
Prior to beginning work on this assignment,
·
Review the Week 1 Model Assignment (Links to an external site.).
·
Make sure you have
completed both Week 1 - Assignment 1 and Week 1 - Assignment 2. It is
recommended that you keep those Excel or PDF documents available when
completing this assignment.
·
Complete the Week 1 - Learning Activity.
·
Review Chapter 2 and
Section 11.3 from Chapter 11 in the textbook.
·
Review the Week 5 - Final Project for this course.
Write:
For this assignment, address the following seven parts in a Word
document:
Part 1: Overview of
the company (one paragraph)
·
State the name of the
company.
·
Provide a brief
overview of the company you selected, including a description of its business
operations.
·
State the current
market price per share.
Part 2: Income
statements (one to two
paragraphs)
·
Summarize key trends
in revenues, operating income, and net income over the last 3 years.
Part 3: Common size
income statements (one
paragraph)
·
Evaluate the trends in
gross margin, operating income margin, and net profit margin over the past 3
years.
Part 4: Balance sheets (one to two paragraphs)
·
Summarize key trends
in total assets, total current assets, total current liabilities, long-term
debt, and total shareholders’ equity over the past 3 years.
Part 5: Common size
balance sheets (one paragraph)
·
Evaluate the trends in
total current assets as a percent (%) of total assets, total current liabilities
as a percent (%) of total assets, long-term debt as percent (%) of total
assets, and total shareholders’ equity as a percent (%) of total assets over
the past 3 years.
Part 6: Cash flow (one paragraph)
·
Calculate simple cash
flow for the past 3 years.
o Show your calculations.
·
Summarize the trend in
simple cash flow for the past 3 years.
·
Compare the simple
cash flow to the net operating cash flow from the statement of cash flows for
the past 3 years.
Part 7: Financial
analysis conclusion: (one
paragraph)
·
Determine the
strengths and weaknesses of the company based primarily on the trends in items
discussed from the income statements, balance sheets, common size income
statements, and common size balance sheets, as well as the comments on cash flow.
·
Create a table that
indicates whether each financial fact is a strength or a weakness.
·
Determine the overall
financial strength of the company based on the financial facts included as
strengths or weaknesses.
o Categorize the overall financial performance
of the company as strong,