Purpose of the Project:
The purpose of the term project is to apply financial analysis and valuation concepts, tools, and techniques
to an issue or situation of particular interest to you. In addition to preparing a written report in Word file,
each student should be prepared to present her/his project in Power Point file and submit them for review.
PPT file should be prepared the same way you would present your paper in face to face class. Since we are
in online learning environment you might want to use voice threads and others visual techniques to
maximize the efficiency of your presentation.
The term project will give you the opportunity to study, in depth, the implications of a specific accounting
issue/controversy, a financial transaction (such as a management buyout, a merger, or acquisition), a
particular circumstance (such as financial distress), a single firm or an industry. It will also give you the
opportunity to develop your research, report writing, and presentation skills. Your project should evidence
detailed analysis of financial statement data, including footnotes.
Your report will be improved if you apply the concepts, tools, and techniques of analysis developed in the
course (such as a discussion of accounting issues and choices, and financial analysis, forecasting, and
valuation techniques). The project should also include some form of “benchmarking;” that is, a comparison
to similar circumstances or firms.
The written part of your project should be no more than 15 pages (double-spaced, word processing font no
smaller than 12-point, one-inch margins all around), including tables, graphs, appendices, and references.
Also include any supporting financial statements and articles (these do not count as part of the 15-page
maximum length). For PPT file I suggest you prepare around 10 slides by summarizing your project.
This is to learn how to measure the performance of companies by analyzing their financial
statements. Show us that you have read and understood the required readings, links and attached files –
quote them where appropriate.
Assignment:
You are the CFO of a major company. Your CEO keeps an eye on the competition, and asks you to do the
following analyses:
Instructions:
You will be assigned a pair of US public firms in the same industry. The firm names are Home Depot and Lowes. These two firms are comparable in terms of
size and other operating characteristics.
A) Select at least 10 most important financial ratios for your two companies and calculate each for the
last 2 fiscal years using Excel. Explain why you selected these ratios. (a sample project in Excel
file will be posted to the classroom early in the semester for your reference.) Create a comparison
chart for these ratios for 2 years for each company. Explain how you calculated each
ratio. Explain what each ratio should mean to management. Using ratio analysis, compare two
major competitors in the same industry.
All calculations should be shown, and all answers should be thoroughly explained.
It is useful to compare financial ratios for a company with financial ratios of its industry. Industry
financial ratios can be found on Morningstar.com, Yahoo Finance and MSN Money.
There is an example posted in the file attached for your reference. The “Compare”
worksheet shows comparison of ratios, however it does not include the required words
about how the ratios were calculated nor does it include what the numbers mean for
management.
You will note that the W and C worksheets are used to calculate average balance sheet
numbers. These are useful when there are large year to year changes on the balance sheet.
If you obtain data from the SEC web site “Interactive Data, then you can copy and paste
into Excel. If you use data from other web sites, it may or may not allow excel to
calculate ratios. The company website usually lists Excel file of its annual report.
Create a single Excel file for your calculations, and cut and paste relevant pages to your Word
and/or PPT file. You need to submit this Excel File, together with the final report. Spend time to
understand what you are trying to do and simplify your format, your calculations and
approach. Think about which ratios are important and WHY?
You may obtain financial information and the companies’ latest annual reports on the web directly
from MSN Money or Yahoo Finance or Morningstar. However, it may be necessary to enter the
numbers by hand into excel to allow Excel to calculate ratios. For additional information, look for
the SEC Form10-K link from one of the MSN Money, or Morningstar, or Yahoo Finance financial
sites