final paper Evaluation of Corporate Performance
The Final Paper will involve applying the concepts learned in class to an analysis of a company using data from its annual report. Using the concepts from this course, you will analyze the strengths and weaknesses of the company and write a report recommending whether or not to purchase the company stock.
The completed report should include:
An introduction to the company, including background information.
A financial statement review.
Pro Forma financial statements (Balance Sheet and Income Statement) for the next two fiscal years, assuming a 10% growth rate in sales and Cost of Goods Sold (COGS) for each of the next two years.
A ratio analysis for the last fiscal year using at least two ratios from each of the following categories:
Liquidity
Financial leverage
Asset management
Profitability
Market value
Calculate Return on Equity (ROE) using the DuPont system.
Assess management performance by calculating Economic Value Added (EVA).
Evaluate the soundness of the company’s financial policies (e.g. capital structure, debt, leverage, dividend policy, etc.) based on the material covered during class.
A synopsis of your findings, including your recommendations and rationale for whether or not to purchase stock from this company.
This report should be 15 to 20 pages long, excluding title page and reference page(s), using APA 6th edition formatting guidelines. Support your findings and recommendations with evidence from at least five scholarly sources in addition to the annual report, such as the textbook, industry reports, and articles from the Ashford University Library. Be sure to include links to websites that were used as references or to access company information.
The Final Paper
Must be 15 to 20 double-spaced pages in length (excluding the title and reference pages), and formatted according to APA style as outlined in the Ashford Writing Center (Links to an external site.).
Must include a separate title page with the following:
Title of paper
Student’s name
Course name and number
Instructor’s name
Date submitted
Must begin with an introductory paragraph that has a succinct thesis statement.
Must address the topic of the paper with critical thought.
Must end with a conclusion that reaffirms your thesis.
Must use at least five scholarly sources.
Must document all sources in APA style, as outlined in the Ashford Writing Center.
Must include a separate reference page, formatted according to APA style as outlined in the Ashford Writing Center.
MORE GUIDANCE :
Steps to calculate EVA:
This is NOT an essay about EVA. (please don’t write an essay and expect a grade)
please calculate EVA for the most recent year (not for pro forma). Assume that the book depreciation and economic depreciation are the same.
Calculate Net Operating Profits After Tax (NOPAT)
Calculate Invested Capital
That is to calculate:
Total debt
Adjusted Equity = shareholders’ equity + Net Deferred tax + Non-controlling interest + other accumulated comprehensive income (loss) {the last item is negative, but should be added in this equation}
Calculate Invested capital =item a above + item b above
Calculate market value of equity (be sure to add the date)
Calculate CAPM (Make a valid assumption for the cost of debt using actual data)
Calculate effective debt interest rate = Interest Expenses / total debt
Calculate WACC
Calculate EVA and explain its importance
The final step is to analyze the result.
Company evaluation (At least do capital structure, debt, leverage, and the dividend policy)
Summary and rational to purchase the stock
Reference page
Reminder: these tasks are worth 29% of the final grade.
What is ratio analysis?
Ratio analysis is a tool that was developed to perform quantitative analysis on numbers found on financial statements. Ratios help link the three financial statements together and offer figures that are comparable between companies and across industries and sectors. Ratio analysis is one of the most widely used fundamental analysis techniques.
However, financial ratios vary across different industries and sectors and comparisons between completely different types of companies are often not valid. In addition, it is important to analyze trends in company ratios instead of solely emphasizing a single period’s figures.
Best Luck!
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