Firm Analysis Assignment

1. Choose two companies in the same industry that you are interested in.

1. Which industry are you interested in?
2. What are the companies that you chose? Provide ticker symbols of the companies.

2. Chapter 3. Financial Statements and Ratio Analysis

1. Find the most recent annual report (10-K that contains major financial statements) of each company. It is necessary to attach the annual reports to the assignment submission.
2. Choose any one ratio from each of the financial ratio categories (liquidity, debt, asset management, and profitability). So, the total number of ratios to be chosen is four. Then, calculate the ratios for each company and compare the ratios. What do the numbers mean? Which one has better ratios?
3. Is your comparison in (b) a comparative analysis or a trend analysis?
4. Use DuPont System of Analysis to evaluate the component parts of each companys return on equity (ROE). Decompose ROE of each company using DuPont System of Analysis and compare the component parts of ROE.

3. Chapter 7. Stock Valuation

1. Find the most recent P/E ratio of each company. Which one has a higher ratio?
2. How would you interpret the ratio?

4. Chapter 8. Risk and Return

1. Find the beta of each company. Which one has a higher beta?
2. What does the beta measure?
3. Based on the betas you found, which company should have a higher expected return?

5. You can choose only one of the companies that you have analyzed.

1. Which one would you choose?
2. Why?