for Week 1: Each week you will have a set of homework problems to complete. They are due by the following Sunday night at 11:55 pm, central time. For Week 1, please turn in the answers to the following questions: 1. Describe the field of finance. How is it different from the field of accounting? 2. In a typical corporation the finance function is divided into two divisions, or departments. What are they? What does each department do? 3. What are the three forms of business generally encountered in the US? What are the main defining characteristics of each? 4. What is the basic financial goal of a business? 5. In the context of a corporation seeking to maximize the wealth of its owners, how is \"wealth\" defined? 6. What are the three main factors affecting the market price of a corporation's stock? 7. What's wrong (if anything) with saying the basic financial goal of a business is to \"maximize profits?\" 8. How would you state the basic goal of a non-profit firm? 9. The Internet company Google managed to avoid $2 billion in international income taxes in 2011 by moving a hefty sum of its revenues to subsidiaries in Bermuda, according to CNBC, which cited a report by Bloomberg.1 The search giant reportedly stashed $9.8 billion in revenues to its shell company in Bermuda which doesn't have a corporate income tax last year allowing the company to shave its overall tax rate by almost 50 percent. Google's Bermuda move was disclosed in a Nov. 21 filing by a subsidiary in the Netherlands. While the company's move to shift funds to the country was legal, it could spur the growing global criticism of corporate tax avoidance. What do you think? Is Google's action ethical? Why or why not? 10. What is \"the agency problem?\" Case Study Tasks: 1 http://www.cnbc.com/id/100296831/Google_Avoided_2_Billion_in_Taxes_by_Stashing_Money_in_Bermuda_Repo rt 1. Refer to the Case Study topic lecture on the Week 1 Content page. Locate the information needed for the Cover Page of your case study report on the Internet. Using that information, complete the Cover Page and submit it on the appropriate case study assignment page. Note that your Cover Page should contain: The name of the company The address of the company's corporate headquarters The company's phone number Your name Notes: - Assignments that are submitted after the deadline will be assessed a late penalty unless it has been cleared with your instructor beforehand or the situation was beyond your control. Contact your instructor ASAP if it appears you are going to submit an assignment late. - Please put all the questions and problems in one file before you submit the assignment for grading. Do not do the questions in Word and the problems in Excel and submit two files, for example. It is too hard for your instructor to keep track of the files when more than one is submitted. - If your answer to a homework problem involves mathematical calculations, please show the calculations. If you are doing the assignment in Excel no extra effort is required because your instructor can see the formulas you used, but if you are doing the assignment in Word you should write out the calculations manually. Showing your calculations is necessary in order for your instructor to give you any partial credit if you make a mistake and come up with the wrong answer. Financial Analysis of the McDonalds Company Stock ticker symbol, exchange where traded _________ Address of company headquarters _________ Company phone number __________ Your name, etc. PART 1, COMPANY OVERVIEW: a. Brief description of the company (one paragraph, briefly summarizing the company's business) b. Company history (origin, major developments, etc.) c. Organization (describe how the company is structured) d. Main products and services (describe what the company sells; how it makes money) e. Geographic area of operations (describe where the company sells its products) f. Recent developments (list recent major news stories, if any) PART 2, FINANCIAL OVERVIEW: a. Sales and Income Record: ------------- Fiscal Years ------------2011 2012 2013 2014 2015 -- Sales ____ -- Percent change in sales each year -- Net Income ____ -- Percent change in net income each year ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ GRAPH OF SALES & NET INCOME, FY 2011 - 2015 -| -| -| (Plot Sales and Net Income for the -| last five fiscal years on the graph) -| -| (Recommend you prepare the graph in Excel, -| then copy and paste it into the report) -| -| -| -|--------|---------|---------|---------| 2011 2012 2013 2014 2015 COMMENTS: Comment on the trends you see in your numbers and on the graph. Be sure to include comments! The numbers and the chart are meaningless by themselves. Comment on what you see. b. Expense Distribution: FY 2015 Major Expenses: ________ (list the major expense categories ________ from the latest income statement) ________ PIE CHART OF EXPENSES, FY 2015 Note - Do not \"explode\" the pie slices COMMENTS: Comment on the company's expense distribution. c. Assets Distribution: Year-end FY 2015 Assets: Cash Accounts receivable Inventory Fixed Assets Other Assets ________ ________ ________ ________ ________ PIE CHART OF ASSETS, Year-end FY 2015 COMMENTS: Comment on the company's asset distribution. c. Capital Structure: Year-end FY 2015 Capital Structure: Current Liabilities Long-term & Other Liabilities Preferred Stock (if any) Common Equity ________ ________ ________ ________ CAPITAL STRUCTURE PIE CHART, Year-end FY 2015 COMMENTS: Comment on the company's capital structure. PART 3, RATIO ANALYSIS: (1) LIQUIDITY: FY 2014 FY 2015 ____ ____ ____ ____ ____ ____ ____ ____ Current Ratio: McDonalds Wendy's Quick Ratio: McDonalds Wendy's Comments On McDonalds Liquidity: Be sure to include comments! The numbers are meaningless by themselves. Comment on what you see. What story do the numbers tell? (2) ASSET MANAGEMENT FY 2014 FY 2015 ____ ____ ____ ____ ____ ____ ____ ____ Total Asset Turnover: McDonalds Wendy's Average Collection Period: McDonalds Wendy's Comments On McDonalds Asset Management: (3) DEBT MANAGEMENT: FY 2014 FY 2015 ____ ____ ____ ____ ____ ____ ____ ____ Total Debt to Total Assets: McDonalds Wendy's Times Interest Earned: McDonalds Wendy's Comments On McDonalds Debt Management: (4) PROFITABILITY: FY 2014 FY 2015 ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ Net profit Margin: McDonalds Wendy's Return on Assets: McDonalds Wendy's Return on Equity: McDonalds Wendy's Modified Du Pont Equation, FY 2015: Net Profit Margin Total Asset Turnover Equity Multiplier McDonalds ____ ____ ____ Wendy's ____ ____ ____ Comments On McDonalds Profitability: (5) MARKET VALUE RATIOS: FY 2014 FY 2015 ____ ____ ____ ____ ____ ____ ____ ____ PE Ratio: McDonalds Wendy's Market to Book Ratio: McDonalds Wendy's Comments On McDonalds Market Value Ratios: PART 4, CONCLUSIONS AND RECOMMENDATIONS - Summarize your analysis. Review your comments in the financial analysis section and provide your assessment of the overall status of the firm. Include any recommendations you think are appropriate. - List any other recommendations you have for the firm in view of your analysis. * End of report Outline * Week 1 Case Study Week 1: Case Study Development Introduction A major portion of this course is devoted to increasing your ability to assess the status of a business by analyzing its financial statements. A good way to do that is to actually analyze a real business firm, so that is what you will do during the next nine weeks. Specifically, the company selected will be identified and each week you will perform a portion of a financial analysis on that company by applying the techniques you learn in that week. Your results will be accumulated as the term progresses so that by Week 9 you will have a complete report to turn in for grading. You will also discuss your results with the rest of the class during Week 9. Therefore, a portion of your homework assignment each week will be devoted to the project. Project Overview The company selected for analysis this term is McDonalds Corporation. (NYSE Ticker Symbol MCD). The task is to describe the company's current financial status. Your Role Imagine you work for a firm that is considering buying stock in McDonald's. Imagine also that your boss, who also happens to be your instructor, has asked you to evaluate the company for possible inclusion in your firm's portfolio. Specifically, your boss wants you to describe McDonalds' current financial status. You are to prepare a formal report of your efforts for your boss, and brief him on the results of your study in nine weeks. Procedure As you go through the course studying the various subjects that apply to the company, you will conduct a portion of the analysis and complete that section of the report. Here is the schedule for this term: Start Week 1 Review requirements (see Week 1 homework assignment) Download info for cover sheet, company overview Work on cover sheet, company overview Complete cover sheet; hand in for review Review requirements (see Week 2 homework assignment) Download financial statements During End Week 2 Start During Revise cover sheet based on instructor feedback Work on Company Overview Load financial statements into Excel Complete Company Overview; hand in for review Review requirements (see Week 3 homework assignment) Revise Company Overview based on instructor feedback Work on Financial Overview Review requirements (see Week 4 homework assignment) Work on Financial Overview Complete Financial Overview; hand in for review Review requirements (see Week 5 homework assignment) Revise Financial Overview based on instructor feedback Work on Ratio Analysis Review requirements (see Week 6 homework assignment) Work on Ratio Analysis End Week 3 Start During Week 4 Start During End Week 5 Start During Week 6 Start During End Week 7 Complete Ratio Analysis; hand in for review Review requirements (see Week 7 homework assignment) Revise Ratio Analysis based on instructor feedback Work on Conclusion Complete Conclusion, finalize report Review requirements (see Week 8 homework assignment) Polish and review final report Hand in completed report Present & Discuss Findings Start During End Week 8 Start During End of Week 9 During As you can see, the general approach is to apply what you learn each week to your analysis, thereby building the report as you go through the course. Two weeks are allowed for each major phase of the report, which is enough time to conduct the analysis, record your findings, submit them for review, and receive feedback from your instructor. In weeks 7 and 8 you will finalize the document and prepare the formal version for submission and grading. In the final week of the course you will discuss your findings with the instructor and your classmates. Information Sources Use this web page, the company's latest annual and quarterly reports, and business publications on the Internet as the basis for your analysis. Good information sources on the Internet include: The company' own website (good for overview information, annual and quarterly reports). The U.S. Securities and Exchange Commission (Links to an external site.) Search EDGAR for 10K and 10Q reports. See SEC Website Instructions below. Yahoo Finance (Links to an external site.) Yahoo Financial Research Annual Reports (Links to an external site.) This free service allows users to review an annual report in an easy and convenient manner. Boasting the most complete and uptodate listings of annual reports on the Internet, AnnualReports.com provides instant access to annual reports in their actual format in one single location. For educated investors, corporate annual reports are the most important research tool available. Annual Reports enable investors to stay up to date on a company's yearly outlook. Hoover's (Links to an external site.) This site delivers comprehensive insight and analysis about the companies, industries and people that drive the economy, along with the powerful tools to find and connect to the right people to get business done. Reuters (Links to an external site.) This site combines industry expertise with innovative technology to deliver critical information to leading decision makers in the financial, legal, tax and accounting, healthcare, science and media markets, powered by the world's most trusted news organization. MSN > Money > Investing (Links to an external site.) Great resource for stock research. Many others (Google search for your company's name, for example) Important Note: Wikipedia.com is not an acceptable information source for your report. Since anybody can edit its information and the owners of the site do not attempt to verify the accuracy of what is posted, it does not meet minimum academic standards. Format Use the Case Study Complete Outline for your report. Using Information Obtained from the Internet Most of the words in your report should be your own. You should only quote when what has been stated is so unique that it would lose its impact or value if it were not kept together as a quote (this is rarely the case). You may paraphrase and use quotes for emphasis when you need to, but when you do you must use quotes and identify the source of the information. Remember that you MUST provide a source for anything that is not your original words or thoughts. Failure to do so is a breach of the Webster University honor policy and will negatively impact your grade. Simply stated, it is plagiarism. To summarize: When you extract information from sources on the Internet for use in reports, there will be a strong temptation to copy and paste the information into your financial statement analysis. You should not routinely do this. Citing sources on a reference page is not enough. Remember that words shown in your paper are presented as if they are your own unless you enclose them in quotes and provide a citation so your readers know where the information came from. The identification of a source must be sufficient to allow the reader to go directly to the source...including the page! There are multiple style sheets available to show you how to cite outside work in your document. Remember, the requirement is to enable the reader to go directly to the source to confirm its veracity. Be sure to ask your instructor if you have any questions about the report in general or using quoted information in particular. Instructions for Obtaining Company Information from the Securities and Exchange Commission's Website 1. With your computer online, go to www.sec.gov (Links to an external site.). This is the U.S. Securities and Exchange Commission's website. 2. At the website, click on Search for Company Filings (its in the Filings and Forms section). That will take you to the Search the NextGeneration EDGAR System page. 3. At the Search the EDGAR System page, click on Company or fund name, ticker symbol, CIK (Central Index Key), file number, state, country, or SIC (Standard Industrial Classification). This will take you to the Company Search page. 4. At the Company Search page, enter the name of your company in the box. Select Starts with or Contains as needed. Leave the other boxes blank. When you are done, click the Find Companies button at the bottom. 5. A list of companies matching the name you typed in will appear. The list may be short or long, depending on how many companies share the same words in their company names. Scroll down the list and locate the specific company you are interested in (you may have to go through several pages if the list is really long.) When you find your company, click the long red number in the left hand column next to the company name. This will bring up a Search Results page with a list of forms on it. Important Note: if there is only one company matching the name you typed in, the system will take you directly to the forms page. See the next paragraph. 6. On the forms page, scroll down the left hand column until you find an entry marked 10K. These forms are the company's annual report. o Note: you will normally find more than one 10K Form listed, because the companies file one for each year. The one you want is the one with the latest date. Check the date of the form in the Filing Date column on the right. o Note: you can shorten the forms search process by entering 10K in the Filing Type: window. Then scroll over to the right and click the Search button. The list of forms at the bottom of the page will then adjust to contain only 10K forms. 7. When you have located the 10K form that you want, click the Documents button for that form. This will take you to a Filing Detail page that contains a list of things that are in the 10K report. You will normally want the first entry, which, in the Document column, will be identified with something like form10k.htm. Click the red entry in the Document column to take you to the form. 8. At this point you can print the entire report (100+ pages!) or you can scroll down through the document to locate the part you are interested in. When you find it, simply highlight it with your mouse, and copy and paste it into a Word document for your review later on. Be careful here! Do not just paste information from the form into your report unless you enclose the text in quotes and insert a footnote saying where you obtained it. Previous