Must use Excel for the ratios

Data Case (Modified - Instructions)

This is your second interview with a prestigious brokerage firm for a job as an equity analyst. You survived the morning interviews with the department manager and the Vice President of Equity. Everything has gone so well that they want to test your ability as an analyst. You are seated in a room with a computer and a list with the names of two companiesFord (F) and Microsoft (MSFT). You have 90 minutes to complete the following tasks:

1. Download the annual income statements, balance sheets, and cash flow statements for the last four fiscal years from MarketWatch (www.morningstar.com). Enter each company's stock symbol and then go to "financials." Export the statements to Excel by clicking the export button.

2. Find historical stock prices for each firm from Yahoo! Finance (finance.yahoo.com). Enter your stock symbol, click "Historical Prices" in the left column, and enter the proper date range to cover the last day of the month corresponding to the date of each financial statement. Use the closing stock prices (not the adjusted close). To calculate the firm's market capitalization at each date, multiply the number of shares outstanding (see "Basic" on the income statement under "Weighted Average Shares Outstanding") by the firm's historic stock price.

3. For each of the four years of statements, compute the following ratios for each firm:

Calculate the Enterprise Value for each firm. For consistency purposes use the following formula: Market Capitalization of Equity + Long-term Debt + Short-term Debt - Cash, Cash Equivalents and

Short-Term Investments.

Valuation Ratios

Price-Earnings Ratio (for EPS use Diluted EPS Total)

Market-to-Book Ratio

Profitability Ratios

Operating Margin

Net Profit Margin

Return on Equity

Financial Strength Ratios

Current Ratio

Book Debt-Equity Ratio(Use Long-Term Debt)

Market Debt-Equity Ratio(Use Long-Term Debt)

Interest Coverage Ratio(Use Operating Income / Interest Expense Net of Capitalized Interest)

4. Examine the Market-to-Book ratios you calculated for each firm. Which, if any, of the two firms can be considered "growth firms" and which, if any, can be considered "value firms"?

5. Compare the valuation ratios across the two firms. How do you interpret the difference between them?

6. Consider the enterprise value of each firm for each of the four years. How have the values of each firm changed over the time period?

7. In general, compare the ratios that you calculated for the two firms. Provide your overall evaluation of each highlighting strengths and weaknesses of each firm compared against the other.