V$.$ FINANCIAL ANALYSIS $-$ Key starting point for all good analysis papers.

A$.$ Basic $($Preliminary$)$ Indications $($set into a table in appendix$)$

B$.$ Use the appropriate ratios to$$ analyze the firm to its competitors

$1.$ Common Stocks

$2.$ Preferred Stocks

$3.$ Bonds ratings

$4.$ Earnings per share:

$5.$ Rating, reputation Rating, reputation$$

$6.$ Current, recent, average Yield

$7.$ Yield$$ Dividends

$8.$ Market price record

$9.$ P$-$E ratio, yield$$

$10.$ Growth rate$$

$11.$ Capital Structure book value

C$.$ Industry analysis and comparisons $$ should compare the firm to $2-3$ main competitors financial ratios. $($HINT: different industries use different rations for measurement$)$

$1.$ Ratios Year$-$to$-$Year Industry Trend for the last four years

$2.$ Liquidity Ratios Current Ratio

$3.$ Quick Ratio

$4.$ Leverage Ratios Debt to Asset Ratio

$5.$ Debt to Equity Ratio

$6.$ Activity Ratios Inventory turnover

$7.$ Total Asset Turnover

$8.$ Fixed Asset Turnover

$9.$ Profitability Ratios Return on Asset

$10.$ Return on Equity

$11.$ Profit Margin

$12.$ Average Collection Period$$

$$Create a Financial analysis of the company using Excel.$$ Use both historical comparisons and industry comparisons PROVIDE MEANINGS AND INTERPRETATION

a$.$ What do the profitability ratios tell you about the firm?

b$.$ What do the liquidity ratios tell you about the firm?

c$.$ What do the leverage ratios tell you about the firm?

d$.$ What do the activity ratios tell you about the firm?

$$ D$.$ The Individual Security

$1.$ Its legal rights $($Of stocks or bonds$)$

$2.$ Its market position

$3.$ Number of holders $($Of stocks or bonds$)$

$4.$ Popularity of type $($well$-$traded$)$

$5.$ Eligibility $($Any convertible securities$?$ Will these securities be converted?$$ Why or Why not?$)$

$6.$ Additional issue or secondary offerings$($Company going to offer new securities$,$ equity or debt? Why?$)$

$7.$ Market history $($Security$\text{'}$s ratings $-$ Why?

$8.$ Financial position in capital structure, improving or weakening

$$E$.$ Economic Analysis and its financial impact on the firm$$

$1.$ Prospects for prosperity or recession $($What is happening to the US and global economy?$)$

$2.$ Trends of money supplies, interest rates, and price level $($How does it impact the industry and firm?$)$

$3.$ Strength of output, sales, and employment $($How does it impact the industry and firm?$)$

$4.$ Cyclical patterns of industry $($Where is industry and firm in the business cycle?$)$

$5.$ How it affects the company and industry

$$ F$.$ Analysis of the Firm$$

$1.$ Growth of earnings, sales $($Is this specific company growing?$)$

$2.$ Return on equity$($Is the financial management strong?$)$

$3.$ Profit margins, costs, overhead $($Is the financial management strong?$)$

$4.$ Sales outlook$($Is the company positioned for the future?$$ Why or Why not?$)$

$5.$ Stability of sales and earnings

$6.$ Assets and operating facilities$($What condition are the company's assets and facilities in$?$ Assets or liability?$)$

$7.$ Working capital position and cash flow$($What is the health of the firm's cash flows?$)$

$8.$ Capital structure $($equity to debt $\%)($How is company financed?$$ Why?$)$

$9.$ Earnings estimates $($for year, actual versus projected$)$

$10.$ Dividend estimates $($for year, actual versus projected$)$

$$ G$.$ Financial S$.$W$.$O$.$T$.$ analysis of individual firm

For the firm of McDonald's