Your supervisor needs some help performing financial analysis concerning two companies-Ford (F) and Microsoft (MSFT). She...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Your supervisor needs some help performing financial analysis concerning two companies-Ford (F) and Microsoft (MSFT). She asked you to: 1. Download each company's annual income statements, balance sheets and cash flow statements for the last four fiscal years. Your supervisor suggested you get the financial statements on 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 for the dates of each financial statement. Your supervisor recommended you get the historical stock prices for each firm on Yahoo! Finance (www.finance.yahoo.com). Enter the 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 prices). To calculate the firm's market capitalization (or market value of equity) at each date needed below, multiply the number of shares outstanding by the firm's historical stock price. To get the number of shares outstanding (see "Basic" on the income statement under "Weighted Average Shares Outstanding") by the firm's historical stock price also on MarketWatch (www.morningstar.com). 3. For each of the four years of statements, compute the following ratios for each firm: Operating Margin equals Operating Income divided by Sales. Net Profit Margin equals Net Income divided by Sales. Return on Equity equals Net Income divided by Book Value of Equity. Current Ratio equals Current Assets divided by Current Liabilities. Book Debt-to-Equity Ratio equals Total Debt divided by Total Equity. Interest Coverage Ratio equals EBIT divided by Interest Expense. Price-Earnings (P/E) Ratio equals Market Capitalization divided by Net Income. Another way of calculating the P/E Ratio is by dividing the Share Price by Earnings per share (EPS). Note: for EPS, use Diluted EPS Total. Market-to-Book Ratio equals Market Value of Equity divided by the Book Value of Equity. Enterprise Value to EBITDA equals Enterprise Value divided by Earnings Before Interest, Taxes, Depreciation and Amortization. Where EBITDA equals EBIT (Earnings Before Interest and Taxes)+ Depreciation and Amortization. While Enterprise Value = Market Capitalization + Debt-Cash. For Debt, include Long-Term Debt and Short-Term Debt. For Cash, include Marketable Securities. 4. Your supervisor told you she must conduct a comparative analysis using your calculated values. Thus, she asked you to obtain industry averages for each firm from Reuters.com (www.cnbc.com). Search for the stock symbol, click the "Peers" tab, then the "Key Measures" tab. (She told you to ignore the company's column as your calculations will differ.) You wanted to impress her for future employment or letters of recommendation, so you told her you wanted to give the comparative analysis a shot to learn more about it. So, she asked you to: Compare each firm's ratios for the most recent year to the available industry ratios (automobile manufacturers and systems software). Analyze each firm's performance versus the industry and comment on trends in each firm's performance. Identify any strengths or weaknesses you find in each firm. Examine the Market-to-Book ratios you calculated for each firm. Which of the two firms can be considered "growth firms," and which can be considered "value firms"? Compare the valuation ratios across the two firms. How do you interpret the difference between them? Consider the enterprise value of each firm for each of the four years. How have the values of each firm changed over time? Your supervisor needs some help performing financial analysis concerning two companies-Ford (F) and Microsoft (MSFT). She asked you to: 1. Download each company's annual income statements, balance sheets and cash flow statements for the last four fiscal years. Your supervisor suggested you get the financial statements on 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 for the dates of each financial statement. Your supervisor recommended you get the historical stock prices for each firm on Yahoo! Finance (www.finance.yahoo.com). Enter the 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 prices). To calculate the firm's market capitalization (or market value of equity) at each date needed below, multiply the number of shares outstanding by the firm's historical stock price. To get the number of shares outstanding (see "Basic" on the income statement under "Weighted Average Shares Outstanding") by the firm's historical stock price also on MarketWatch (www.morningstar.com). 3. For each of the four years of statements, compute the following ratios for each firm: Operating Margin equals Operating Income divided by Sales. Net Profit Margin equals Net Income divided by Sales. Return on Equity equals Net Income divided by Book Value of Equity. Current Ratio equals Current Assets divided by Current Liabilities. Book Debt-to-Equity Ratio equals Total Debt divided by Total Equity. Interest Coverage Ratio equals EBIT divided by Interest Expense. Price-Earnings (P/E) Ratio equals Market Capitalization divided by Net Income. Another way of calculating the P/E Ratio is by dividing the Share Price by Earnings per share (EPS). Note: for EPS, use Diluted EPS Total. Market-to-Book Ratio equals Market Value of Equity divided by the Book Value of Equity. Enterprise Value to EBITDA equals Enterprise Value divided by Earnings Before Interest, Taxes, Depreciation and Amortization. Where EBITDA equals EBIT (Earnings Before Interest and Taxes)+ Depreciation and Amortization. While Enterprise Value = Market Capitalization + Debt-Cash. For Debt, include Long-Term Debt and Short-Term Debt. For Cash, include Marketable Securities. 4. Your supervisor told you she must conduct a comparative analysis using your calculated values. Thus, she asked you to obtain industry averages for each firm from Reuters.com (www.cnbc.com). Search for the stock symbol, click the "Peers" tab, then the "Key Measures" tab. (She told you to ignore the company's column as your calculations will differ.) You wanted to impress her for future employment or letters of recommendation, so you told her you wanted to give the comparative analysis a shot to learn more about it. So, she asked you to: Compare each firm's ratios for the most recent year to the available industry ratios (automobile manufacturers and systems software). Analyze each firm's performance versus the industry and comment on trends in each firm's performance. Identify any strengths or weaknesses you find in each firm. Examine the Market-to-Book ratios you calculated for each firm. Which of the two firms can be considered "growth firms," and which can be considered "value firms"? Compare the valuation ratios across the two firms. How do you interpret the difference between them? Consider the enterprise value of each firm for each of the four years. How have the values of each firm changed over time?
Expert Answer:
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780137852581
6th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Posted Date:
Students also viewed these finance questions
-
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....
-
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....
-
Use PrecisionTree to create and solve the influence diagram that corresponds to the decision tree in Figure 4.44. A1 S8 SO A2 $4 0.45 $10 S0
-
Cite evidence indicating that school-age children view the mind as an active, constructive agent.
-
You are preparing the 2 0 2 0 tax return for Mr . and Mrs . Gumball, who are both over age 6 5 . Their AGI was $ 2 2 , 0 0 0 . What amount may they use as a credit for the elderly? They file a joint...
-
Describe the procedure for examining a hypothesis related to proportions of paired samples.
-
1. Why did the Iowa Supreme Court rule in favor of the criminal intruder, Katko? 2. What classes of people other than intruders are of concern to the courts in cases like Katko? 3. A businessman in...
-
Consider the following three simple statements: h: All rooms have hardwood floors. r: Some rooms have rugs. w: The house has windows. Compound Statement p: (rV w) ^-h Compound Statement q: (hw) V -...
-
What has happened if the selling price has increased but the gross profit percentage remains the same?
-
What is the importance of the IPS? What information is explained about the investor? Would you expect institutional investors, such as insurance companies and pension funds, to develop and follow an...
-
What database provides localized data, but is synchronized together for a more global database system? give explanation with reason
-
Company is rated investment grade has 2 bonds with 5% coupon, trading 95% and mature in 7 years. Bonds are identical, expect one has a 102% change of control, other does not. the company should be a...
-
What is the differences between a flat database and a relational database. Does JDBC provide a way for Java programmers to access flat databases, relational databases, or both? What specific...
-
The recent emergence of cloud computing has drastically altered everyone's experience of software delivery and database development. This rapid transition towards the clouds, has created number of...
-
Read the article International Social media and write a paper about it
-
For the following exercises, find the area of the triangle. Round to the nearest hundredth. 22 50 36
-
Write a numerical algorithm to solve Eq. 8.71 for \(A_{n}\). Obtain lift coefficients for \(h / 2 b=2\) and \(\mathrm{AR}=6,10\) at \(\mathrm{AoA}=12\). Eq. 8.71 Asin no 1 (y) 1 ban b 4h2b2 (cos...
-
Using (8.76) find the chord wise variation of the lift as \(L^{\prime}(x)\). Eq 8.76 1 za 2hg ax ax ax - (x)- aza
-
Why are none of the bulbs in Figure 31. 24 lit? Data from Figure 31. 24 Figure 31.24 (1) (iii) NNN
Study smarter with the SolutionInn App