Assignment:
Case - Comprehensive Financial Statement Analysis
Assume that you just inherited $100,000 and want to invest your inheritance into the stock of a publicly traded company. Your task is to choose a company to analyze in order to determine if it is the company in which to invest your inheritance. You may choose any company listed on one of the major U.S. stock exchanges. This will ensure that there is plenty of information available for your analysis. You may obtain financial information from the company's website (usually under their "Investor Relations" webpage) or you can go to the SEC website.
1. Download the past four years of financial statements of your company.
2. Evaluate the company's past financial performance:
a. Prepare financial ratios related to profitability, efficiency (activity), liquidity, and solvency. These can be found in Chapter 7. How have these measures changed over time?
b. What are the company's business model and strategy? How do they influence the company's performance in its sales growth, efficiency, and profitability?
3. Project future financial performance:
a. Project out five years of future net income and cash flows (similar to Example 5 in chapter 12). Please include a list of all assumptions used in the forecast.
4. Based on the above information, would you risk your $100,000 in this company? Why or why not (be specific)?