What are your company’s major cash inflows and outflows?

REQUIREMENTS
1. Business.  In this section provide a brief description of where your company fits in its industry. What products do they sell? Who are their primary customers and suppliers?
Who are their main competitors?

2. Industry.  In this area provide a brief description of the industry outlook. Your primary
resources here are some of the publications mentioned in chapter 5 of the Gibson
textbook (e.g. Standard & Poor’s Industry Surveys, Value Line Investment Survey, etc.),
as well as news articles (from publications such as The Wall Street Journal, New York
Times, Washington Post, and the Financial Times). You will need a different resource for each group member. I recommend that each one of the group members reviews a
different industry publication and provides a summary industry description identifying where the information was obtained.

3.  Complete the “FR & Comparisons” worksheet in the “Comparison with Industry &
Peers” file based on the financial statements of your company – you can find these
statements approximately in the middle of your company’s 10K reports (right after or
before the independent auditor’s report). In the Modules 10K reports area, I have posted
the three latest 10K reports for each company which you will need for this assignment.
Specifically, you need to submit the following:
a) The financial summary and ratio calculations using the formula sheet (all the areas that
are highlighted in yellow).
b) Perform trend analysis. Using the ratios that you calculated, identify the areas that show improvement and the areas of potential concern. You can describe the trends in
simple terms such as improving, stable, fluctuating, etc.
c) Under the RMA Norm column, list the industry median values for the subject ratios
(the ones highlighted in yellow). Then compare your ratios to the industry ones and
indicate whether they are better/favorable, worse/unfavorable or the same.
d) Compare your company’s ratios to the ratios of the other company in your group; what
you need to do here is to rank the ratios for your companies for the most recent year i.e. 1
or 2 with 1 being the best. You can use the last column in this worksheet to present your comparisons.

4.  For your company, assuming an anticipated 10% sales increase in the following year
calculate the following:
a. Working Assets in the most recent year that you have data for.
b. Working Liabilities in the most recent year that you have data for.
c. Working Investment in the same year.
d. Working Investment Factor in the same year.
e. New Working Investment in the following year.
f. What are the company’s additional working investment needs in the upcoming year?
g. Can the company cover these additional needs internally? If not, how much it needs from external sources?
It should be noted that items a through c have already been calculated in your worksheet
but they should be shown again here for comparison purposes

5. For your company, provide answers to the following questions:
a. Why has leverage increased or decreased during this period?
b. Is your company using debt efficiently? (Use the financial leverage index ratio)
c. How well is your company covering fixed charges? (Use the times interest earned, the
fixed charge coverage and the cash flow adequacy ratios).

6. Review your company’s cash flow statement. What are your company’s major cash inflows and outflows? What are their sources of cash? Where do they invest it?

7. Consider your company’s Return on Equity ratio (ROE=Net Profit/Total Equity). What is the trend during this period? As developed by DuPont and shown below:
ROE = (Net Profit/Total Sales) x (Total Sales/Total Assets) x (Total Assets/Total Equity)
or ROE = Net Profit Margin x Total Asset Turnover x Equity Multiplier. Using these last three ratios, explain the trend in the return on equity. For example, if your company’s
ROE has declined, is it due to a drop in the net profit margin (profitability problem), total asset turnover (efficiency problem) or equity multiplier (a financial leverage issue).

8. Calculate the Economic Value Added (EVA) for your company for this period assuming a 10% cost of capital. Discuss the EVA trend and provide reasons for the increases/decreases. How does this reconcile with the DuPont Analysis?
(Formula: EVA = EBIT(1-T) – (Total Invested Capital x Cost of Capital)).

9. Based on your analysis list your company’s strengths and weaknesses (in bullet points)