economics two hous

You are the assistant to the CEO of a major company.  Your CEO keeps an eye on the competition, and asks you to do the following. Using ratio analysis, compare two major competitors in the same industry.

 

Instructions:

  • Pick any two U.S. public companies in the same industry.
  • You may obtain financial information and the companies’ latest annual reports on the web directly from MSN Money or Yahoo Finance. For additional information, look for the SEC Form10-K link from one of the MSN Money or Yahoo Finance financial sites. 
  • One of your two companies can be the same company you used in Week 2.
  • Select the 10 “most important” financial ratios for your two companies and calculate each for the last 2 fiscal years using Excel.  You should calculate at least one ratio in each category: liquidity, leverage, profitability, and efficiency.  Then, add other ratios where there are large differences between the two companies you chose.  That’s my definition of the phrase “most important.”
  • Follow the same format as the Drugstore Chains example (DrugstoreChains.xls). 
  1. Create a single Excel file for your entire assignment.  
  2. You should calculate, and comment upon, all 10 financial ratios for the last 2 fiscal years.  For each ratio, your comment should indicate which company has the better ratio.
  3. All calculations should be shown, and all answers should be thoroughly explained (a.k.a. “show your work”).
  4. It is often useful to compare financial ratios for a company with financial ratios of its industry, but this is not required. Industry financial ratios can be found on Morningstar.com, Yahoo Finance and MSN Money andhttp://www.bizstats.com/corporations.asp?profType=ratios
  5. What can you tell from your analysis?  In other words, which company is the stronger competitor overall? Give your reasons.
  6. Your Excel file should be submitted via the “Week 3 – Individual Assignment” link.
  7. Here’s how I’ll grade your sheet.  1pt for each ratio calculated correctly as your work should show; 1pt for each correct interpretation of the ratio (i.e. which company has the stronger ratio?); 1pt for your conclusion on which company is the stronger competitor overall (actually pick one or the other. no ties!);  1pt for your reason (a qualitative statement about the company that draws on but is not simply rehashing the analysis you’ve done) .   Total: 22pts.