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.
- 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).
- Create a single Excel file for your entire assignment.
- 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.
- All calculations should be shown, and all answers should be thoroughly explained (a.k.a. “show your work”).
- 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
- What can you tell from your analysis? In other words, which company is the stronger competitor overall? Give your reasons.
- Your Excel file should be submitted via the â€œWeek 3 – Individual Assignmentâ€ link.
- 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.