Assignment 11.1: Final Project
9204Instructions
Final project: Financial Statement Analysis
(OVERVIEW)
Financial statement analysis project. This project consists of the following parts;
Part A: Financial analysis of a publicly-held company. We will use Ford’s latest consolidated and segment financial statements (form 10K) as filed with the SEC. You will calculate the current ratio and profit margin for the company as a whole. You will also answer general questions relating to Ford’s business operations.
Part B: Discussion of risks. You will search Ford’s form 10K and identify three majors risks identified by the company. You will also assess the company’s market share for automobiles. You will determine the company’s growth rate of EPS or dividends.
Part C: Discussion of Ford’s capital structure. You will review Ford’s consolidated financial statements. You will calculate the company’s debt/equity ratio and the earnings per share. You will also determine the company’s return on investment and the weighted average cost of capital.
Part D: Discussion of Free Cash Flow. You will determine Ford’s consolidated free cash flow. In this part, you will make a prediction as to what the company’s stock price would be in three (3) months. You will also review analysts’ estimates and predictions for the past year.
Part E: An investment recommendation. You will answer questions relating to whether the company maximizing the wealth of its shareholders? If not, what can they do to achieve this result? You will review your calculations and discussion of the following 6 ratios and financial measures: Current Ratio, Debt/Equity Ratio, Return on Investment, Earnings per Share, Profit Margin and Free Cash Flow. You will conclude your analysis with other observations on the firm and whether your analysis differs from other analyses that are available. You will indicate if there is any other measure you would want in order to make an investment recommendation. Finally, you will make an Investment Recommendation. For this recommendation, assume you have been asked by an investor, age 35, who wishes to invest in conservative stocks that will provide some income now but is mainly interested in growth over the next ten (10) years. Would Ford meet this investor’s investment goals? Defend your analysis in 2,000 to 2,500 words written in APA style and cite your sources in a reference list.
Part A: Financial analysis of a publicly-held company. We will use Ford’s latest consolidated and segment financial statements (form 10K) as filed with the SEC. You will calculate the current ratio and profit margin for the company as a whole. You will also answer general questions relating to Ford’s business operations.
Requirements:
Step 1: Locate Ford’s form 10K for the most current year.
1. Go to the SEC’s website: www.sec.gov
2. Under Filings and Forms, go to “search for Company Filings”
3. Click on : Company or fund name, ticker symbol, CIK (Central Index Key), file number, state, country, or SIC (Standard Industrial Classification)
4. The Ticker Symbol for Ford is F
5. Locate the form 10K for the latest year. Ford files its annual reports in February. Note the interactive document does not provide all of the information. You will need to open the form 10K.
Step 2: Answer general questions which are stated below also state where the answers were found.
1. What are Ford’s 2 major segments?
2. What are the major 3 components associated with Ford’s profitability for cars and trucks?
3. Comment briefly (one paragraph) on Ford’s planning assumptions and key metrics share.
4. Comment briefly (one paragraph) on Ford’s Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Step 3: Calculate the current ratio and the profit margin for Ford . It is useful to understand that you may have difference calculations due to differences in the formula for the ratio. Compare your answers to publicly-available information to see if your answers are close. Use any of the websites listed in the directions. Be sure to use the consolidated financial statements.
Step 4: Summarize your findings in a word document. Your final submission will include the results from part A – D.
Part B: Discussion of risks. You will search Ford’s form 10K and identify three major risks identified by the company. You will also assess the company’s market share for the automotive segment. You will determine the company’s growth rate.
Requirements:
Step 1: From the form 10K, item 1A, identify three (3) major risks identified by the company you consider most important.
1. Read the form 10K item 1A.
2. Identify three major risks you consider most important to the company’s future.
3. Calculate the company’s Beta coefficient of the stock. From any of the websites listed in the directions, how does your calculation compare?
Step 2: From the form 10K, review item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. Assess the company’s market share.
1. Read the form 10K, item 7, Management discussion and analysis of financial Condition and Results of Operations.
2. Locate information about production volume of cars and market share.
3. Explain if the company’s market share for automobiles increased or decreased over the past year. You may look at other sources to support management’s position.
Step 3: Calculate the company’s growth rate of EPS or dividends. Compare your calculation with publicly-available information from any of the websites listed in the directions.
1. Calculate the growth rate of the company’s EPS or dividends using the formula presented in the text.
2. Compare your result to publicly-available rates. Use one of the websites listed in Part A.
3. Provide and explanation if your calculations differ from your publicly-available information.
Step 4: Summarize your findings in a word document. Add to the document You started on Part A. Your final submission will include the results from part A – D.
Part C: Discussion of Ford’s capital structure. You will review Ford’s consolidated financial statements. You will calculate the company’s debt/equity ratio and earnings per share. You will also determine the company’s return on investment and weighted average cost of capital.
Requirements:
Step 1: Review the form 10K, item 15, to determine Ford’s capital structure. From the consolidated balance sheet, what kinds of stock has Ford issued?
Step 2: Read note 24. CAPITAL STOCK AND AMOUNTS PER SHARE. What is the meaning of Earnings per share and diluted earnings per share?
Step 3: Calculate the debt/equity ratio. Use all long-term debt in your calculation. Compare your answer to publicly available information.
Step 4: Calculate the Earnings per Share. Compare your answer to publicly available information.
Step 5: Determine the company’s return on investment. Compare your answer to any website listed in the directions.
Step 6: Determine the company’s weighted average cost of capital. Compare your answer to any of the websites listed in the directions.
Step 7: Comment on whether the firm’s capital structure is optimal.
Step 8: Add to the document you started on Part A. Your final submission will include the results from part A – D.
Part D: Discussion of Free Cash Flow. You will determine Ford’s consolidated free cash flow. In this part, you will make a prediction as to what the company’s stock price would be in three (3) months. You will also review analysts’ estimates and predictions for the past year.
Requirements:
Step 1: Look at Ford’s Consolidated Statement of Cash Flows. Note the operating cash flow section is found in Note 25.
Step 2: Calculate the free cash flow.
Step 3: Compare your answer to any of the websites listed in the directions.
Step 4: Make your prediction as to what the stock price will be 3 months from now.
Step 5: Add to the document you started on Part A. Your final submission will include the results from part A – D.
Part E
Requirements: Answer the following questions and write your final report.
Step 1: Is the company maximizing the wealth of its shareholders? If not, what can they do to achieve this result?
Step 2: Share your tentative conclusions about whether or not the company is maximizing the wealth of shareholders. Provide support for your answer.
Step 3: Review your calculations and analysis of the following 6 ratios and financial measures: Current Ratio, Debt/Equity Ratio, Return on Investment, Earnings per Share, Profit Margin and Free Cash Flow.
Step 4: Conclude your analysis with other observations on the firm and whether your analysis differs from other analyses that are available. Indicate if there is any other measure you would want in order to make an investment recommendation.
Step 5: Make an Investment Recommendation. Assume you have been asked by an investor, age 35, who wishes to invest in conservative stocks that will provide some income now but is mainly interested in growth over the next ten(10) years. Begin your final project essay with an investment recommendation to this investor and support it with solid financial analysis. Your report should include your conclusions related to each of the five parts of this financial statement analysis project. You should conclude with a statement on whether or not Ford would meet this investor’s investment goals. Your essay should be in 2,000 to 2,500 words, written in APA style, and cite any your sources you used both in the body of the paper and in a reference list found at the end of the paper.
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