Financial Analysis Snapshot and Initial Findings
A critical financial accounting skill is the ability to read, analyze, and make actionable decisions from published financial statements. Business leaders gain valuable information from the annual reports of direct competitors, companies that operate in similar fields, and companies in which they are considering an investment or partnership.
Instructions
You are a financial analyst with RedRock, a global investment company. RedRock is investigating the energy drink business to determine which company to add to its new “RR+ Global Consumer Goods” fund. You are assigned to complete a financial analysis of two companies in the energy drink business, Monster Beverage Corporation (MNST) and Celsius Holdings, Inc. (CELH). The financial analysis was started by your summer intern, who had to return to college, and you will be finishing his work. Both companies use a December fiscal year-end and report their financial statements in thousands of dollars. The analysis period is from 2020 through 2023.
Lena Gerard, the Managing Director, has specifically asked for a financial analysis presentation of four key areas:
1. Profitability: Gross Margin Ratio
2. Profitability: Selling, Marketing & Promotional Expenses as a % of Net Sales (Ratio)
3. Collections Management: Accounts Receivable Turnover
4. Cash Flow: Net Cash Provided by Operating Activities as a % of Net Sales (Ratio)
You will organize your work into TWO components:
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· Part A: Financial Analysis Snapshot and Initial Findings using data from the companies’ annual reports (Due: Monday 9:00AM (eastern) of Week 5; worth 10% of your final grade)
· Part B: Executive Memo and brief Video Presentation of your analysis (Due: Monday, 9:00AM (eastern) of Week 6; worth 20% of your final grade)
Before starting your work on Assignment 1A, carefully read the instructions for both 1A and 1B. Your deliverables for Assignment 1B are directly connected to the work you will complete for Assignment 1A.
Assignment 1A: Financial Analysis Snapshot and Initial Findings
1. All work must be completed and submitted in the Excel Assignment 1 Workbook .
2. Download the 2023 Form 10-K annual reports for MNST and CELH, and the Q4 2023 Earnings Release for CELH from their investor relations websites. Please read the footnotes within the Student Input Sheet at the bottom that direct you to specific documents and page numbers for select items.
3. Use the financial statements, management discussion & analysis and Notes within the Form 10-K reports, and the Q4 2023 Earnings Release for CELH, to populate the Student Input Sheet in the Excel workbook template for the two most recent years, 2023 and 2022. Do not use third-party sources for financial statements because they often have errors due to data load problems. As you complete your entries, please note:
· Two years of historical data and ratios for 2020 and 2021 have already been provided in the template from the prior years’ annual reports; do not change the data and ratios provided.
· Some of the data from 2022 and 2023 have been completed for MNST and CELH by your summer intern, and that data is 100% correct. Please use all data provided as a guide to locate the correct line items and to make the correct calculations in the template.
· Some entries require finding the respective line-item amounts, while others will require calculations that should be entered as formulas. The formulas for items to be added together on one line are included in the descriptions. Subtotal and ratio calculations should use the rows indicated under “Comments.”
· Note: The template has been set up to provide immediate feedback on your entry. If the cells turn green after you enter the data or formula, you have made a correct entry. If the cell does not change to green, it indicates that the wrong value has been entered into the cell. This may be caused by a mistake in a calculation or by selecting the wrong data from the Form 10-K financial statements. If a cell fails to turn green, complete the following steps to troubleshoot:
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· Ensure that you understand what data is required for that entry.
· If you cannot locate the data in the 10-K financial statements, review the Reference Guides from weeks 2-4 and the other course materials to help find the needed data.
· If you have confirmed you have identified the correct data, review your calculations. A simple math error or a misunderstanding of a ratio may be the culprit.
4. In the Summary Sheet you will summarize your findings on the Four Key Topics specified by Lena Gerard, Managing Director:
4. Collections Management: Accounts Receivable Turnover
4. Profitability: Gross Margin Ratio
4. Profitability: Selling, Marketing & Promotional Expenses as a % of Net Sales (Ratio)
4. Cash Flow: Net Cash Provided by Operating Activities
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· There are data tables and charts for each of these four key topics. These tables will populate the charts that illustrate the data and trends for MNST and CELH. You will be able use these tables and charts in your Assignment 1B communication package.
· Briefly answer the three questions in italics for each key metric; there are 12 questions in total. These 12 questions will form the basis for your Assignment 1B executive memo and video presentation for Lena Gerard, your Managing Director. You will be able to expand upon your answers to these 12 prompt questions in Assignment 1B, so use lists or bullet points to summarize your answers.
Note: Your summary notes do not require elaborate responses. Bullet points are fine. Focus on outlining key differences between the two companies, anything that surprised you or is noteworthy, and your initial thoughts on where one company might have a financial advantage over the other. These notes will help you think through what you will highlight in your Executive Memo and Presentation in Assignment 1B and will be an opportunity for your professor to provide feedback before you submit that assignment, allowing you to make edits if needed.
With the data in hand and some initial analysis of the stories behind the numbers, you should feel confident about moving on to Assignment 1B, where you will discuss your findings in your memo and presentation. However, if you need extra support with analyzing and interpreting trends for the four key topics of Assignment 1B, please reach out your Professor or the Finance Coach assigned to your section via email as soon as possible.
Submission Requirements
Your Financial Analysis Snapshot and Initial Findings must be submitted using the Excel workbook provided.
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