Guidelines for Course Project: Financial Analysis

School: University of California, Irvine - Course: MGMT 101 - Subject: Accounting

Course Project-Guidelines (1) •Collect as much quantitative and qualitative information as possible from 10-Qs, 10-Ks, 8-Ks, proxy statements, legal proceedings, company websites, financial websites (Hoovers, Yahoo!, MSN, etc.), analyst reports (Capital IQ), etc. -Within annual or quarterly reports: financial statements, notes to the financial statements (accounting policies, acquisitions, restructurings, etc.), Management Discussion & Analysis (MD&A), management report on financial reporting controls, independent auditor report, risk factors, unresolved staff comments, etc. •Discuss the impact of economic conditions (market-wide, industry-specific, and company-specific). •Define the industry (narrower and/or broader definition).Identify the main competitors (including, but not only, the three competitors selected).Identify industry characteristics (level of competition, barriers of entry, monopoly, etc.). •UsePorter's five forcesor a SWOT analysis to briefly analyze the competitive landscape for the company. Identify and discuss company strategies. Compare with main competitors. What are the firm'scompetitive advantages? •Explore the financial statements and get the information regarding company basics: -What accounting standards are used, US GAAP, IFRS or others? What is the date of the most recent fiscal year-end? Who are the company's auditor(s)? Are any concerns raised in the audit report? -What is the market capitalization at the most recent year-end? Obtain the year-end stock price from an investment website such as Seeking Alpha or Yahoo Finance. Compare market cap with the book value (total equity) of the company.

Course Project-Guidelines (2) •Prepare common-size financial statements (IS, BS, and SCF). -For the company. -For the three competitors/peers selected. -For the four companies (i.e., your focal company and its three competitors), prepare common-size F/S for the most recent 4 yearswith available data. Say, if financial statements for fiscal year 2020 have not been available, use the fiscal year period 2016-2019. •Analyze common-size B/S and I/S: -Focus on accounts/items on B/S and I/S that are important to your focal firm. -Conduct time-series analysis and cross-sectional analysis for important items on common-size B/S and I/S. •Specifically, analyze company over the period (4 years) (i.e., time-series analysis); analyze company against its three competitors (i.e., cross-sectional analysis). •Bonus: conduct a combined time-series and cross-sectional analysis. For instance, compare the time- trend of your focal company with the time-trend of its competitors for important items. -Some questions to consider: •Are there any major differences over time and between companies? Do any patterns emerge? •B/S: what are the company's largest assets? What proportion of total assets is financed by owners vs. non-owners? •I/S: what is the level and trend for revenues? What are the major expenses? Are there any unusual or discontinued items? Are they large in magnitude (material)?