Write an 8-10 page research paper on any two companies, who are competitors in the same industry. The 8-10 pages do not include the title page, graphs or references. The paper must include an introduction or abstract and a summary conclusion.
Project Assignment Using Coke and Pepsi as an Example:
To learn more about PepsiCo and Coca-Cola Enterprises, download both company’s latest Annual Report. Review the annual reports for general information.
Required:
1. Read -Understanding the Income Statement at: http://www.investopedia.com/articles/04/022504.asp
2. Read -Reading the Balance Sheet at: http://www.investopedia.com/articles/04/031004.asp
3. Compute- the following financial ratios for both companies and provide as an appendix to the required paper.
Liquidity measurement ratio: · Current ratio
Profitability indicator ratios:· Return on assets · Return on equity
Debt ratio: · Debt ratio
Operating performance ratio: · Fixed asset turnover ratio
Cash flow indicator ratio: · Dividend payout ratio
Investment valuation ratio: · Price / Earnings ratio
You can take these from a financial website and provide them. I do not need to see the calculations. You will need to reference these ratios as you answer the required questions below. If you want to put a short table together to show the ratios as you answer the questions, it is helpful. If not, the appendix is fine
For each company and comparing the two, you are to write an eight to ten (8-10) page report that answers the following:
1. Provide a short background on each company, the industry and the market (growing, declining, etc?) in which they operate. (This should be no more than 1- 1.5 pages for both companies in total and can be a part of your introduction.) 5 points
Do not waste too much time on this. It should be short.
2. Using the current ratio and debt ratios, discuss what conclusions you can make about each company’s ability to pay current liabilities (debt). Support your conclusions. Which company is doing better, why or why not? 25 points
Liquidity measurement ratio: · Current ratio
Debt ratio: ·Debt ratio
You must use the two ratios above for your analysis and discussion.
3. Using the profitability and operating performance ratios, discuss what conclusions you can make about each company’s profits over the past three years. Support your conclusions. Which company is doing better, why or why not? 25 points.
Profitability indicator ratios:· Return on assets · Return on equity
Operating performance ratio: · Fixed asset turnover ratio
You must use the three ratios above for your analysis and discussion.
4. Using the cash flow indicator and investment valuation ratios, discuss which company is more likely to have satisfied stockholders. Support your conclusions. Which company is doing better, why or why not? 25 Points
Cash flow indicator ratio: Dividend payout ratio
Investment valuation ratio: Price / Earnings ratio
You must use the above two ratios for your analysis and discussion.
5. As an investor, discuss which company you would choose to invest in and provide a rationale for your decision. Support your conclusions, why or why not? 10 points
6. After concluding your research about each company and reviewing their annual report, discuss what non-financial criteria you would consider when choosing between these two investment options? Support your conclusions, why or why not? 10 points
The biggest thing I can tell you is this paper IS NOT a research paper on the financial health of each company. I do not want the opinion of some expert on the web. This paper requires a little bit of research and then it is YOUR analysis of the results. This paper helps tie together much of what you learned.
Please let me know if you have any questions.
Something that helps to distinguish outstanding papers is that they discuss not just what, but why.
For example, Company A has a debt ratio of 25% and Company B is 30%. To tell me Company A is better doesn’t tell me much. For example, you could tell me what the debt ratio measures, what is normal for this industry, and why it is important. Maybe look at the last three years for each company. Even though Company B is higher right now, what has their three year trend been. Maybe something unusual happened this year, like an acquisition.
I have mentioned (I think) that ratios are just clues. You are the detectives. Dig deeper into the numbers to tell me what is going on.
