Financial Analysis and Firm Strategies Project Please perform financial analysis on two public companies in the same industry and interpret the firm policies and strategies. You only need to perform...

Financial Analysis and Firm Strategies Project
Please perform financial analysis on two public companies in the same industry and interpret the
firm policies and strategies. You only need to perform the analysis on one year of data for ratio
analysis and two years of data for horizontal analysis. Here is the requirement information in the
final project. The most recent financial statement you look at must be issued after June 30, 2019.
Content Description of Content Points
Part 1 Basic Information
In this part, please provide information about the firms and the source of the data. (30 points)
Company
Name
Identify the two firm names. 5
Basic
Information
Including the firm industry, the firm location and other general
information of the firms.
5
Source of the
Financial Data
Provide the link of the source data. For example, Walmart
financial data is from: https:
www.sec.gov/cgi-
in/viewer?action=view&cik=104169&accession_number=00001
XXXXXXXXXX&x
l_type=v#
10
Extract the
numbers used
in the reports
Please provide a table of the raw data you used to calculate the
atios. Please also provide the time frame of the data.
10
Part 2 Dupont Analysis Ratio
In this part, please calculate the DuPont analysis ratios for both of the firms for the most recent
fiscal year. Please refer to the slides how to put the DuPont analysis together. (40 points)
ROE Return on Equity=Net Income/Avg. Total Stockholder’s Equity 6
ROA Return on Asset=Net Income/Avg. Total Asset 6
Financial
Leverage
Financial Leverage=Average Asset/Avg. Stockholder’s Equity 6
ROS Return on sales =Net Income/Sales 6
Asset Turnover Asset Turnover=Sales/ Avg. Total Asset 6
Put the ratios
under Dupont
Analysis
Framework
and make
comparison of
the two firms.
ROE = ROS x Asset Turnover x Financial Leverage
(You need to interpret the performance of the two firms based on
the numbers.)
10
Part 3 Horizontal Analysis (40 points)
In this part, please perform horizontal analysis on both of the companies.
Income
statement
Horizontal analysis on Income Statement for both of the
companies on the most two recent fiscal years (e.g. 2018 & 2019)
financial statement.
15
https:
www.sec.gov/cgi-bin/viewer?action=view&cik=104169&accession_number= XXXXXXXXXX&x
l_type=v
https:
www.sec.gov/cgi-bin/viewer?action=view&cik=104169&accession_number= XXXXXXXXXX&x
l_type=v
https:
www.sec.gov/cgi-bin/viewer?action=view&cik=104169&accession_number= XXXXXXXXXX&x
l_type=v
Balance Sheet Horizontal analysis on Balance Sheet for both of the companies
on the most two recent fiscal years financial statement.
15
Interpretation Interpretation of the horizontal analysis. The interpretation
includes but not limited to following questions. How the sales
increased/decreased in the past year? How components of net
income changes in the past year? Which company’s performance
is improving? Were the companies expanding in the past year?
10
Part 4 Accounting Policies
Please select TWO accounts in the list and find the accounting policies in the financial
statement notes of the both firms. Please copy and paste the accounting policies into the
project to see if the two firms have similar policies. (20 Points)
Account List Revenue (Sales), Accounts Payable, Accounts Receivable, Long-
term Liabilities (Bonds or Notes payable), Inventories, Properties,
Plant and Equipment, Intangibles, Contingencies.
Part 5 Strategies
Do the firms disclose their strategies about the profitability, efficiency or leverage? If they do,
please paste it into the project. If there is no information about the strategies, please interpret
the difference of the strategies of the two firms by using the financial ratios. If you believe the
two firms have very similar strategies about profitability, efficiency and leverage, please state
your reasons. (10 points)
Hints to the Project:
1. Where to find the firm financial data?
The last topic in Module 1 provides the information. To be
ief, you can easily find the
information either from SEC Edgar or the official website of the company.
2. There are so much information online, which information I should use for our project?
We should use the Annual Report for the firms. If you get information from SEC Edgar website,
you should use 10-K information. 10-K is annual report filings.
3. How do I know the two firms are in the same industry?
Here is the Standard Industrial Classification Codes (SIC code) list for the public firms. If the
two firms have the same SIC code, they are in the same industry. You only need the first three
digits of the code match to be the same industry. You can find firm’s SIC code by simply google
“Kroger (Firm Name) SIC Code”.
4. What do you mean extracting the numbers used in the reports?
https:
www.sec.gov/info/edga
siccodes.htm
Please find the data you need to use for performing the Part 2 and Part 3 analysis and put it into a
table similar to the below.
Financial Information from Financial Statement
In Millions $
AMERICAN
AIRLINES UNITED AIRLINES
Asset (Dec. 31, 2017)
51,396
42,326
Asset (Dec. 31, 2016)
51,274
40,140
Liabilities (Dec. 31, 2017)
47,470
33,520
Liabilities (Dec. 31, 2016)
47,489
31,481
Stockholder's Equities (Dec. 31, 2017)
3,926
8,806
Stockholder's Equities (Dec. 31, 2016)
3,785
8,659
……
5. A lot of ratios use average. How do I get the average?
Average is last years’ data add cu
ent years’ data divided by two. Here is the example:
XXXXXXXXXXAverage Asset of 2018= (Asset at end of XXXXXXXXXXAsset at end of 2018)/2
6. What do you mean accounting policies? Where do I find it?
Accounting policies are how the firms apply accounting standard and report the financial
statement. We used a lot of examples during the class. You can simply find this information
under “Notes to Consolidated Financial Statements”. You should only copy the critical
information for each of the account. It is not necessary to paste the tables or list in the financial
statement notes to the project.
For example, I found following information for Walmart inventories:
“The Company values inventories at the lower of cost or market as determined primarily
y the retail inventory method of accounting, using the last-in, first-out ("LIFO") method
for Walmart U.S. segment's inventories. The inventory at the Walmart International
segment is valued primarily by the retail inventory method of accounting, using the first-
in, first-out ("FIFO") method. The retail inventory method of accounting results in
inventory being valued at the lower of cost or market, since permanent markdowns are
immediately recorded as a reduction of the retail value of inventory. The inventory at the
Sam's Club segment is valued using the weighted-average cost LIFO
method. At January 31, 2018 and January 31, 2017, the Company's inventories valued at
LIFO approximated those inventories as if they were valued at FIFO.”
7. Where do I find firm strategies?
Firms usually discuss their strategies in the first part of annual report, the general information
about the business. Firms also discuss their strategies in “Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations” in the annual report.
For example, I found the following information in the Walmart annual report: “Our objective of
prioritizing strong, efficient growth means we will focus on increasing comparable sales and
eCommerce sales growth while slowing the rate of growth of new stores and clubs. At times, we
make strategic investments which are focused on the long-term growth of the Company, which
may not benefit comparable sales in the near term.”
You can use Ctrl + F to search “strategy” in the annual report. It is normal that the information is
not about profitability, efficiency or leverage. If you cannot find any information, just write your
interpretation based on the ratios.
8. How long each part should be?
The total project should not be longer than five pages if the font size is 12 with single space. The
part 1 should be less than two pages, part 2 and part 3 together should be less than two pages,
and part 4 and part 5 together should be less than two pages. A three pages project with full
information is totally fine.
9. Which firm or which industry should I choose?
You can present any public firms. Not necessary the firms we mentioned in the class. You can
select the firms you familiar with or the firms you interested in.

Financial Analysis and Firm Strategies Project
Please perform financial analysis on two public companies in the same industry and interpret the
firm policies and strategies. You only need to perform the analysis on one year of data for ratio
analysis and two years of data for horizontal analysis. Here is the requirement information in the
final project. The most recent financial statement you look at must be issued after June 30, 2019.
Content Description of Content Points
Part 1 Basic Information
In this part, please provide information about the firms and the source of the data. (30 points)
Company
Name
Identify the two firm names. 5
Basic
Information
Including the firm industry, the firm location and other general
information of the firms.
5
Source of the
Financial Data
Provide the link of the source data. For example, Walmart
financial data is from: https:
www.sec.gov/cgi-
in/viewer?action=view&cik=104169&accession_number=00001
XXXXXXXXXX&x
l_type=v#
10
Extract the
numbers used
in the reports
Please provide a table of the raw data you used to calculate the
atios. Please also provide the time frame of the data.
10
Part 2 Dupont Analysis Ratio
In this part, please calculate the DuPont analysis ratios for both of the firms for the most recent
fiscal year. Please refer to the slides how to put the DuPont analysis together. (40 points)
ROE Return on Equity=Net Income/Avg. Total Stockholder’s Equity 6
ROA Return on Asset=Net Income/Avg. Total Asset 6
Financial
Leverage
Financial Leverage=Average Asset/Avg. Stockholder’s Equity 6
ROS Return on sales =Net Income/Sales 6
Asset Turnover Asset Turnover=Sales/ Avg. Total Asset 6
Put the ratios
under Dupont
Analysis
Framework
and make
comparison of
the two firms.
ROE = ROS x Asset Turnover x Financial Leverage
(You need to interpret the performance of the two firms