SITUATION
You are a financial analyst with the mythical High Technology Corporation (“HTC”). HTC is an established manufacturer of a line of electronic components, which services an international market. HTC is currently a new fully-integrated wireless communication service for world-wide use. A competitive technical and economic product evaluation has determined that THE COMPANY THAT IS TO BE ANALYZED FOR THIS PROJECT (APPLE) (a real publicly-traded company) is the best potential candidate for a long-term commitment. THE COMPANY (APPLE) is offering a competitively favorable deal. However, based on some serious general concerns about the fallout of companies in the industry in general, the CEO has asked your CFO to conduct a financial analysis of THE COMPANY (APPLE) to determine if it is prudent to commit to this company’s communication system. The cost of cutting over to the new communications system is significant and any interruption in support during the next few years would adversely affect HTC’s performance and profit. Specifically, the question is: will THE COMPANY be financially viable over the next two to three years?
YOUR SPECIFIC ASSIGNMENT
Your specific assignment is to research, analyze, and prepare a report for the CFO on the actual financial performance of THE COMPANY THAT IS TO BE ANALYZED FOR THIS PROJECT (APPLE). In addition to reviewing the traditional financial performance indicators, you are also to review THE COMPANY’S past and current stock performance. Your report includes three parts:
(1) An evaluation of THE COMPANY’S financial performance for the last year. DuPont analysis and analysis of significant financial performance results are required for the last three years. (See detailed description below)
(2) An evaluation of THE COMPANY’S stock performance for the last one year.
(3) Finally, a specific recommendation, with supporting rationale, as to whether or not THE COMPANY’S recent trend in financial and stock performance is of sufficient financial strength to warrant entering into a long-term commitment.
To assist you in your task, the CFO has provided the following general guidance. Since it is recognized that the industry is undergoing a major contraction, it is very important to comparatively evaluate THE COMPANY’S financial and stock performance trends against its Industry.
You may wish to include all necessary and relevant financial performance and stock information, trends, and projections in supporting your recommendation. These factors may include, financial ratio trends and industry comparatives, capital spending, stock growth, Beta values, credit rating service valuations, bond rating valuations, and management and investment reports – when these documents are available.
REPORT REQUIREMENTS
YOUR SPECIFIC ASSIGNMENT
Research and analyze the following information for THE COMPANY (APPLE).
–Annual Balance Sheets for THE COMPANY for the last three years.
–The Income Statements for THE COMPANY the last three years.
— Annual reports, 10K or 10Q
–Industry norms
—Analysts’ reports on performance
— Management reports or press releases
Using this information the students have to develop evaluation of the financial performance for THE COMPANY (APPLE).
-1-Background and Industry (one short paragraph).
-2-Select of most significant financial performance results for the company: Compare Revenue, net income, working capital, total assets for the last three years and other results of your choice of the company against the industry or main competitor. Present the table with this information in your report. Write about 1 page of the analysis of these financial performance results.
-3-Find financial ratios for the company and its major competitor in the Internet. Write about 1-2 pages of analysis of the ratio results you received, Compare the ratio results against the industry or main competitor.
-4- Evaluate Return on Equity for the company for the last three years using the DuPont analysis. Compare the company’s results to a major competitor.
Taking the information from the Income statements and the Balance sheets, calculate the company’s return on equity using the DuPont technique for the company for three years. Show your calculation!
Write about 1 page of analysis of the results that you received. Compare the results to main competitor. If the management of the company would like to improve their return on equity, what should the management of these companies do?
-5- Evaluate other areas of financial analysis: capital spending, stock growth, Beta values, credit rating service valuations (if possible), bond rating valuations (if possible), etc. Make an overall conclusion about financial performance of the company during the last years. Compare the results that you received against the industry or main competitor. Summarize the results that you received in 1 page. What are the firm’s financial strengths and weaknesses?
-6- Collect and evaluate the data about stock performance of the assigned company’s for the last one year. Compare the results that you received against the industry or main competitor.
Write about 1-2 pages of analysis of the ratio results you received.
-7- Develop a specific recommendation, with supporting rationale, as to whether or not the assigned company’s recent trend in financial and stock performance is of sufficient financial strength to warrant entering into a long-term commitment (about 1 page)
PRESENTATION OF PAPER AND WRITING
-Organization, Format and Presentation of Paper including the Title page, Introduction, Body, and Summary
Use of Tables, Figures and Other Graphics to Summarize and Support Analysis Presented in the Paper
Logical and Smooth Flowing Transitions and Relationships Among Sections of the Written Report
Research Sources and Significance of Research Information and Data, Use of APA Citation Methodology
Your final report is to be an executive-level financial report, directed to the CFO. This report should be about 8 double-spaced typewritten pages (without tables and graphs). Include suitable comparative, quantitative and qualitative analyses and conclude with a specific and supported recommendation on the projected financial viability of THE COMPANY THAT IS TO BE ANALYZED FOR THIS PROJECT (APPLE) for the next several years.
Essential research data, financial calculations and other documentation as necessary to support your recommendation should be referred to in summary form in your report and attached in detail as enclosures. All major sources should be referenced. There is no set limit to the size of the enclosures, but it is recommended that only essential enclosures be attached. You should use references and bibliography to identify any remaining supporting documents you wish to include.
