20 Jul WHICH COMPANY IS EXPERIENCING GREATER NET INCOME AND EARNINGS PER SHARE?
Financial Statement Analysis Case
Directions:
1) Complete the ratio analysis worksheet for the two companies((Dunken Brand vs Panera bread)) that have been assigned to you. The annual reports are found on Learn in the Course Project folder (10-K’s).
2) Complete the write-up portion of the assignment. The write-up is described below.
Write-Up
The write-up will consist of two parts.
Part I. Consists of a 1-2 page (single-spaced) analysis using the ratios calculated in the ratio analysis worksheet to compare the two companies. This analysis should use the ratios and the most recent year’s (2014 calendar year) financial statements to answer the following questions:
1. Which company appears to be more profitable? Which company is experiencing greater net income and earnings per share? How do their profit margins compare and why would you guess one company has a higher profit margin than the other?
2. Which company appears to be more liquid? Does either company have a liquidity problem? Which company holds more cash as a proportion of total assets? Which company holds more marketable securities compared to total assets?
3. Which company is more solvent? Which company uses more long-term debt to finance operations? Looking at the statement of stockholders’ equity, did either company issue stock in the previous two years? Did either company pay dividends?
4. Look at the statement of cash flows. Which method of the statement of cash flows is employed by each company? What is the company using cash for? How are they receiving cash? How do these companies compare in the activities they acquire and use cash for?
Part II. Consists of a 1-2 page (single-spaced) recommendation on which company an investor should invest in. Use the information in the previous analysis as part of your recommendation. You should also include supplementary analysis that can include items such as:
1. Change in Price/Earnings ratio
2. Change in Earnings per Share/Profitability
3. Liquidity/Solvency Issues
4. Volatility of the Stock Price/Stock Price History
5. Economic Factors
…………………………………………………………………………………
Project Report Format and Grading
Sample Template for Part II
I. Executive Summary
1. Your investment recommendation
2. Synopsis of reasons for this recommendation
II. Interpretation of findings in Part I
1. Summary of financial highlights in Part I
2. How did these highlights influence your investment recommendation?
3. Based on your analysis in Part I, what could be the risks of your investment decision?
III. Further Analysis
1. Supplement the accounting analysis with observations from comparisons of the companies for any of the following:
(i) Business models/industries
(ii) Business risk factors
(iii) Trend of earnings or average historical earnings
(iv) Dividend policies
(v) P/E ratio, saturation points
(vi) Profiles of the CEOs
(vii) Growth, expansion in different markets
2. When possible, support your observations or opinions with data from the financial statements
IV. Brief Conclusion
Format of Report
1. Use Times New Roman Font, 11pt type, and either “single” or the default “multiple” spacing.
2. Per the original instructions, Part I is to be 1-2 pages and Part II is to be 1-2 pages (please leave the margins at their default settings of 1” on all sides).
3. Make sure your name and date are in a title page or in the header of the first page.
4. Use headings Part I and Part II for the two different sections of the report (you can give these parts whatever title you want such as “Part I. Comparison of Financial Ratios”).
5. You may use subheadings for Profitability, Liquidity, Solvency, and Statement of Cash Flows in Part I and you may also use subheadings in Part II but do not go overboard.
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