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pleas, I need the complete solutions for this data case. Data Case for Chapter 2:
pleas, I need the complete solutions for this data case..
Data Case for Chapter 2: Introduction to Financial Statement Analysis
This is your second interview with a prestigious brokerage firm for a job as an equity analyst. You survived the morning interviews with the department manager and the Vice President of Equity. Everything has gone so well that they want to test your ability as an analyst. You are seated in a room with a computer and a list with the names of two companies—Ford (F) and Microsoft (MSFT). You have 90 minutes to complete the following tasks:
1) Download the annual income statements, balance sheets, and cash flow statements for the last four fiscal years from MarketWatch (www.marketwatch.com). Enter each company's stock symbol and then go to "financials." Export the statements to Excel by right-clicking while the cursor is inside each statement.
2) Find historical stock prices for each firm from Yahoo! Finance (http://finance.yahoo.com). Enter your stock symbol, click "Historical Prices" in the left column, and enter the proper date range to cover the last day of the month corresponding to the date of each financial statement. Use the closing stock prices (not the adjusted close). To calculate the firm's market capitalization at each date, we multiply the number of shares outstanding (see "Basic Weighted Shares Outstanding" on the income statement) by the firm's historic stock price.
3) For each of the four years of statements, compute the following ratios for each firm:
- Valuation Ratios
- Price-Earnings Ratio (for EPS use Diluted EPS Total)
- Market-to-Book Ratio
- Enterprise Value-to-EBITDA
- (For debt, include long-term and short-term debt; for cash, include marketable securities.)Profitability Ratios
- Operating Margin (Use Operating Income after Depreciation)
- Net Profit Margin
- Return on Equity
- Financial Strength Ratios
- Current Ratio
- Book Debt-Equity Ratio
- Market Debt-Equity Ratio
- Interest Coverage Ratio (EBIT ÷ Interest Expense)
4) Obtain industry averages for each firm from Reuters.com (http://www.reuters.com/finance/stocks). Enter the stock symbol on top of the page in the "Symbol lookup" and then click the "Ratios" button.
- Compare each firm's ratios to the available industry ratios for the most recent year. (Ignore the "Company" column as your calculations will be different.)
- Analyze the performance of each firm versus the industry and comment on any trends in each individual firm's performance. Identify any strengths or weaknesses you find in each firm.
5) Examine the Market-to-Book ratios you calculated for each firm. Which, if any, of the two firms can be considered "growth firms" and which, if any, can be considered "value firms"?
6) Compare the valuation ratios across the two firms. How do you interpret the difference between them?
7) Consider the enterprise value of each firm for each of the four years. How have the values of each firm changed over the time period?