The objectives/purpose of the research paper project are to enable you to do a comprehensive financial analysis of a publicly traded corporation; and provide you with substantial information for you to make recommendations regarding investing in this corporation.

Your financial analysis report will be driven by a rigorous ratio analysis, and aggressively supplemented with your written analysis, interpretation, and evaluation of the data.

Your research should be strategically driven by two probing questions:

-Would you invest your financial capital in the selected bank as a shareholder?

-Would you invest your human and intellectual capital in the bank as an employee?

Steps in preparation of financial analysis report:

1.) Select a publicly held banking company

2.) Select a benchmark firm to compare your company against. The benchmark firm is typically the largest competitor.

3.) Obtain the firm’s balance sheet, income statement, and statement of cash flows for

the past 5 years. Download or read the firm’s annual report.

   Go to:  

Research EDGAR’s database for additional SEC report filings: 8-k, 10-Q.

4.) The following table is the type of Excel or Word table that should be used to gather and report your ratio and financial performance data. A table must be included for your selected company, benchmark company and industry. Note the 5 financial diagnostic categories that should be used in your analysis. You must select a minimum of 2 ratios per category, for 10-15 ratios total per company and the industry.

5.) Use 2-3 ratios per diagnostic category. Place your ratio calculations in the table for your selected companies—primary company, benchmark competitor, and the industry. Using 5 diagnostic categories, and 2-3 ratios to assess each category, results in 10-15 ratio measures per company that will be compared side by side.

6.)   To validate your research, 5 years of data should be analyzed. Individual ratios are to be computed for each of the 5 years, for both companies.

7.) The financial analysis report must be written properly. They must include a title page, a table of contents, and a reference page. Information sources from the web, etc. must be cited properly, using APA style.

This means that every table that you cut and pasted or typed from the web must have a source at the bottom of the table AND that citing must also be included in a reference page at the end of the report.

The parts of the research paper are discussed below. The completed report (parts a through h) is due day 7 of week 6. Your project should include:

a. An overview of the corporation.

i. Provide general information regarding the type of business, products and/or services, location of headquarters, name of CEO, number of employees, and countries of operation, etc.

b. The latest financial statements

i. Get the income statement, balance sheet, cash flow statement, and the statement of owners’ equity for the past fiscal year. Do not forget to cite the source under each statement.

ii. If you cannot cut and paste them, you may have to type in the information in a table in your report.

c. A summary of each financial statement

i. Take each statement and state the key parts in words. Tell a story from each of the financial statements. For example, for the income statement, the story starts like, “Total Revenues in 2010 were $10 billion, while Cost of Goods Sold were $8 billion, leaving a gross profit margin of $2 billion, or 20 percent of total revenues….After taking out interest and taxes from EBIT, the net income was $0.5 billion, or 5 percent of total revenues.”

d. Ratio calculation (include 5 major types of ratios, 2-3 ratios per category for a total of 10-15 ratios per company and the industry. Refer to chapter 3, Analysis of Financial Statements)

i. Organization of this section is based on the FIVE types of ratios listed in the text book. Calculate the ratios from the financial statements in part c above using Excel or your calculator and present them in a table.

ii. Find industry financial ratios online (ex. Yahoo.com, MSMMoney.com) and compare your corporation’s ratios to these industry ratios.

iii. Present your results following the five types of ratios, 2-3 ratios per category, 10-15 ratios total per company and the industry discussed in part d. These results would be an analysis of the ratios.

iv. A table with both corporations and industry ratios for five years is required;

e. Discussion of key statistics provided by sources like Yahoo finance.

i. There are many different other statistics available for your corporation. These include market value, beta, and diluted EPS, etc. Discuss some of the key statistics that you think can assist you to determine if this corporation is a good buy or sell.

f. For you to decide if a corporation’s stock is a good buy or sell, you must forecast several key variables, including the stock price.

i. Use historical prices (5 years of monthly data recommended) and forecast the stock price for the next year. Use regression analysis, and/or moving average, etc. to create your forecast.

ii. Create a graph from the historical data and show your forecast on the same graph. You can add a trend line to the graph to help you with a forecast. Include the graph in your report.

iii. You need to say specifically what the forecasted value of the stock price is.

iv. You must address the question, “Is this forecast reasonable?” Must you amend your analysis to get a more reasonable forecast?

g. Other information pertinent to the corporation that could affect its future performance and stock price.

i. This could include dividend policy, capital structure, bond ratings, expert opinions on TV, new projects, litigation, regulation, etc. Search for information on the web regarding this corporation. Look at company complaint blogs, etc.

h. Recommendation regarding the future of this corporation.

i. Is the stock a good buy, average buy, or a poor buy (implying a good sell)?

ii. Include a justification of your recommendation based on your analysis and research.