PAPER 1-STRATEGIC MANAGEMENT-FINANCIAL ANALYSIS-SUMMER 2019
Select one pair of companies from the following list:
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Wal-Mart (WMT) and Dollar General DG)
Papa John’s (PZZA) and Domino’s (DPZ)
Starbucks (SBUX) and Dunkin Brands (DNKN)
Charles Schwab ((SCHW) and TD Ameritrade (AMTD)
GM (GM) and Toyota (TM)
Review the most recent annual reports for each of the two companies to gain an
understanding of each company’s products and services, the markets they serve, their
strategies, strategic goals, key strategic actions, and financial performance.
Complete a financial analysis to determine which of the two companies has better
overall financial performance by looking at the most recent full-year financial reports
(USE ONLY ANNUAL REPORT DATA), and compare a the financial performance metrics
of the two companies (see sample below).
A well- performing company is one whose overall financial performance is better than
the industry average over a long period of time, and is generally measured by ROIC
(return on invested capital).
A company that achieves superior financial performance generally has consistent
annual revenue and profit growth; higher than industry average profit margins; high
inventory turns; positive cash flows; and a strong balance sheet, when compared to
other firms in their industry.
Superior financial performance is the result a good business strategy that is executed
well and often includes investments in appropriate technology; visionary leadership;
talented and dedicated employees; a customer focus; having and maintaining a
competitive advantage, and a strong operational focus on strategic goals.
Based on your analysis, explain which of the two companies has the better overall
financial performance and why. What does the company do well to achieve the
superior financial performance?
What is the strategy of the better performing company (cost leadership, differentiation,
focus, or a combination of several)? How does their strategy compare with their
competitor?
EXAMPLE OF FINANCIAL ANALYSIS:
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Financial Comparisons
Financial Metric
Current Year Total Revenues
Current Year Net Profit (income)
Net Profit Margin
Return on Assets
Return on Equity
Debt to Equity
Return on Invested Capital
Earnings Growth (3yr.)
Revenue Growth (3 yr.)
Inventory Turns
Sales/Square Foot
Sales/Employee
Net Income/Employee
Free Cash Flow
Company 1
$12.3bn
$0.54bn
4.39%
8.57%
23.0%
0.71
18.6%
-1.7%
4.2%
8.3
$437
$218,400
$6,876
$0.20 bn
Company 2
$6.7bn
$0.23bn
3.45%
6.22%
36.6%
2.11
21.7%
+15.4%
2.7%
15.0
161
$277,328
$7,243
$0.16 bn
ANALYSIS:
Company 2 has better overall financial performance, as its Return on Invested Capital is
21.7% compared to 18.6% for Company 1.
Company 2 is faster growing in earnings (15.4% per year), and does a much better job
with inventory turns (15.0 vs. 8.3); but its revenue growth is slower that Company 1. This
suggests that Company 2 does a better job in managing their costs and investment to
which results in better financial performance with slower growth than their competitor.
Best on an analysis of their annual report and strategic actions, there strategy is one of
being the low cost provider in the industry which well positions them for future growth
and further increases in profitability.
Format and Content of Paper:
Each paper should have: a cover page, an abstract, an introduction, an analysis
section, conclusions based on the analysis, recommended actions, and a brief
summary of the paper’s key points, and a reference page. Include table of financial
comparisons in body of paper.
Paper to follow APA format. All the Guidelines for Written Assignments apply to this
paper including a minimum of four credible outside sources.
All data should come from each company’s most recent annual report and use only full
year figures. Annual reports are found on each company’s website or on www.sec.gov.
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Below are the sources and calculations of the metrics:
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Current year Total Revenues comes from the Income Statement
Current year Net Profit (or Income) comes from the Income Statement
Net Profit Margin is calculated by dividing the Net Income by the Total Revenues
Return on Assets is calculated by dividing the Net Income (from Income
Statement) by the by the Total Assets (from the Balance Sheet)
Return on Equity is calculated by dividing the Net Income (from the Income
Statement) by the Total Stockholder’s Equity (from the Balance Sheet)
Debt to Equity is calculated by taking the sum of the short-term debt and the
long-term debt (from the Balance Sheet) and divide by the Total Shareholders
Equity (from Balance Sheet).
Return on Invested Capital (ROIC) is calculated by dividing the Net Income (from
the Income Statement) by the total of the Long-term Debt (from the Balance
Sheet) plus the Shareholders Equity (from the Balance Sheet)
Earnings Growth (3 year) is calculated by subtracting the current year’s Net
Income (from Income Statement) from the Net Income of three years ago (from
the Income Statement) and dividing this difference by the Net Income from 3
years ago. If the current year’s Net Income is lower than 3 years ago, then the
growth is negative.
Revenue Growth (3 year) is calculated by subtracting the current year’s Total
Revenues (from Income Statement) from the Total Revenues from 3 years ago
and dividing the difference by the Total Revenues from 3 years ago. If the Total
Revenues for the current year is less than 3 years ago, then the growth is
negative.
Inventory Turns is calculated by dividing the Total Cost of Goods (from the
Income Statement) by the total inventory (from the Balance Sheet).
Cash Flow comes from the Statement of Cash Flows and is the Cash and Cash
Equivalents at End of Year.
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4|Page
Sample APA Formatted Paper
APA Research Paper (Mirano)
Obesity in Children
Can Medication Cure Obesity in Children?
A Review of the Literature
Luisa Mirano
Psychology 107, Section B
Professor Kang
October 31, 2004
XXXX
Marginal annotations indicate APA-style formatting and effective writing.
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
i
Short title and
page number for
student papers.
Lowercase roman
numerals are used
on title page and
abstract page,
arabic numerals
on all text pages.
Full title, writer’s
name, and section
number of course,
instructor’s name,
and date (all centered).
Sample APA Formatted Paper
Abstract appears on
a separate page.
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
Sample APA Formatted Paper
Full title, centered.
The writer sets
up her organization by posing four
questions.
The writer states
her thesis.
The writer uses a
footnote to define
an essential term
that would be cumbersome to define
within the text.
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
Sample APA Formatted Paper
Headings, centered,
help readers follow
the organization.
In a signal phrase,
the word “and”
links the names of
two authors; the
date is given in
parentheses.
Because the author
(Carmona) is not
named in the signal
phrase, his name
and the date
appear in parentheses, along with the
paragraph number
of the electronic
source.
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
Sample APA Formatted Paper
Ellipsis mark
indicates omitted
words.
An ampersand
links the names of
two authors in
parentheses.
The writer draws
attention to an
important article.
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
Sample APA Formatted Paper
The writer uses a
table to summarize the findings
presented in two
sources.
A note gives the
source of the data.
A content note
explains data
common to all
subjects.
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
Sample APA Formatted Paper
When this article
was first cited, all
four authors were
named. In subsequent citations of
a work with three
to five authors,
“et al.” is used
after the first
author’s name.
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
Sample APA Formatted Paper
For a source with
six or more
authors, the first
author’s surname
followed by “et al.”
is used for the first
and subsequent
references.
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
Sample APA Formatted Paper
The writer
develops the
paper’s thesis.
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
Sample APA Formatted Paper
Brackets indicate
a word not in the
original source.
A quotation longer
than 40 words
is set off from
the text without
quotation marks.
The writer interprets the evidence;
she doesn’t just
report it.
The tone of the
conclusion is objective.
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
Sample APA Formatted Paper
Obesity in Children
9
While none of the medications currently available is a miracle
drug for curing the nation’s 9 million obese children, research
has illuminated some of the underlying factors that affect obesity and has shown the need for a comprehensive approach to
the problem that includes behavioral, medical, social, and
political change.
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
Sample APA Formatted Paper
List of references
begins on a new
page. Heading is
centered.
List is alphabetized by authors’
last names. All
authors’ names
are inverted.
The first line of
an entry is at the
left margin;
subsequent lines
indent 1⁄ 2'' (or
five spaces).
Double-spacing is
used throughout.
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
Sample APA Formatted Paper
Source: Diana Hacker (Boston: Bedford/St. Martin’s, 2006).
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