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PROCESS OF PERFORMING FINANCIAL ANALYSIS OF A PUBLIC COMPANY
GENERAL COMPONENT---No more than one paragraph describing the history of the
company.
Company: Nike For EVA, Weighted Ave Cost to Capital = 8%
ACCOUNTING COMPONENT
1. Obtain the most recent ten years of annual total sales (total revenue) data from the
firm’s financial history. In addition, use just the last three years for the firm’s
financial statement data:
a. Income Statement
b. Balance Sheet
c. Statement of Cash Flow
2. Derive common size statements for the income statement and the balance sheet NOT
the cash flow
a. Looking at trends in the data
b. Looking at variations in the same data as well as variations in the trends
ECONOMIC COMPONENT
3. How does the above relate to the industry that the company is in, i.e. need to perform
competitive economic analysis with regard to the company:
a. Macroeconomic analysis----is the company’s sales cyclical or counter cyclical for
example?
b. Industry analysis---market share, is the company’s sales growing, declining, or
staying the same? How is the company performing relative to its competition?
SWOT
4. STRENGTHS and WEAKNESSES should focus exclusively on the internal
characteristics of the firm’s finances.
5. The OPPORTUNITIES and THREATS should focus exclusively on the external
characteristics of the firm’s finances.
FINANCE COMPONENT
The above should provide you the assumptions for deriving proformas for each of the three
financial statements (balance sheet, income statement, and statement of cash flow), and will
allow you to do your critical financial analysis of the firm. The pro forma, must be forecasted
out three years. Make sure you explicitly show your assumptions with your constructive critical
analysis. Finally, in your analysis you need to justify your conclusions, for example is the
company in a strong financial position, why or why not?
****FORMAT FOR FINANCIAL ANALYSIS PAPER WRITEUP****
I. Executive Summary
II. Introduction
• One paragraph history of the firm
• Problem Statement-----Is the firm financially viable and is it going to
grow?
III. Review of Literature
• newspapers
• Periodicals
• Etc.
IV. Structural Framework---Estimation of sales (revenue) forecast using your data
• Regression Analysis
• Alternative Estimation Techniques
• Derivation of Proformas---Balance Sheet, Income Statement, Cash Flow
V. Analysis of your findings
• Using your historical data from your financial statements and commonsize financial statements
• Using your forecast data from your pro-forma financial statements
VI. Summary and conclusions
VII. Appendix
• Tables
• Graphs
• Other
1. Use the APA format---Full Documentation, which includes explicitly identifying
others works.
2. NO CUTTING AND PASTING
3. Title page
4. Executive Summary
5. Maximum of five (5) written pages, does not include title page, executive summary
or appendences---tables etc. go into appendix
6. Bibliography
7. Page numbers
8. No Plagiarism
***Rubric***
An A paper is excellent in nearly all respects:
Ideas--An A paper is an interesting and sophisticated response to the topic. The central
idea is clearly stated, worthy of development, and suitably specific. The paper recognizes
the complexity of the topic or question, acknowledging contradictions, qualifications or
limits while sustaining logical development.
Support--It uses evidence appropriately and effectively, providing sufficient and
convincing support for its main ideas, with specific reference to the material in the
textbook or outside sources where appropriate. If it uses outside sources, it does so
competently, critically and shows clear comprehension of the material. It appropriately
defines terms and limits its scope, and cites useful illustrative examples. All sources,
including the textbook, are acknowledged, properly referenced and all material taken
from other sources is properly cited.
Organization and Coherence—An A paper has a logical structure appropriate to the
subject, purpose, audience, and discipline. Usually, transitional sentences lead the reader
from one idea to the next, and/or identify the logical relations between ideas. Paragraphs
make clear points that support the main idea and sentences within paragraphs demonstrate
coherence and continuity.
Style--An A paper shows a clear command of English prose, with words chosen for their
precise meanings and proper tense, and an appropriate level of specificity and
sophistication. Sentence style fits the audience and purpose; sentences are varied, yet
clearly structured and carefully focused--neither long and rambling nor short and choppy.
Mechanics--An A paper contains few, if any, errors in spelling, punctuation, or grammar,
and observes all applicable conventions of format and citation.