Economically evaluate a company in an industry and perform a comparative analysis of profitability and financial health with one of it’s competitors. Then provide recommendation for investment.
Instructions
In order to complete your case analysis successfully, you should consider
• identifying the role you are playing and the tasks you need to perform,
• analyzing the issues (qualitatively and quantitatively),
• providing a solution to the problem, and
• offering recommendations for each issue identified in the case.
An average grade will come from you performing appropriate accounting analyses and addressing any questions with basic coverage and accuracy, showing all your work. Additional points come from including greater detail, astute and informed commentary where appropriate, and connections to readings and other content.
Respond in a single Word doc (or comparable text editor).
Project Scenario
You have been an Analyst for the professional service firm, FINACC LLP. Your firm specializes in providing a wide variety of internal business solutions for different clients. On your first day on the job, you have helped the Manager in the Consulting area in making investment decisions for one of your large clients, Big Spenders Inc. Big Spenders Inc. was very impressed with your report and has asked your Manager if you could work on another project.
Additional Information
Big Spenders Inc. plans to expand its portfolio of investments and requires your firm to suggest and evaluate several Canadian equity investment opportunities. Your responsibility is to pick an industry that you are an expert in and choose a listed company that you think will be a great potential investment opportunity (the target company). You will then have to perform a comparative analysis of the profitability and financial health of this company compared to one of its competitors (the competitor). Finally, you will be asked to give recommendations on why you think your target company will be a great investment for Big Spenders Inc.
As you are new to the job, your Manager has provided you with some initial instructions to carry out this project. He recommends that you break the project into parts.
Part 1- Identify the Companies
To start with, you can visit the Toronto Stock Exchange website for information on listed companies in Canada. You can then perform a stock screening to obtain information about the stocks listed as well as the companies’ financial information. The stock screener can be found at https://web.tmxmoney.com/screener.php?locale=EN.
After you have picked a company of your choice and identified one of its competitors (due Unit 2), your Manager has asked that you provided a brief background on the operations of the two companies as well as on the current stock prices of the two companies.
Part 2- Read and Understand the Financial Statements
Similar to your past project, an important part of the analysis of the potential equity investment is an assessment of each company’s current and future profitability as well as their financial soundness. You will have to extract details from their income statements in the last five years for both the target and the competitor companies. You can obtain this information directly after you have performed the stock screening on the TSX website, or you can go to the SEDAR filing system to search for Canadian companies’ financial statements (https://www.sedar.com).
Final Project- Perform Financial Statement Analysis
Based on the information obtained from the two companies’ income statements as well as the background information, you are to compare the performance of the two companies using financial statement analysis. Begin with performing the horizonal analysis, the vertical analysis and the ratio analysis. Discuss any other issues that you believe are relevant to the investment decision and make a recommendation to Big Spenders Inc. for whether your target would be a good investment.
Big Spenders Inc. would likely be a long-term client of FINACC LLP if you could once again gain their trust from this project. The Manager would like you to prepare the final report and trust that your analysis will be thorough and complete as always. (Due Unit 10) (worth 15%)
Evaluation
Competencies Demonstrated % of Total Grade
1. Identification and Analysis of Issues (80%)
a. Company backgrounds, financial statement information, stock prices 30%
b. Horizontal analyais 15%
c. Vertical analysis 15%
d. Ratio Analysis 20%
2. Recommendation (20%)
a. Provides appropriate recommendation given the facts and analysis completed 20%
Total 100%
