The ratios for the case study are provided in the attached excel file.
Deliverables for Case Study: Historical Financial Analysis Assignment
Executive Summary – this should be no more than one page and provide the reader with an overview of what will be contained in the following pages. The problem and strategic solution being recommended should be in this summary.
Historical Financial Statements (Income Statement, Balance Sheet and Statement of Cash Flows) from the 3 most current years for the firm. These should be downloaded from the SEC website. The financial statements must include horizontal (shown between the years) and vertical analysis (shown to the right of the last year of historical data).
Ratio analysis for the ratios shown on Table 1 in the Guide to Case Analysis (CA) of the textbook:
Profitability ratios
Liquidity ratios
Leverage ratios
Activity ratios
Price-to-earnings ratio
The changes between years are included in the calculations.
Competitor ratios to compare with the ratios that were calculated in item 2. These should be included on the same tab as the ratio analysis for the firm.
Financial analysis should include comparisons to the firm’s main competitor as well as to the industry. How does the financial position of the firm influence the strategic direction of the company? This section should not be used to define what each ratio is rather it should clearly provide analysis based on the calculations as to the strategic choices and implications of the firm’s financial position. A compare and contrast with the main competitor should be included in this section of narrative.
Alternative strategies (giving advantages and disadvantages for each). There should be at least two alternative strategies identified and discussed.
Projected Financial Statements (Income Statement, Balance Sheet and Statement of Cash Flows) for 3 years into the future. This must be broken down by year into two (2) columns: 1 column without your strategy and 1 column with your strategy. The without column should serve as the basis for your with strategy column and only those financial statement accounts that will be changed, based on your strategy, should be impacted.
Include Projected ratios for the without and with strategy by year. Discuss how these ratios compare and contrast with the historical findings.
Cost Analysis completed on an Excel tab that outlines the cost that will be incurred to implement the strategy. This information should correspond with the With Strategy on the Projected Financial Statements, linking of cells to the financial statements is encouraged.
Net Present Value analysis of proposed strategy’s new cash flow – you may also use Excel to solve for this. From the income statement the change in operating income between your with and without strategy should serve as your cash inflow for each year.
NOTE: To construct the first cash flow (cf1) the new revenue from your strategy(s) must be discounted back to the present value by calculating EBIT (Operating Income on the Income Statement) and that figure will be your cfn for each year. cf0 (initial cost of your strategy), cf1 (discounted cash flow first year), r (opportunity cost of capital, the rate of the next best alternative use of cash/debt/equity resources).
NPV=-〖cf〗_0+ 〖cf〗_1/(1+r)^1 +〖cf〗_2/(1+r)^2 +〖cf〗_3/(1+r)^3 …〖cf〗_n/(1+r)^n
Implementation strategy – how and when will the strategy be implemented, this should outline the who, how, what, and when of the implementation process.
Specific recommended strategy and long term objectives
Explain why you chose the strategy, discuss the advantages/benefits to organizational success and sustainability. Incude a discussion of the challenges or disadvantages that may arise as a result of the strategic choice.
