COMPANY ANALYSIS

FIN 3403, 3404 PROF DIGGLE

WHAT IS THE POINT OF THIS EXERCISE?

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TEAMWORK
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PEER GROUP ANALYSIS WILL BE MADE

USING REAL WORLD FINANCIAL STATEMENTS

FINANCIAL FORECASTING BASICS INTERPRETING REAL WORLD RATIOS BENCHMARKING

GETTING STARTED
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SEE YOUR LECTURE NOTES pp. 5-7 FOR DETAILS AND A CHECKLIST REFER TO EXCEL DISK FOR MORE DETAIL ON POWERPOINT PRESENTATION ASSIGN TASKS TO EACH TEAM MEMBER USING DATA YOU HAVE GATHERED, ENTER AS MUCH AS POSSIBLE ON DISK SEE INSTRUCTOR

ORGANIZE YOUR TEAM

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Set a time for team to meet that is convenient for all. I recommend your team meet weekly. Each member should report on progress
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s WRITE OR CALL COMPANY. ASK FOR: 5 years of annual reports and/or 10K Latest proxy 10Qs since last 10K Recent press releases

USING INTERNET SOURCES

Find out the TICKER of your company s Look on course home page s Click on Internet home pages for financial data, price information and current news on your company. s Download relevant material so you have a hard copy to show instructor
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SEE INSTRUCTOR
I will assist you in interpreting output s I need the following:
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x Copy of your disk x Hard copy printout x Copy of annual or 10K x

Data on your company, the industry environment, and selected competitors. I will help you pick benchmarking companies.

THE EXCEL SPREADSHEET

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COPY THE DISK I GIVE EACH TEAM.

MAKE MULTIPLE COPIES AND RETURN ORIGINAL TO INSTRUCTOR.

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Enter data in the YELLOW CELLS in your Excel spreadsheet.

Use the last 10K 5 year summary page for historical data that is Pro-forma. SHOW ME OUTPUT DO NOT ENTER DATA IN ANY CELL EXCEPT YELLOW CELLS!!

CHECKLIST ON EXCEL DISK

FIN 3403 s Complete ratio analysis s Industry overview and brief history s Check recent news and chart of stock s Prepare 15 MIN Powerpoint presentation/handouts FIN 3404 s More advanced ratio analysis s Complete EPS forecast(Fin 3403 students can do this for extra credit) s Stock Valuation s Benchmarking s 20 MIN PPT Presentation/ handouts

ENTERING DATA IN EXCEL SPREADSHEET

Use most recent financial reports. Start with last year and work back, s Get price data, P/E, and LTM E.P.S. from recent Wall Street Journal s See instructor with questions. Give yourself plenty of time to assemble data on company, the industry and the competiton.
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CHECK YOUR DATA

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SPREADSHEET HAS DIAGNOSTICS TO GUIDE YOU. DO RATIOS MAKE SENSE? ARE REVENUE AND EXPENSE ITEMS GROWING AT CONSISTENT RATES?

IMPORTANT CONCEPTS
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ALWAYS EXCLUDE EXTRAORDINARY ITEMS. BE SURE DATA IS CONSISTENT (PROFORMA) ADJUST FOR ANY RECENT SPLITS OR STOCK DIVIDENDS

READ THE CEO LETTER. WHAT IS HIS STRATEGY? DID HE DO WHAT HE PROMISED IN OLDER ANNUAL REPORT LETTERS? IS THE AUDIT UNQUALIFIED?

TIPS IN USING 10K

10K=ANNUAL, 10Q = QUARTERLY s

IF LT DEBT INTEREST IS NOT BROKEN OUT IN FOOTNOTES, USE TOTAL INTEREST R&D OR CAPITAL SPENDING IS USUALLY FOUND IN CASH FLOW STMT. LOOK ON THE INTERNET AND ON LEXISNEXIS FOR NEWS AND RESEARCH.

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TRY AND FIND MACRO-GROWTH OF EACH SEGMENT OF SALES. E.P.S. GROWTH SHOULD BE => SALES GROWTH. P/E IS TIED TO GROWTH. READ FOOTNOTES. R.O.E IS THE MOST IMPORTANT RATIO.

TREND ANALYSIS
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LOOK AT SALES SEGMENTS AND MARGINS. WHICH IS GROWING FASTEST. USING YOUR FINANCIAL CALCULATOR, CHECK GROWTH OF SALES AND EXPENSES.

ORGANIZATIONAL TIPS
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One team member should be in charge of operating the PC and slides. This person may also work on preparing the slides. Two members should be responsible for entering data from 10K

One person should get current prese releases and price chart. Another may assist in getting industry data. One team member should prepare DuPont Model which is on your diskette. COPY ALL FILES

INDUSTRIAL COMPANY RATIOS (see Lec Notes appendix)

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INCOME STMT
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BALANCE SHEET
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GROSS MARGIN OPERATING MARGIN PRETAX MGN NET MGN INVENTORY TURNOVER TOTAL ASSET TURNOVER P/E PRICE / BOOK (BVPS)

CURRENT RATIO QUICK RATIO (ACID TEST)

P&L + BAL SHEET

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ROE ROA
X INTEREST EARNED LT DEBT / ASSETS LT DEBT / EQUITY

MARKET RATIOS
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CAP. STRUCTURE
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WHAT IS THE STORY?

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WHAT ARE YOUR CONCLUSIONS? USE RATIO DATA TO SUPPORT YOUR CONCLUSIONS. WOULD YOU INVEST IN THIS COMPANY NOW? WHY OR WHY NOT?

PRESENTATION SLIDES SEQUENCE (each company is unique)

1. Brief company recent history 2. Trend analysis 2. Interpret ratio data 3. DuPont model 4. Benchmarking with competitors using Compustat 5. Assumptions in your forecast 6. Recent news or events impacting your company 7. Stock chart and price trends (THIS MAY BE DOWNLOADED)

TREND ANALYSIS
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SPREADSHEET LOOKS AT 5 YR GROWTH USE FIN CALCULATOR TO LOOK AT TREND LINE GROWTH IN:
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NET INCOME L.T DEBT B.V.P.S.

ASSETS SALES

DO A COMPARISON OF YOUR COMPANY AND SEVERAL KEY COMPETITORS USING LINE OR BAR CHARTS

TEAM CLASS PRESENTATION

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DEVELOP A SCRIPT ASSIGN ONE TEAM MEMBER TO OPERATE PC ONE OR MORE TEAM MEMBERS CAN DO PARTS OF THE PRESENTATION

TIME YOUR PRESENTATION PREPARE A HANDOUT FOR CLASS GIVE INSTRUCTOR CLASS HANDOUT AND ALL SLIDES + SPREADSHEET & 10k --PUT IN A FOLDER

JUST DO IT!
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DRESS PROFESSIONALLY. WATCH YOUR TIME. ENCOURAGE QUESTIONS AND DISCUSSION AFTER FORMAL REMARKS.

USING POWERPOINT
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ICONS AT BOTTOM OF SCREEN

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SLIDE EDIT VIEW OUTLINE SLIDE SORTER (you can move slides around) SCRIPT FULL VIEW --USE
FOR PRESENTATION

PPT IS EASY AND FUN EXPERIMENT WITH ICONS AND SOUND EFFECTS BE SURE FONTS ARE LARGE ENOUGH TO BE SEEN AT BACK OF ROOM

USING MS POWERPOINT
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Computer labs for UCF use WINDOWS NT. Classroom computer uses this as well. Try and save your file in Windows NT (1997). Make multiple copies.

Load your presentation on the PC before class on the C drive. Be sure and test slides to be sure everything works. IF YOU SAVE
DATA IN AN EARLIER VERSION OF WINDOWS YOU MAY HAVE A PROBLEM

SAVE REPORT FOR JOB INTERVIEWS

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MAKE A COPY FOR EACH TEAM MEMBER PUT ON YOUR RESUME THAT:
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YOU ARE PROFICIENT IN MS EXCEL AND POWERPOINT

DO AN ANALYSIS OF EACH PUBLIC INDUSTRIAL COMPANY THAT YOU PLAN TO INTERVIEW WITH GIVE INTERIEWER COPY OF ANALYSIS

TEAM PEER EVALUATION

I AM NOT A POLICEMAN. YOUR TEAM ORGANIZATION IS UP TO YOU. s I AM INTERESTED IN MAKING SURE THAT ALL TEAM MEMBERS WORK. s PLEASE SEE ME WITH ANY PROBLEMS. DO NOT WAIT UNTIL END OF THE TERM! SET MEETING TIMES THAT WORK FOR ALL MEMBERS.
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FIN 3404 COMPANY ANALYSIS PROJECT

PROF DIGGLE ADDITIONAL ADVANCED CONCEPTS

READING THE WSJ

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SEE LEC NOTES PP. 43-44 SEC C:

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SEC C CONTD
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LEFT COL-PG 1 FINANCIAL MKTS TREASURY BONDS, NOTES AND BILLS AGENCIES NYSE STOCK QUOTES NASDAQ

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DOW JONES AVERAGES CHARTS READING A STOCK QUOTE ON YOUR COMPANY

SEC B--THE MART

FORECASTING
1. Determine 4. Spreadsheet will segments--I will assist develop a forecast. You should know what 2. Develop an estimated E.P.S. were for the past growth rate for each year. Adjust your segment sales growth rates to 3. Develop an estimated coincide margin for each 5. Fine tune forecast. segment based on the This is a trend line corporate wide margin forecast only.

VALUATION
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Complete Dividend Discount Model (part of Excel spreadsheet) Complete DuPont Model Chart the stock. You may be able to download this. Use a 5 year chart if possible.

Compare the current price with DDM value. Compare P/E and Price to BVPS with historical data and industry norms. WOULD YOU BUY THIS STOCK NOW?