Read the following for the case report questions:
Please read the questions and instructions carefully and answer all the questions;
Please read through the sample report;
Watch the Nike Recordings (Part 1 & Part 2) on downloading data & calculating ratios, and use the Nike Excel file as a template to start (you will need to put the ratio calculations of each company in one sheet, and make it one Excel file);
Calculate all the ratios using companies’ financial statements and with formula on PowerPoint from this class;
Please make sure you read and understand the Academic Integrity section on this class’ Moodle.
- Read the following very very carefully for the sample report for Marriott International submitted by an MBA student.
Please note that the sample report is to demonstrate how to approach each question. You are not allowed to copy & paste content of the report.
Please also note that some questions and ratio definitions in the Sample Report may be different from the questions you get. You must use the definitions and discussions in our class – review the lecture slides and your own notes. Some definitions may be different from the ones in the Sample Report.
The Report cites Higgins (2019), this is a textbook previously used. You should NOT cite Higgins (2019), instead, you should cite our textbook. Failure to do so will be considered violation of academic integrity – you have not read Higgins (2019), you should not cite it.
You should always use my Nike Excel as the template.
Only can use the formula from the ppt. Dont use other formula form website.
MY company : Rogers Morningstar Link: https://www.morningstar.com/stocks/xnys/rog/quote
comparable company 1: AT&T https://www.morningstar.com/stocks/xnys/t/quote
Comparable company 2: Telus https://www.morningstar.com/stocks/xnys/tu/quote
Requirements for the Overall Report:
⦁ Please submit (1) this report (must submit in a word document), and (2) the Excel file that calculates and lists all required ratios through Moodle.
⦁ The Excel file will be graded as part of your report.
⦁ For questions with the ratios: in general, 4 points are given to correct calculation of the ratios and 6 points are given to the interpretation and comments of the ratios.
⦁ Your answers must be typed below each question.
⦁ Formatting: Single-spaced, Times New Roman, 12 font, 1″ margins
⦁ References: APA 7th edition. ⦁ http://libguides.twu.ca/c.php?g=284731 HYPERLINK “http://libguides.twu.ca/c.php?g=284731⦁”⦁ &⦁ p=1897471
⦁ If you get information from a company’s annual report, you should also cite it.
⦁ Failure to meet the requirements will result in a minimum of 10% points deducted.
⦁ The key information should be from the company’s financial statement and annual report (10-K). Please only use primary sources of information. Do not use secondary sources (e.g., Wikipedia, Investopedia, Baidu). If you’d like to discuss theories and definitions of ratios, you should cite the Desai textbook, and no other sources are allowed.
⦁ e.
⦁ Your submission will be checked using TurnItIn where originality will be checked against other students’ submissions and anything available on the Internet.
⦁ I only look at the similarity of your answers to online content and submissions. I will not consider the overall similarity score itself or the similarity in the question part.
⦁ Do not use AI-generated content or AI tools. We will be able to identify them.
⦁ Any submission that is deemed to contain plagiarized material will receive an “F” mark.
⦁ Please note that whenever the questions mention “your company” or “your main company”, it refers to the company you choose to analyze.
⦁ Read through the Sample Report posted on Moodle. Watch the Nike recordings on downloading data & calculating ratios, and use the Nike Excel file as a template to start (you will need to put the ratio calculations of each company in one sheet, and make it one Excel file).
Your Report consists of four parts:
Part 1: Background
Part 2: Financial Analysis including your spreadsheet ratios
Part 3: Managerial Actions
Part 4: Investors’ Decisions
Part 1: Background of your company (20 points)
Brief business description:
⦁ What does your company do? Which industry/industries?
⦁ Describe in detail the main activities through which your company generates revenue.
⦁ You should read the company’s most recent annual report, and provide a pie chart on the percentage of revenue coming from various business units/products, and a similar pie chart on various geographic areas where revenue is generated. Use your own words to describe the pie charts.
Note: you should be able to find all the information above on the company’s most recent annual report and cite the annual report properly.
Type your answers starting from here:
Part 2: Financial Analysis (10 points each)
Please read the requirements and instructions for the ratio analysis:
⦁ You should calculate all the ratios based on our lecture slides from this class. I will check your calculation from the Excel file.
⦁ You should NOT look for other formulas from online sources.
⦁ You should NOT take the ratios from online sources (including Morning Star) directly.
⦁ For each and every ratio or number asked in the part, list the ratio or the number of your company and its two competitors for the three years, e.g.
Your company name Competitor 1 name Competitor 2 name
2020 2021 2022 2020 2021 2022 2020 2021 2022
Current Ratio
⦁ Please follow the Sample Report on listing the numbers in your report.
⦁ Please make sure your three companies have the same three years.
⦁ For each ratio, you are required to:
⦁ Discuss what it says about your main company: is it high? is it low? is it just right? Why?
⦁ Discuss any trend that you have noticed in your company’s ratios over the past 3 years. If there’s any significant change, you need to do some research and explain why.
⦁ Explain how your company is doing compared to its competitors.
⦁ Focus on your main company’s ratios and analyses, not the competitors.
⦁ You do NOT need to define the ratio, you do NOT need to discuss how it is calculated.
⦁ It should take approximately one or two paragraphs per ratio to cover these items.
⦁ If the financial statement numbers and the stock price are in different currencies, you need to do the conversion to make them one currency.
⦁ For example, if your financial statement numbers are all in EURO and stock price is in USD, then use EURO in all ratio calculation and convert the stock price from USD to EURO using the historical exchange rate.
⦁ Historical exchange rate: if your stock price is on May 30, 2020, then to convert your USD price to EURO, you need the USD/EURO exchange rate for May 30, 2020.
⦁ If the financial statement shows no inventory, you need to (1) check to ensure the company carries no inventory (check from the company’s annual report), then (2) take inventory =$0, inventory period =0. NOT carrying inventory is a company’s decision, and you need to comment on it in the relevant section of the report.
⦁ If the financial statement shows no dividend: you need to (1) check to ensure the company does not pay dividends (check from the company’s annual report), then (2) use dividend =$0, dividend payout ratio =0%, retention ratio = 100%. NOT paying dividends is a company’s decision, and you need to comment on it in the relevant section of the report.
⦁
⦁ Short-Term Solvency:
1.1 Current and Quick Ratios:
⦁ Current Ratio
⦁ Quick Ratio
List and Comment on the ratios above and discuss your company’s general ability to pay off its current liabilities.
Type your answers starting from here:
1.2 Inventory, AR, AP Periods
⦁ Inventory Period
⦁ Account Receivable (A/R) Period (Assuming 100% Sales Are Credit Sale)
⦁ Account Payable (A/P) Period
List and Comment on the ratios above and discuss your company’s general ability to manage inventory, A/R, and A/P.
Type your answers starting from here:
1.3 Cash Cycle
⦁ Cash Cycle
List and Comment on your company’s cash cycle and its impact on the operating cash flow.
Type your answers starting from here:
1.4 Cash Cycle: Discuss at least 3 ways through which your company could reduce its cash cycle. Please discuss in detail action plans to reduce the cash cycle and recognize the possible drawbacks of your suggestion.
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1.5 Cash Flow Measures
⦁ Net Income
⦁ Operating Cash Flow (OCF)
⦁ Free Cash Flow (FCF)
List and Comment on the Net Income, OCF, and FCF of your company, in comparison with its competitors, also draw a graph similar to that of Amazon and Netflix shown in the class PowerPoint.
Type your answers starting from here:
1.6 Cash Position: Based on your answers to questions 1.1-1.5, do you think the company is holding too much, too little, or the right amount of cash? Please explain your answers, considering the need to pay bills, manage risks, and achieve/sustain growth.
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- Long-Term Debt Policy:
2.1 Leverage Ratio
⦁ Liabilities to Asset Ratio (Total Liabilities divided by Total Assets)
⦁ Equity Multiplier (also called: financial leverage)
List and Comment on the ratios above and discuss your company’s overall financial leverage.
Type your answers starting from here:
2.2 Interest Coverage Ratio
⦁ Debt to Asset Ratio (Total Debt divided by Total Assets)
⦁ Interest Coverage Ratio
List and Comment on the ratio above and discuss your company’s overall ability to pay off debt.
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2.3 Give advice to the company in terms of its debt policy—should the company reduce its debt, issue more debt, or stay in the current situation, explain your answers in detail and consider the interest rate and its future trend.
Type your answers starting from here:
- Asset Utilization:
3.1 Ratios:
⦁ Total Asset Turnover
⦁ Fixed Asset Turnover
List and Comment on the ratios above and discuss your company’s turnover ratios.
Type your answers starting from here:
3.2 If you see any problem with the company’s total asset turnover and/or fixed asset turnover, identify the problem and suggest two ways through which the company could improve its asset utilization. If you do not see any problem, also suggest two ways through which the company could maintain its current position.
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- Profitability:
4.1 Gross Margin
⦁ Gross Profit Margin
⦁ COGS as a percentage of total revenue (cost of goods sold or cost of revenue divided by total revenue)
List and Comment on the ratios above. Are the company’s margins changing? Why and what are the underlying business cause—changes in competition, changes in input costs, or something else?
Type your answers starting from here:
4.2 Operating Margin
⦁ Operating Margin
⦁ Operating expense as a proportion of total revenue (if operating expense is not given, use SG&A as a proportion of total revenue)
List and Comment on the ratio above. Is the company managing its overhead and administrative costs well? What are the business activities driving these costs? Are these activities necessary?
Type your answers starting from here:
4.3 Net Profit Margin:
⦁ Net Profit Margin
List and Comment on the ratios above. Are the company’s margins changing? Why and what are the underlying business cause—changes in competition, changes in input costs, or poor overhead cost management?
Type your answers starting from here:
4.4 Tax:
⦁ Effective Tax Rate (list the ratios for your company and its competitors)
List and Comment on the ratio above. Discuss the company’s tax planning strategies and whether it strategically locates certain operations in tax havens. Is the company’s effective tax rate affected by the US tax cut?
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4.5 Based on your discussion above, suggest two ways through which the company can improve its net profit margin, if necessary; or if you think the company’s current net profit margin is fine, you can also suggest two ways specifically to keep or even further increase it.
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- Return on Investment:
5.1 Ratios:
⦁ ROA
⦁ ROE
List and Comment on the ratios above and discuss your company’s return on investment.
Type your answers starting from here:
5.2 DuPont Analysis
List ROE’s three components of your company and its competitors.
Suggest two ways through which the company could improve its ROE, if necessary; or if you think the company’s current ROE is fine, you can also suggest two ways specifically to keep it or even further increase it.
Type your answers starting from here:
- Payout Policy
6.1 Dividend Payout:
⦁ Earnings per share
⦁ Dividend per share
⦁ Dividend payout ratio (hint: your dividend payout ratio = 0 if dividend =0)
List and Comment on the ratios above and discuss your company’s payout.
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6.2 Read the company’s most recent annual report, what does it say regarding its dividend payout policy (whether they pay a dividend, how much they pay, or do they prefer repurchase)? In your opinion, should the company return more or less cash to stockholders? Please explain your answers.
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- Market Ratios:
7.1 Market Ratios:
⦁ P/E
⦁ Price to Sales
List and Comment on the ratios above and discuss your company’s overall market valuation.
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7.2 Growth Ratios:
⦁ Sustainable Growth Rate
⦁ PEG Ratio
List and Comment on the ratios above and discuss your company’s overall growth.
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Part 3: Managers’ Perspectives & Actions (20 points each)
- Based on the financial analyses in part 2: from a CEO/CFO’s perspective, summarize your company’s overall strengths and weaknesses in (1) operation, (2) investment, and (3) financing. What is your company’s overall core competence?
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- Based on the financial analyses in part 2: from a CEO/CFO’s perspective, understand the value drivers and various ratios and suggest how your company could increase its value and further its growth. Please also relate your answers to the Capital Allocation decisions discussed in Chapter 6 of the Desai textbook. (Hint: you can read Chapters 4 & 6 but please apply it to your company specifically)
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Part 4: Investors’ Perspectives & Actions for the company (20 points each)
- Creditors’ decision:
If you work for a bank and the company approaches you for debt financing:
⦁ Which ratios/numbers in Part 2 are important considerations?
⦁ Will you issue loans to the company? Why?
⦁ If you are not issuing a loan to the company for now, what would need to improve for you to decide to issue loans?
Type your answers starting from here:
- Equity Investors’ decision:
If you are considering whether or not to invest in the company’s publicly traded stocks:
⦁ Which ratios/numbers in Part 2 are important considerations?
⦁ Will you invest in the company’s stock now? Why?
⦁ If you are not investing in the stock for now, what would need to improve for you to decide to invest?
Type your answers starting from here:
