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FIN 110 – Capital Structure and Financial Analysis Assignment

Final Submission Due Date:

Part 1 - Company Overview

1. Each student will select a large company that begins with the first letter of their last name. Try to find a company in the S&P 500 or a similar index. I suggest U.S. companies, as foreign companies may not provide as much information in financial statements (e.g, Sony, Samsung, etc.)

2. Download the last 5 year’s Annual Report (10-K) and Proxy Statement (DEF 14A) from Edgar Database from SEC website (https://www.sec.gov/edgar/searchedgar/companysearch.html)

Part 1 is Due:

Part 2 - Financial Analysis

3. Compute the ENTIRE list of ratios for the most current year and from 5 years ago (not necessary for years in between)

a. Be sure to identify / explain each component of the ratio, not just the end result (ratio)

b. Compare the ratios for each year to see if they improved, worsened, or stayed the same

c. Interpret the ratios

i. For example, for leverage ratios, increasing is BAD, and for profitability ratios, increasing is GOOD

d. Analysis should be in Excel: you will submit a softcopy of the file so I can verify calculations

4. Compute the WACC for EACH of the previous 5 years and discuss changes and trends

Part 2 is Due:

Part 3 - Corporate Governance & Mergers and Acquisitions Analysis

5. Find the Management, Discussion and Analysis Section (MD&A) and summarize for EACH year.

a. Is the managerial view optimistic, pessimistic, or neutral at the time of the 10-K?

b. Does this view correspond with the analysis you performed?

c. Retrospectively, was management optimistic, pessimistic, or neutral (objective) in their discussion and forecasts.

6. Find information (from 10-K, proxy statement and investor relations) about the management of the company and elements of the corporate governance

a. Names of the CEO, COO, CFO, Treasurer and President of the company

b. Compensation of CEO (salary, bonus, stock options/grants)

c. Names and backgrounds of all members of the Board of Directors (primary occupation, other board memberships, years on board, etc.)

d. Compensation of Outside Board Members (will vary: any possible combination of salary, stock options/grants, etc. is possible)

e. Determine if each member of the BOD is an insider or outsider based on bio, not self-disclosure

f. Auditor

g. Number of years that the auditor has audited company

h. Draw overall conclusion of the company’s governance (shareholder-focused or management-focused)

7. Find information pertaining to recent M&A activity that your company has undertaken

a. Discuss the motivations (in general) of M&A activity

b. Identify M&A activity for your company over last 10 years

c. Has M&A activity benefited the firm? Explain

d. Suggest possible M&A targets and explain rationale

e. Should your firm divest assets or divisions? Explain

Part 3 is Due: Tuesday, April 25^th

Note

No “copy and pasting” of information for any section; instead, summarize succinctly in your own style. Do not “copy and paste” definitions from sample

Submission Format

Neat, organized report with Table of Contents, page numbers, references to charts and tables as appropriate and proper citations

Grading

Grade will be based 50% of analysis and 50% on presentation and format

* Extra Credit

Compare your company analysis to an analysis of a peer in the same industry