financial profile of a company of your choosing Include a brief description of t
ID: 2652843 • Letter: F
Question
financial profile of a company of your choosing Include a brief description of the firm and its operations in the introduction. The main body of the paper should contain the financial information for your company, including a financial ratio analysis and a brief history of financial performance over the last ten years, including sales, Net Income, EPS, dividends, market capitalization, return on stockholder’s equity and stock price. Pay attention to possible indications of risk, and any of the other major financial dimensions that we discuss in class, such as leverage and financial structure. The conclusion should contain your overall opinion of the financial health of the firm and its likely future performance. You should also include the firm’s current market price and a discussion of how appropriate you think the price is based on your analysis.
Explanation / Answer
Answer:
Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a company's financial statements to make better economic decisions. These statements include the income statement, balance sheet, statement of cash flows, and a statement of retained earnings. Financial statement analysis is a method or process involving specific techniques for evaluating risks, performance, financial health, and future prospects of an organization.[1]
It is used by a variety of stakeholders, such as credit and equity investors, the government, the public, and decision-makers within the organization. These stakeholders have different interests and apply a variety of different techniques to meet their needs. For example, equity investors are interested in the long-term earnings power of the organization and perhaps the sustainability and growth of dividend payments. Creditors want to ensure the interest and principal is paid on the organizations debt securities (e.g., bonds) when due.
Common methods of financial statement analysis include fundamental analysis, DuPont analysis, horizontal and vertical analysis and the use of financial ratios. Historical information combined with a series of assumptions and adjustments to the financial information may be used to project future performance. The Chartered Financial Analyst designation is available for professional financial analysts.
Financial ratios are very powerful tools to perform some quick analysis of financial statements. There are four main categories of ratios: liquidity ratios, profitability ratios, activity ratios and leverage ratios. These are typically analyzed over time and across competitors in an industry.
DuPont analysis uses several financial ratios that multiplied together equal return on equity, a measure of how much income the firm earns divided by the amount of funds invested (equity).
A Dividend discount model (DDM) may also be used to value a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present value.[9] In other words, it is used to value stocks based on the net present value of the future dividends.
Financial statement analyses are typically performed in spreadsheet software and summarized in a variety of formats.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.