SITUATION You are a financial analyst with HTC Corporation. HTC is an establishe
ID: 2744807 • Letter: S
Question
SITUATION
You are a financial analyst with HTC Corporation. HTC is an established investment banker which services an international market. A client has determined that it wants to invest $2.3 billion in either Deere & Co. or Caterpillar stock (real publicly-traded companies). Which of these companies' shares is the best potential candidate for a long-term commitment? Both targeted companies are competitively favorable. However, based on some serious general and economic concerns about the fallout of companies in the industry in general, the CEO of the client-company has asked your CFO to conduct a financial analysis of both CAT and DE to determine if it is prudent to commit to either company. The cost of this investment is significant and any interruption in cash flow from the investment during the next few years would adversely affect the client's performance and profit. The CFO has given you the job of conducting this analysis. Specifically, the question is: will a commitment to invest in either Caterpillar or John Deere be financially viable over the next two to three years?
YOUR SPECIFIC ASSIGNMENT
Your specific assignment is to research, analyze, and prepare a report for the CFO on the actual financial performance of both DE and CAT for the most recent three years. In addition to reviewing the traditional financial performance indicators, you are also to review both targed companies past and current stock performance for the last one year. Your report is to consist of three parts:
(1) An evaluation of financial performance for the last three years, for both companies.
(2) An evaluation of stock performance for the last one year, for both companies.
(3) Finally, a specific recommendation, with supporting rationale, as to whether or not either targeted company's recent trend in financial and stock performance is of sufficient financial strength to warrant entering into a long-term commitment.
To assist you in your task, the CFO has provided the following general guidance. Since it is recognized that the industry is undergoing a major contraction in selected markets, it is very important to comparatively evaluate both CAT and DE relative to financial and stock performance trends against its Industry.
IMPORTANT: You must include all necessary and relevant financial performance and stock information, trends, and projections in supporting your recommendation. These factors must include, financial ratio trends and industry comparatives, capital spending, stock growth, Beta values, credit rating service valuations, bond rating valuations, and management and investment reports - when these documents are available.
REPORT REQUIREMENTS
YOUR SPECIFIC ASSIGNMENT
Research and analyze the following information for both Caterpillar and Deere:
Annual Balance Sheets for the last three years.
The Income Statements for the last three years.
Annual reports, 10K or 10Q
Industry data
Analysts’ reports on performance
Management reports or press releases
Using this information the students have to develop evaluation of the financial performance for both targeted companies. (Totally 85% of the assignment grade)
Background and Industry (one short paragraph).
Select of most significant financial performance results for the companies: Compare Revenue, net income, working capital, total assets for the last three years and other results of your choice of the companies against the industry. Present the table with this information in your report. Write about 1 page of the analysis of these financial performance results. (15% of the project grade)
Find financial ratios for each company and the industry in the Internet. Write about 1-2 pages of analysis of the ratio results you received. (15% of the project grade). Compare the ratio results for each company against the other, and the industry.
Prepare a DuPont analysis for three years. (10% of the project grade). Compare the each company’s results to each other and to the industry.
Taking the information from the Income statements and the Balance sheets, calculate each company’s return on equity using the DuPont technique for the company for three years. Follow general formulas for such analysis. Show and discuss your calculation!
Write about 1 page of analysis of the results that you received. Compare the results. If you think the management of Caterpillar and John Deere would like to improve their return on equity, what should the management of these companies do?
Evaluate other areas of financial analysis: capital spending, stock growth, Beta values, credit rating service valuations (if possible), bond rating valuations (if possible), etc. Make an overall conclusion about financial performance of each company during the last years. Compare the results that you received against each company and the industry. Summarize the results that you received in 1 pages. What are these firm’s financial strengths and weaknesses? (10% of the project grade)
Collect and evaluate the data about stock performance of these assigned companies for the last one year. Compare the results that you received against the industry.
Write about 1 page of analysis of the ratio results you received. (20% of the project grade).
Develop a specific recommendation, with supporting rationale, as to whether or not the assigned company's recent trend in financial and stock performance is of sufficient financial strength to warrant entering into a long-term commitment. (about 1 page) (15% of the project grade)
Ratio examples:
Gross profit rate
return on sales
returns on assets
return on stockholders
net working capital
debt ratio
equity ratio
Earnings per share
price earning
Explanation / Answer
HTC Corporation (HTC) formerly, High Tech Computer Corporation is a manufacturer of smartphones and
tablets. The company focuses on the designs, develops, manufactures, and sells smart hand-held devices,
such as, personal digital assistants (PDAs), smartphones, and other related components. The company
alsodesigns Microsoft mobile platform, including interface software, operating systems, human machine
interface and application software. It markets and sells products under its own brand name. The company's
portfolio of hand-held devices provides custom-made solutions to telecommunications clients and retail
partners across Europe, Americas and Asia.
This comprehensive SWOT profile of HTC Corporation provides you an in-depth strategic SWOT analysis of
the company’s businesses and operations. The profile has been compiled by GlobalData to bring to you a
clear and an unbiased view of the company’s key strengths and weaknesses and the potential opportunities
and threats. The profile helps you formulate strategies that augment your business by enabling you to
understand your partners, customers and competitors better.
The profile contains critical company information including:
- Business description – A detailed description of the company’s operations and business divisions.
- Corporate strategy – Analyst’s summarization of the company’s business strategy.
- SWOT Analysis – A detailed analysis of the company’s strengths, weakness, opportunities and threats.
- Company history – Progression of key events associated with the company.
- Major products and services – A list of major products, services and brands of the company.
- Key competitors – A list of key competitors to the company.
- Key employees – A list of the key executives of the company.
- Executive biographies – A brief summary of the executives’ employment history.
- Key operational heads – A list of personnel heading key departments/functions.
- Important locations and subsidiaries – A list and contact details of key locations and subsidiaries of the
company.
- Detailed financial ratios for the past five years – The latest financial ratios derived from the annual financial
statements published by the company with 5 years history.
- Interim ratios for the last five interim periods – The latest financial ratios derived from the quarterly/semiannual
financial statements published by the company for 5 interims history.
Note: Some sections may be missing if data is unavailable for the company
Key benefits of buying this profile include:
You get detailed information about the company and its operations to identify potential customers and
suppliers.
- The profile analyzes the company’s business structure, operations, major products and services, prospects,
locations and subsidiaries, key executives and their biographies and key competitors.
Understand and respond to your competitors’ business structure and strategies, and capitalize on their
weaknesses. Stay up to date on the major developments affecting the company.
- The company’s core strengths and weaknesses and areas of development or decline are analyzed and
presented in the profile objectively. Recent developments in the company covered in the profile help you
track important events.
Equip yourself with information that enables you to sharpen your strategies and transform your operations
profitably.
- Opportunities that the company can explore and exploit are sized up and its growth potential assessed in
the profile. Competitive and/or technological threats are highlighted.
Scout for potential investments and acquisition targets, with detailed insight into the companies’ strategic,
financial and operational performance.
- Financial ratio presented for major public companies in the profile include the revenue trends, profitability,
growth, margins and returns, liquidity and leverage, financial position and efficiency ratios.
Gain key insights into the company for academic or business research.
- Key elements such as SWOT analysis, corporate strategy and financial ratios and charts are incorporated in
the profile to assist your academic or business research needs.
Contents: List of Tables
List of Figures
Section 1 - About the Company
HTC Corporation - Key Facts
HTC Corporation - Key Employees
HTC Corporation - Key Employee Biographies
HTC Corporation - Major Products and Services
HTC Corporation - History
HTC Corporation - Company Statement
HTC Corporation - Locations And Subsidiaries
Head Office
Other Locations & Subsidiaries
Section 2 – Company Analysis
HTC Corporation - Business Description
HTC Corporation - Corporate Strategy
HTC Corporation - SWOT Analysis
SWOT Analysis - Overview
HTC Corporation - Strengths
Strength - Perpetual Innovation
Strength - Improved Profitability
Strength - Patent Agreements
HTC Corporation - Weaknesses
Weakness - Patent Infringement Litigations
Weakness - Dependence on Few Customers
HTC Corporation - Opportunities
Opportunity - Increasing Demand for 3G/4G
Opportunity - Demand for Smartphones
Opportunity - Partnerships and Agreements
HTC Corporation - Threats
Threat - Stringent Regulations
Threat - Competitive Pressure
Threat - Rapid Technological Changes
Threat - Global Economic Scenario
HTC Corporation - Key Competitors
Section 3 – Company Financial Ratios
Financial Ratios - Capital Market Ratios
Financial Ratios - Annual Ratios
Performance Chart
Financial Performance
Financial Ratios - Interim Ratios
Financial Ratios - Ratio Charts
Section 4 – Appendix
Methodology
Ratio Definitions
About Us
Contact Us
Disclaimer
List of Tables
HTC Corporation, Key Facts
HTC Corporation, Key Employees
HTC Corporation, Key Employee Biographies
HTC Corporation, Major Products and Services
HTC Corporation, History
HTC Corporation, Other Locations
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