1. Choose two companies in the same industry that you are interested in. (a) Whi
ID: 2789013 • Letter: 1
Question
1. Choose two companies in the same industry that you are interested in. (a) Which industry are you interested in? (b) Provide summary of two companies. Include names, Ticker symbols, and price ranges of the day (Highest and Lowest) of the companies. 2. Chapter 2. Financial Statements (a) Find the most recent balance sheet of each company. For each firm, how much are total assets, total liabilities, and total equity? How are the numbers related? (Hint: Show the relation as an equation.) (b) Choose any three of the ratios covered in Chapter 2 and find financial statements related to the ratios you chose. Then, calculate the ratios for cach company. What docs cach number mean? Which one has better ratios? (c) Is your comparison in (b) a comparative analysis or a trend analysis? 3. Chapter 7. Stocks (Equity) (a) Find the most recent P/E ratio of each company. Which one has higher ratio? (b) How would you interpret the ratio? Chapter 8. Risk and Rates of Return (a) Find the beta of each company. Which one has higher beta? (b) What does beta measure? (c) Based on the betas you found, which company should have higher expected return? 4. You can choose only one of the companies that you have analyzed. (a) Which one would you choose? (b) Why? 5. Useful Websites . Google Finance (https://www.google.com/finance) . Yahoo Finance (https:/finance yahoo.com SEC EDGAR (https://www.scc.gov/edgar/scarchedgar/companyscarch.html (You can find 10-K reports which contain financial statements.)Explanation / Answer
Ans:
a)We choose two companies from Financial Industry.
b)Following two companies are selected:
1)J P Morgan Chase & Co
Ticker symbol- JPM
Day’s price range- $ 97.57 to 98.41 (On November 19, 2017)
2)Bank of America Corporation
Ticker symbol- BAC
Day’s price range- $ 26.44 to 26.73 (On November 17, 2017)
2(a) Total Assets and liabilities are represented as-
Assets= Liabilities+ Equity
Numbers are in thousands.
JPM- 2,490,972,000 = 2,236,782,000+254,190,000
BAC- 2,187,702,000= 1,920,862,000+ 266,840,000
2(b) Financial ratios
Following are the three profitability ratios:
JPM- Profit margin- 28.85%
Return on Assets (ROA)- 1.06%
Return on Equity (ROE)- 10.51%
BAC-
Profit margin- 24.37%
Return on Assets (ROA)- 0.91%
Return on Equity (ROE)- 7.52%
The above ratios measure the effectiveness of the firm in generating profitability and returns to the investors. Profit margin measures the percentage of income to sales. Return on Assets measures the profits generated by the corporation with assets and Return on equity measures the returns generated by the corporation on shareholders’ funds.
Based on the above three ratios, financial performance of JPM is better than BAC. It is able to operate on high profit margins, it is generating higher income on available assets and it is able to generate higher returns on shareholders’ funds.
The analysis is comparitive as we are comparing financial performance of the companies against each other based on the ratios.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.