Finance

How to Prepare a FIN 501Company Portfolio Report

You are asked to prepare a fundamental analysis report of a publicly-traded U.S. domestic corporation. The body of the report should beapproximately twentypages in length. Front pages, reference list, detailed quantitative and qualitative supporting documents should appear in appendices at the end of the report are excluded from the suggested length of the report.The target audience for your report is investors. You must evaluate the last three years’(minimum) worth of information with a focus on the most recently available information. You must get approval from the instructor concerning the company you wish to evaluate. 

You are required to used Cambria font or other approved by the instructor using 12 point. Your paragraphs must have single spacing. The report must be typed in MS Word.  MS Excel components, summary tables, charts, pictures, etc. need to be imported into your MS Word file.

Choose Ebay Inc

The structure of a Research Report is as follows:

1. Title Page

Company name, Fin 510 Managerial Finance, Spring 2013, for Jim Haskins, Ph.D.,group members listed is surname alphabetic order, and dated. A professionally looking title page design is desirable but not necessary.

2. Executive Summary

Two to three paragraphs outlining the nature of the report and company, overview of the report’s content, and recommendations with implementationstrategies about the stock (buy sell, hold) and the major reasons for the recommendation.

3. (Brief) Introduction of the Company

A few paragraphs outlining the profile of the company.  You can find this info on the company website (sec.gov) or on Yahoo! Finance (or similar).

4. Economy and Industry Profile

5. Company Analysis

6. (Brief) Summary of the Recommendation and Implementation Strategies

7. References

8. Appendices - The liberal use of graphs, charts, tables, etc is strongly encouraged, particularly in the Appendices.

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Sources of Information

• Yahoo! Finance and Google Finance are considered reliable sources of data and information. Use them freely by simply acknowledging the source.
• Contact the Chester Fritz Business and Government librarian for how you can use the various resources in the library.  If you have questions, please call and set up an appointment.
• Morningstar and/or Mergent Online
• Ratios
• Analysis
• Competitors
• Research (don’t buy any)
• News
• Create Reports options
• Industry Reports options
• DataMonitor Reports
• Company overview and history
• SWOT Analysis
• Much more
• SEC forms particularly the 10-K and -Q, 8-K and –Q, DEFA14A, 4, etc. available through www.sec.gov .
• Newspapers and industry magazines
• Almanac of Business and Industry Ratios
• 50 operating and financial factors in 179 fields of business
• Industry profiles
• Figures
• Ratios

Key Areas to the Portfolio Report

Economy Profile

·         Rely on information concerning the economy, unless you would prefer to make your own forecast of the economy.

Industry Profile

·         Demand Determinants (prices, consumer tastes and preferences, characteristics of product or service, e.g. necessary or base good versus luxury good, etc)

·         Supply Factors (supply chain issues, impacts of being the dominate purchaser of certain factors of production, and ability to negotiate preferential input costs)

·         Marketing Strategies such as those for branding, product differentiation, etc

·         Competition in the Industry

o   Characteristics of products or services in the firm’s industry

o   What products or services are sold in the industry by the firm and competitors?

o   Threat of new entrants (ease of competitor entry)

o   Threat of close substitutes that could erode sales and/or market share

·         Evaluate any regulatory changes or legal proceedings that may influence the firm’s future earnings, cash flows, or value. 

·         Brefily outline the internal and external factors that will affect the firm – review the SWOT Analysis from DataMonitor Report (if available).

·         Analyze the company’s strategy, business model, and business organization within the industry

Management and Key Employee Analysis (Corporate Governance)

·         Corporate Governance Risk Profile

·         Board composition and background as well as Directors’ independence (ownership concentration and control and the diversity of the Board’s membership to gain broad perspectives - see most recent10-K and 10-Q).

·         Stock price performance versus the sector spyder since the CEO and Chairman of the Board took office.

Company Analysis

The following list of ratios and information should be presented in an appendix table and analyzed in the text of the report.  You don’t have to discuss all of the items in the text, only the most significant ones of which you feel the investor should be aware to assess risk and return, the potential for abnormal earnings, and the effects on future cash flows. You should have threeyears of company ratios, peer ratios, and industry averages for comparisons of the following factors:

·         Liquidity     WANT TO HAVE A PROFESSIONAL WRITER WORK ON THIS PAPER? CLICK HERE TO ORDER THIS PAPER

o   Current Ratio

o   Quick Ratio

·         Asset Utilization and Efficiency

o   ROCE

o   ROA

o   Gross Profit Margins

o   Operating Profit Margins

o   Net Profit Margins

·         Debt Management (Leverage and Coverage)

o   Debt Ratio

o   Debt-to-Equity

o   Times Interest Earned

·         Cash Flow

o   Operating Cash Flow

o   Free Cash Flow

o   Free Cash Flow as a Percentage of Sales (this is a big one)

·         Valuation

o   Trailing PE

o   Forward PE

o   Price-to-Book

o   Price-to-Sales

o    PEG Ratio

·         Growth Rates

o   Revenue Growth Rate

o   Earnings Growth Rate

o   Free Cash Flow Growth Rate

·         Dividends

o   Trailing Dividend Yield

o   Forward Dividend Yield

·         Insider Transactions

·         Technical Analysis

·         Other

o   Beta

o   Shares Short as a Percentage of Float

o   Earnings Misses and Earnings Surprises

o   Analyst Opinion

Forecasting Cash Flows

1.)   Begin by putting into a MS Excel spreadsheet the income statement, balance sheet and cash flow statement for each of the last three years.

2.)   Then:

a.       Determine the percentage of revenue for each item on the income statement.

b.      Determine the percentage of assets and percentage of revenue for each item on the balance sheet. You will forecast some balance sheet items as a percentage of assets and some as a percentage of revenue.

c.       Determine the percentage of assets and percentage of revenue for each item on the cash flow statement.  You will forecast some cash flow statement items as a percentage of assets and some as a percentage of revenue.

3.)   Look for stability of percentage of revenue on the income statement.  If it is a stable function of revenue, use the percentage of revenue to forecast it.  If it is not stable, then you will need another forecast method.  You can’t forecast everything as a percentage of revenue.  If it is not stable, look for trends in the relationship with revenues.

4.)   Look for stability of percentage of revenue or percentage of assets on the balance sheet and cash flow statement.  If it is a stable function of revenue or assets, use the percentage of revenue or assets to forecast it.  If it is not stable, then you will need another forecast method. You can’t forecast everything as a percentage of revenue or assets.If it is not stable, look for trends in the relationship with revenues or assets.

5.)   Forecast revenues for the next five years.  Look at management’s guidance on this from the 10-K and most recent 10-Q.  Perform channel checks.

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Tentative Course Timetable Fall 2013

Week	Date	Topic	Readings	Deadlines
1	8/26	Syllabus, Introduction, Chapter 1 PPTX	Chapter 1
2	9/2	Labor Day Holiday	No Classes
3	9/9	No Class, Instructor is Out of State	Review recordings and assignment, No scheduled class
4	9/16	Financial Statements, Research	Chapters 7 & 8, Notes	Group Memberships
5	9/23	Risk & Return	Chapters 2 & 3, Notes	TVM Problems
6	9/30	Risk & Return	Chapters 2 & 3, Notes
7	10/7	Bonds	Chapter 4, Notes	Risk & Return Problem Set
8	10/14	Equities, Review	Chapter 5, Notes	Part 1 of Portfolio Paper, Data and Sources
9	10/21	Midterm
10	10/28	Cost of Capital	Chapter 10, Notes
11	11/4	Capital Budgeting	Chapters 12 & 13, Notes
12	11/11	Veteran’s Day Holiday
13	11/18	Capital Budgeting	Chapters 12 & 13, Notes	Part 2 of Portfolio Paper, Quant. and Qual. Analyses
14	11/25	Capital Structure	Chapters 15 & 16, Notes
15	12/2	Capital Structure	Chapters 15 & 16, Notes	Capital Budgeting Problem Sets
16	12/9	Dividend Policy & Working Capital	Chapter 17 & selected portions of Chapters 21-23 (WCM, CCC, Trade Credit, Cash Budget)	Final Individual Portfolio Paper/Tegrity Recordings
	12/13	READING AND REVIEW DAY
	12/16	FINAL 7:45-9:45 PM	Electronic examination for all	Discuss Papers
				Liquidity 6/30/2013 12/31/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008 12/31/2007 Assets (in millions) 80201 80885 67889 63063 59045 55815 50899 Liabilities (in millions) 48051 47586 39597 37238 35439 35035 Cash and equiv 7654 8406 9429 9123 9800 7426 Short-term investments 2443 3031 2577 2072 1239 783 accounts receivable 3674 2709 2294 2061 1954 1929 current ratio 1.669080768 1.6997646 1.714498573 1.693512004 1.666102317 1.593121165 quick ratio 0.28659133 0.2972723 0.36113847 0.35598045 0.366629984 0.289367775 Asset Utilization and Efficiency ROCE 0.070254938 0.1441011 0.167420434 0.187561924 0.157475191 0.128252066 capital employed = (total assets - current liabitilies) 59583 59833 47539 39363 36882 36054 current liabilities 20618 21052 20350 23700 22163 19761 EBIT 4186 8622 7959 7383 5808 4624 ROA 0.0686093 0.069124982 0.070774024 0.062600321 0.051837019 net income 5526 5142 4634 3822 2977 Gross Profit Margin 0.9771918 0.976585969 0.977526419 0.979744773 0.981770256 Revenue 110618 101862 94155 87138 81186 COGS 2523 2385 2116 1765 1480 Operating Profit Margin 0.5971472 0.607514178 0.589267548 0.601037899 0.565646969 Operating Income 9254 8464 7864 6359 5263 Net Sales 5526 5142 4634 3822 2977 Net Profit Margins 0.9353179 0.931593725 0.933375816 0.935447222 0.947798882 operating expenses 7155 6968 6273 5625 4238 Debt Ratio 0.5883167 0.583260911 0.590488876 0.600203235 0.627698647 Debt-to-Equity 1.4290519 1.399582921 1.441936108 1.501270863 1.68599615 Times Interest Earned 13.642405 15.76039604 15.34927235 10.54083485 7.236306729 Interest Expense 632 505 481 551 639 Operating Cash Flow 7155 6968 6273 5625 4238 Free Cash Flow 6085 5999 5395 4886 3632 capital expenditures 1070 1018 878 739 791 proceeds from disposal of CE 0 49 0 0 185 Free Cash Flow as % of Sales 1.1011582 1.166666667 1.164220975 1.278388278 1.220020155 Trailing PE 10.081784 10.53638254 8.722222222 current share price 54.24 50.68 36.11 previous 12 months earnings/share 5.26 5.38 4.81 4.14 Forward PE expected earnings per share Price-to-Book 0.0018954 0.001987685 0.001575824 intangible assets, net amortization 4682 2795 2910 2381 amortization of intangibles 1824 1451 1350 1038 Price-to-Sales average shares outstanding PEG Ratio 0.1031179 0.094200743 0.075072765 Annual EPS Growth 97.769517 111.8503119 116.1835749 Revenue Growth Rate 0.0859594 0.081854389 0.080527439 Earnings Growth Rate 3.90% forecast (NASDAQ) 0.039 0.074679113 0.109624514 Net Earnings 5741.514 5526 5142 4634 Free Cash Flow Growth Rate 0.0143357 0.111955514 0.104175194 Trailing Dividend Yield 0.0147493 0.012085635 0.01121573 Forward Dividend Yield 0.0194506 0.01578532 0.01696206 dividend 1.055 0.8 0.6125 0.405 0.03