Deciding whether to invest in a company or not using Financial Statement Analysis

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You are to act as a financial advisor to a client interested in investing in a particular industry.  You will research a company and provide a recommendation to your client whether he/she should invest. Some possible industries include:

 

PART A: Obtain Financial Statement-Deciding whether to invest in a company or not using Financial Statement Analysis

PART B: Enter data into FSAP (Financial Statement Analysis Package)

(Google – “Financial Statement Template.xls, click on “Excel Template for Income Statement – Accounting Simplified”).

 

Enter the Balance Sheet and Income Statement amounts for 3 years into the Financial Statement Analysis Package Excel file (just the

PART C: Company Analysis

 

Focus more on their position within the industry, recent developments, fluctuation in stock prices relative to the market/industry, and other items of significance that would impact your investment decision. Legal issues facing the company. New markets and new products.

 

PART D: Industry Analysis

 

Summarize the economic outlook for your industry.  Look at recent market activity, recent indicators impacting your industry. Address recent change in stock prices.  Obtain industry averages for your ratio and common size analysis. Identify laws/regulations impacting your industry. Identify market trends and geo/political events impacting your industry. Identify Micro/Macro economic conditions impacting your industry.

 

PART E: FINAL PAPER

 

  1. Include Company Analysis (address prior comments)
  2. Include Industry Analysis (address prior comments)
  3. Include FSAP summary – Create tables summarizing the analysis tab of your FSAP. Make it look professional.
  4. Write a summary of the significant findings from the financial statement analysis. (1 single spaced page). Address significant (Focus on the 2-4 items under each) Ratios, Horizontal Analysis, and Common Sized Analysis from the FSAP (look under the Analysis Tab). Do not address all the ratios and every line of vertical and horizontal analysis, just what you feel is important.
  1. Based on your findings would you invest? Include specific support for your decision based on your findings in the analysis.  Also include support (for or against) investing in the industry you chose.
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