Assignment Paper

Paper details
The writing assignments are short memos that should be written in response to the case presented in the
textbook. There is no word requirement on your response to these case studies; however, you should
submit both the Excel spreadsheet that you used to solve the case and a succinct memo to the instructor
that provides a summary of your solution to the case. Please note, one of the criteria for which you will be
assessed on each of these writing assignments is your integration of your understanding of how the core
value of Responsible Stewardship applies in each of these cases. Turnitin.com software will be used to
ensure that submitted assignments are original works.
Your submission should be a one-page executive summary of what you found in your analysis with two
external citations and a copy of the Microsoft Excel spreadsheet that you used to complete your analysis.
Graphs and figures should be presented as appendices (i.e. not presented within the body of the executive
summary).
SCENARIO:
This is your second interview with a prestigious brokerage firm for a job as an equity analyst. You survived
the morning interviews with the department manager and the Vice President of Equity. Everything has gonewell that they want to test your ability as an analyst. You are seated in a room with a computer and a list
with the names of two companies—Ford (F) and Microsoft (MSFT). You have 90 minutes to complete the
following tasks:
1. Download the annual income statements, balance sheets, and cash flow statements for the last four
fiscal years from MarketWatch (www.morningstar.com). Enter each company’s stock symbol and then go to
“financials.” Export the statements to Excel by clicking the export button.
2. Find historical stock prices for each firm from Yahoo! Finance (finance.yahoo.com). Enter your stock
symbol, click “Historical Prices” in the left column, and enter the proper date range to cover the last day of
the month corresponding to the date of each financial statement. Use the closing stock prices (not the
adjusted close). To calculate the firm’s market capitalization at each date, multiply the number of shares
outstanding (see “Basic” on the income statement under “Weighted Average Shares Outstanding”) by the
firm’s historic stock price.
3. For each of the four years of statements, compute the following ratios for each firm:
Valuation Ratios
Price-Earnings Ratio (for EPS use Diluted EPS Total)
Market-to-Book Ratio
Enterprise Value-to-EBITDA
(For debt, include long-term and short-term debt; for cash, include marketable securities.)
Profitability Ratios
Operating Margin
Net Profit Margin
Return on Equity
Financial Strength Ratios
Current Ratio
Book Debt-Equity Ratio
Market Debt-Equity Ratio
Interest Coverage Ratio (EBIT ÷ Interest Expense)
4. Obtain industry averages for each firm from Reuters.com (www.reuters.com/finance/stocks). Enter the
stock symbol in the field under “Search Stocks,” select the company from the list, and then click the
“Financials” button.
Compare each firm’s ratios to the available industry ratios for the most recent year. (Ignore the “Company”
column as your calculations will be different.)
5. Analyze the performance of each firm versus the industry and comment on any trends in each individual
firm’s performance. Identify any strengths or weaknesses you find in each firm.
6. Examine the Market-to-Book ratios you calculated for each firm. Which, if any, of the two firms can be
considered “growth firms” and which, if any, can be considered “value firms”?
7. Compare the valuation ratios across the two firms. How do you interpret the difference between them?
8. Consider the enterprise value of each firm for each of the four years. How have the values of each firm
changed over the time period?