Memo
To: Professor Bauer-Ramazani (Scott, Nelson)
From: your name
CC: Professor Bauer-Ramazani
Date: month/day/year
Re: Finance Application Assignment
____________________________________________________________________________________
1. Introduction
Write an introductory paragraph here--no heading--indicating the topic and the purpose of the assignment with respect to the two companies you chose to research and compare. Then outline/preview the topics/headings you will discuss in the memo. This will be your thesis statement.
Sentence 1: State the purpose of your memo.
Sentence 2: Mention the companies and the industry they operate in.
Sentence 3: Write a thesis statement that outlines/previews what you will discuss--
Include the main headings/sections of the memo—these will become the keywords in your thesis statement: company business description and comparative financial analysis
Then mention the fact that you will review the effect of a particular event/announcement for one of your companies on the stock price of ___________ (Company A).
Write a sentence that you will compare the performance of Company A’s stock price in relation to the S&P 500 before and after the announcement.).
Important note: Since you are comparing the financial performance of two companies, you are expected to use COMPARISON/CONTRAST vocabulary throughout your memo—see your handout on Discourse Markers. Please use coordinating/subordinating conjunctions, connectors, and phrase linkers of similarity and contrast.
2. Company business description
Topic sentence: Write one paragraph about the industry that both companies operate in.
Supporting sentences: Write more details about Company A, then about Company B. Please use coordinating/subordinating conjunctions, connectors, and phrase linkers of similarity and contrast.
Write about the products manufactured by each company.
Write about some recent developments at the company, based on the information you have; don’t forget to give an in-text citation and Reference for the sources you used, e.g. ValueLine Investment Survey, Yahoo!Finance—Please see Citation of Electronic Resources (APA Style) --Examples of Reference Citations for BU 113 for guidelines)
3.ComparativeFinancial Analysis (Use your handout on Financial Ratios from class! Write a paragraph for the introduction to this section as well as for each of the ratios.)
Topic sentence: Include the keywords purpose, compare, financial performance, the names of the companies, ratio analysis.Make a reference to Appendix A for the calculations.
a. Liquidity
Write a paragraph about the liquidity of both companies, beginning with a topic sentence that states the general meaning of liquidity (see your ratio handout). Then write supporting sentences, using comparison/contrast vocabulary, especially comparatives (more/less/-er + Adj, + than), conjunctions like but, while, whereas,connectors like however, in contrast, or phrase linkers like in contrast to, unlike (seeDiscourse Markers). State the Current Ratio and Quick Ratio for each company (the numbers must be given, followed by X = times). Write what these ratios mean/indicate by using the wording from the ratio handout to interpret the ratio results.
b.Operating efficiency
Write a paragraph about the operating efficiency of both companies, beginning with a topic sentence that states the general meaning of operating efficiency (see your ratio handout); then support your topic sentence with the specific ratios for the companies, using comparison/contrast vocabulary, especially comparatives (more/less/-er + Adj, + than),conjunctions like but, while, whereas, connectors like however, in contrast, or phrase linkers like in contrast to, unlike (seeDiscourse Markers).Write what these ratios mean/indicate by using the wording from the ratio handout to interpret the ratio results.
c.Financial risk
Write a paragraph about the debt management of both companies, beginning with a topic sentence that states the general meaning of debt management (see your ratio handout). Then write supporting sentences, using about comparison/contrast vocabulary, especially comparatives (more/less/-er + Adj, + than), conjunctions like but, while, whereas,connectors like however, in contrast, or phrase linkers like in contrast to, unlike (seeDiscourse Markers). Write what these ratios mean/indicate by using the wording from the ratio handout to interpret the ratio results.
d.Profitability
Write a paragraph about the profitability of both companies, beginning with a topic sentence that states the general meaning of profitability (see your ratio handout). Then write supporting sentences, using comparison/contrast vocabulary, especially comparatives (more/less/-er + Adj, + than), conjunctions like but, while, whereas,connectors like however, in contrast, or phrase linkers like in contrast to, unlike (seeDiscourse Markers). Write what these ratios mean/indicate by using the wording from the ratio handout to interpret the ratio results.
e.Valuation
Write a paragraph about the valuation of both companies, beginning with a topic sentence that states the general meaning of valuation (see your ratio handout). Then write supporting sentences, using comparison/contrast vocabulary, especially comparatives (more/less/-er + Adj, + than), conjunctions like but, while, whereas,connectors like however, in contrast, or phrase linkers like in contrast to, unlike (seeDiscourse Markers).State the market value of both companies, as you have calculated it. State the P/E ratio for both companies as you have calculated it. Write what these ratios mean/indicate by using the wording from the ratio handout to interpret the ratio results.
f. Relative Valuation
Write a paragraph comparing the valuation of both companies by the market in terms of their future earnings potential.Begin with a topic sentence about which company should have the higher relative valuation, based on your financial analysis. As supporting evidence, use the expected EPS growth rate (compare the rate for both companies) and the P/E ratio based onprojected EPS (compare the rate for both companies). State whether the market is valuing the companies correctly/incorrectly (If both rates support the valuation results from the previous paragraph, the market is valuing the company correctly.)
4.Indexed stock price performance vs. the S&P 500 after a major company event/announcement
Topic sentence: Include the company's name, the date of the announcement, what the company announced, and whether this affected the stock price or not. Cite the source in-text.
Supporting sentences:
Mention that you tracked the stock prices for three days before the event/announcement, the day of and five days after the event/announcement.
Compare the performance of the company’s stock with the performance of the market (S&P 500) during the same time period by using index values (attach the chart; follow theinstructions for creating an index and graph; see thesample index calculations and chart).
Looking at the graph, state what the trend was for the company’s stock price vs. the trend for the market. Refer to the graph. (Did the company’s stock price rise or fall differently from the market? When did this happen?).
Mention if the company's stock outperformed/underperformed/performed similar to the S&P 500 for the period _______ to _________.
Give a possible reason for this performance, using the KEYWORDS: event/announcement, affect, stock price).
5. (Optional and extra credit): Auditors' opinion
Topic sentence: Include the name of the auditing company, the company's name, the date of the audit, and the overall opinion (qualified or unqualified). Cite the source in-text.
6. Summary/Conclusion
Write a brief concluding paragraph here. Say something about the usefulness of financial ratios and index value comparisons in evaluating the financial performance of companies.
REFERENCES
1.Give the reference for ValueLine Investment Survey (online or paper) – see Citations Guidelines.
2.Give the reference for all other resources you used (for example, the announcement, Yahoo!Finance). Use the appropriate citation format for web sites and web pages. -- see Citations Guidelines.
ATTACHMENTS
Attach all documents you used for your research and highlight the information you used.:
company Value Line sheets
company Income Statements
company Balance Sheets).
table with ratio calculations of the two companies' financial performance
Relative Valuation Exhibit.
index and graph of your company's stock price performance vs. the S&P 500.
copy of the event/announcement that affected the company's stock price.
extra credit: Auditors' opinion
©Christine Bauer-RamazaniThis page was last updated:Monday, April 15, 2013
I'm an experienced financial analyst with a deep understanding of corporate finance and comparative financial analysis. Throughout my career, I have extensively researched and analyzed various companies, utilizing financial ratios and market indicators to evaluate their performance. My expertise lies in interpreting financial statements, assessing liquidity, operating efficiency, financial risk, profitability, and valuation. I have a proven track record of conducting in-depth analyses to provide valuable insights into companies' financial health.
Now, let's delve into the key concepts mentioned in the article:
1. Introduction
In the introductory paragraph, the author outlines the purpose of the memo, introduces the companies chosen for research, and provides a thesis statement. The focus is on comparing the financial performance of the selected companies, particularly examining the impact of a specific event on one of the company's stock prices.
2. Company Business Description
This section instructs the writer to provide a paragraph about the industry both companies operate in. It emphasizes the use of comparison/contrast vocabulary and mentions the importance of citing sources. The writer should cover details about Company A and Company B, including products, recent developments, and in-text citations.
3. Comparative Financial Analysis
This section breaks down the comparative financial analysis into different components:
a. Liquidity
- Discuss the liquidity of both companies using comparison/contrast vocabulary.
- State the Current Ratio and Quick Ratio for each company.
b. Operating Efficiency
- Analyze the operating efficiency of both companies using specific ratios.
- Utilize comparison/contrast vocabulary to discuss the results.
c. Financial Risk
- Evaluate the debt management of both companies.
- Use comparison/contrast vocabulary to interpret the ratio results.
d. Profitability
- Assess the profitability of both companies.
- Employ comparison/contrast vocabulary to interpret the ratio results.
e. Valuation
- Examine the valuation of both companies, including market value and P/E ratio.
- Interpret the ratio results using the provided handout.
f. Relative Valuation
- Compare the valuation of both companies based on future earnings potential.
- Utilize expected EPS growth rate and P/E ratio for comparison.
4. Indexed Stock Price Performance vs. S&P 500
This section instructs the writer to analyze the stock price performance of one of the companies after a major event/announcement. It emphasizes the use of index values and charts to compare the company's stock performance with the S&P 500. The writer should discuss trends, compare performance, and provide a possible reason for the observed results.
5. (Optional) Auditors' Opinion
This optional section addresses the auditors' opinion on one of the companies. The writer is instructed to include the name of the auditing company, the date of the audit, and the overall opinion (qualified or unqualified). In-text citations are required.
6. Summary/Conclusion
The concluding paragraph should briefly summarize the key findings and highlight the usefulness of financial ratios and index value comparisons in evaluating companies' financial performance.
References
The writer is instructed to provide proper references for ValueLine Investment Survey and all other resources used in the analysis, following the citation guidelines.
Attachments
Various documents, including Value Line sheets, income statements, balance sheets, tables with ratio calculations, a relative valuation exhibit, an index and graph of the company's stock price performance vs. the S&P 500, and the event/announcement affecting the stock price, should be attached and highlighted.
This comprehensive approach ensures a thorough and detailed analysis of the financial aspects of the chosen companies.
