Analyze the financial performance of a company to make recommendations to potential investors about the purchase of stock.
Studying all aspects of a company’s financial statements is necessary in order to understand the financial performance and health of a company. This is particularly important for investors trying to determine whether or not to buy stock in the company.
An investor has approached you about whether or not purchasing stock in the company would be a wise investment. Using your financial analysis of the company, you will send a letter to the investor summarizing your findings and explaining whether you recommend a stock purchase at this time.
You will use information in the Form 10-K for the company you selected in the Topic 1 to complete this assignment. Using the correct formulas and a separate tab for each analysis, calculate the following ratios using Excel:
Three liquidity ratios for the past 3 years
Three solvency ratios for the past 3 years
Three profitability ratios for the past 3 years
Conduct research about a competitor company within the same sector using IBIS World and other topic resources. Complete a competitor analysis that includes a minimum of three ratios and compares your company to a competitor company using these ratios to determine financial performance as well as how the company rates compared to overall industry averages. Be prepared to justify your analysis by explaining your findings.
Using your research findings and analysis of company performance in relation to industry competitors, construct a 250-500 word letter making stock purchase recommendations for a potential investor. In the letter, address the following, referencing specific ratios and comparative numbers as appropriate.
Discuss the overall financial performance of your company in relation to industry averages and a specific competitor. Explain whether the company performed better or worse than the competition using specific numbers and providing an explanation of what the numbers illustrate.
Recommend whether the potential investor should purchase stock in your company and justify your recommendation based upon your research and analysis of the company ratios and industry competition.
Submit the Excel file that contains your ratios and the Word file letter to your instructor.