Corporate finance

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NIKE, INC  is the company of your choice.
Using the following steps, the attached samples ONLY as a guide and the attached project details to summarize all the information in no more than a 1-3 page written report and an appendix of tables. Incorporate the project detail questions into your the below steps respectively. It has to be 100 percent original work and no plagiarism allowed.
“It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Warren Buffett
Ideally, all investors and firms making decisions on financing and investing believe that they are making informed decisions. If this is true, there would be only winners in the markets and all investors/firms would make winning decisions, but that is clearly not the case.  It would be excellent to have firms/investors to be information-driven and not be just driven by market swings. In addition, it is not just having access to information but being able to interpret and make sound investment and financing decisions that makes a difference, but practice tells us that this is not the case many of the time. Sieving through a myriad of information and collate, summarize and interpret this information for decision making is a daunting and tedious task and requires careful analysis.
This raises several questions: What should an investor-centric analysis look like? What are the building blocks of an investor-centric analysis?
One of the key focus areas is for students to appreciate how financial data is collated and analyzed. You cannot analyze numbers in a vacuum and numbers by themselves (such as from financial statements) for any given year do not mean much unless patterns and interconnectedness are observed that indicate the company’s underlying business strategy and past and future decisions. Financial indicators vary from industry to industry; the ratios can only be interpreted when compared and contrasted with other companies in that industry.  Financial analysis is something of an art form.  Experienced managers such as Warren Buffet, George Soros to name a few, are investors and analysts who develop a data bank of information over time, and after analyzing many companies across industries, they can identify intuitively and after much research, undervalued firms.
This project provides an opportunity to get some hands-on experience applying some of the concepts in corporate finance theory to real firms. In the process, you will get a chance to
(a) understand the ownership patterns of a firm
(a) evaluate the risk profile of a firm, and examine the sources of risk.
(b) analyze its capital structure, and decide whether the firm is under or over leveraged.
(c) examine its dividend policy, and decide whether more or less should be paid in dividends
(d) Evaluate a company’s free cash flows and determine how they are interpreted.
(e) Evaluate a company’s ratios and determine how to use them to evaluate a firm
(f) Collate and analyze Research Analysts’ reports and other data on your firm and understand how to interpret and use them in valuing a firm.
These are some basic steps that you may use to do for the analysis but please understand a couple of issues.
Given the constraints of time and data, this is not by any means an exhaustive list. There are other more detailed steps that will be needed to get deeper into the meaning of the numbers. This is just a first step in that direction.
NIKE, INC  is the company of your choice.
Using the following steps, the attached samples ONLY as a guide and the attached project details, Summarize all the information in no more than a 1-3 page written report and an appendix of tables.
Step 1:  Find information about your company from yahoo finance, cnn money, google finance etc including ratios, betas and any other type of information that may help you understand the company you are analyzing. You do not calculate anything but gather data.
If you want, you can also acquire the company’s financial statements for the past three years from a company’s website or their recent annual report; in the company’s 10K filing on the SEC’s EDGARdatabase; or from other sources found at the library.  As a minimum, get the following statements, for at least 3 years.
•    Annual Report
•    Balance sheets
•    Income statements
•    Shareholders equity statements
•    Cash flow statements
Step 2:  Quickly scan all of the statements to look for large movements in specific items from one year to the next.
Create an excel sheet summarizing important financial information (not every asset/liability/equity item) from which you can glean patterns.
For example, did revenues have a big jump, or a big fall, from one particular year to the next?  Did total or fixed assets grow or fall?  If you find anything that looks very suspicious, research the information you have about the company to find out why.  For example, did the company purchase a new division, or sell off part of its operations, that year?
Step 3:  Review the notes accompanying the financial statements for additional information that may be significant to your analysis.
Step 4:  Examine the balance sheet.  Look for large changes in the overall components of the company’s assets, liabilities or equity.  For example, have fixed assets grown rapidly in one or two years, due to acquisitions or new facilities?  Has the proportion of debt grown rapidly, to reflect a new financing strategy?  If you find anything that looks very suspicious, research the information you have about the company to find out why.
Step 5:  Examine the income statement.  Look for trends over time.  Calculate and graph the growth of the following entries over the past several years.
·          Revenues (sales)
·          Net income (profit, earnings)
Are the revenues and profits growing over time?  Are they moving in a smooth and consistent fashion, or erratically up and down?  Investors value predictability, and prefer more consistent movements to large swings.
For each of the key expense components on the income statement, calculate it as a percentage of sales for each year.  For example, calculate the percent of cost of goods sold over sales, general and administrative expenses over sales, and research and development over sales.  Look for favorable or unfavorable trends.
For example, rising G&A expenses as a percent of sales could mean lavish spending.  Also, determine whether the spending trends support the company’s strategies.  For example, increased emphasis on new products and innovation will probably be reflected by an increased proportion of spending on research and development.
Look for non-recurring or non-operating items.  These are “unusual” expenses not directly related to ongoing operations.  However, some companies have such items on almost an annual basis.  How do these reflect on the earnings quality?
If you find anything that looks very suspicious, research the information you have about the company to find out why.
Step 6:  Examine the shareholder’s equity statement.  Has the company issued new shares, or bought some back?  Has the retained earnings account been growing or shrinking?  Why?  Are there signals about the company’s long-term strategy here?
If you find anything that looks very suspicious, research the information you have about the company to find out why.
Step 7:  Examine the cash flow statement, which gives information about the cash inflows and outflows from operations, financing, and investing.
While the income statement provides information about both cash and non-cash items, the cash flow statement attempts to reconstruct that information to make it clear how cash is obtained and used by the business, since that is what investors and creditors really care about.
If you find anything that looks very suspicious, research the information you have about the company to find out why.
Step 8:  Find information about your company from yahoo finance, cnn money etc including ratios, betas and any other type of information that may help you understand the company you are analyzing. You do not need to do as much calculating as much as gathering of data.
•    Obtain data for the company’s key competitors, and data about the industry.
•    Review the market data you have about the company’s stock price, and the price to earnings (P/E) ratio.
Try to research and understand the movements in the stock price and P/E over time.  Determine in your own mind whether the stock market is reacting favorably to the company’s results and its strategies for doing business in the future.
•    Review the evaluations of stock market analysts.  These may be found at any brokerage site, or from various locations on yahoo, cnn money and other finance sites.
Step 9:  Review all of the data that you have generated.  You will probably find that there is a mix of positive and negative results.  Answer the following question:
“Based on everything I know about this company and its strategies, the industry and the competitors, and the external factors that will influence the company in the future, do I think this company is worth investing in for the long term?” Explain why based on the data that you present.
Step 10: Summarize all the information in no more than a 1-3 page written report and an appendix of tables.
 

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