Interpret Capital Structure Theories and Applications: Evaluating Financial Performance of Chosen Co

For this assignment, you must first choose a publicly traded company that you want to analyze. It is recommended that you choose a company from an industry in which you have an interest. One way to find an annual report for a company is to search on www.annualreports.com. Reports are grouped by industries, public market exchanges on which listed and other filters.

Once you have chosen a company, find the organizations’ most recent annual report online. You can usually find the annual report on the company’s website in Investor Relations. Or, you can just conduct an Internet search on “’ company name’ annual report.” Your first task is to read the entire annual report, paying close attention to the Letter to Shareholders (perhaps a slightly different name, but usually the first few pages of the report in the form of a letter from the CEO or chairman of the board to the company’s stockholders).

Create a chart of financial ratios for your company of choice. Include the last 2 years of reported data found in the Annual Report.  If you cannot compute a specific ratio due to a lack of data, record N.A. for that ratio in that year in your chart.

Using these tables and the information you learned from reading the company’s annual report, complete a financial analysis of the company. Your report should use the following structure:

1.Company profile (written in your own words, this is a summary of what the company does, how long the company has been in existence, and information about future plans that you believe an outside reader should know about the company).

2.A table of ratios.  Use a single-spaced format for this table.

3.A written analysis of the ratio table – for three ratios (choose whichever you think are most interesting). Identify what you believe might be trends that indicate strengths or weaknesses.

4.A written analysis of the comparison of fiscal years for income statement found in the annual report, comparing the changes in key categories from the statements (e.g., total revenue, gross margin or profit, return on assets, research and development expenditures, total administrate costs). Identify what you believe might be trends that indicate strengths or weaknesses in the operations.

Your opinion of the overall financial and ethical health of the company. Discuss the company’s Statement of Condition as reported in the Letter of Opinion from the external auditors.

Your assignment should demonstrate thoughtful consideration of the ideas and concepts that are presented in the course and provide new thoughts and insights relating directly to this topic. Your response should reflect graduate-level writing and APA standards. Be sure to adhere to Northcentral University's Academic Integrity Policy.

Financial Analysis of Company

For this assignment, you are the head of the budget committee for the chosen company from your previous assignments. Create a chart to convey the information in a chart or graphic format for each of the three stated assumptions below. The assumptions below will become part/support for the company strategic plan being developed. Incorporate each of your charts into a narrated PowerPoint presentation for the full strategic development committee.

This mid-term assignment has three related parts:

1.Create pro forma statements for your chosen company for next year.

2.Estimate the sustainable growth rate for your company.

3.Perform a SWOT analysis on your company, using lessons you learned in Weeks 1 through 4 concerning microeconomics, macroeconomic, financial analysis, and financial forecasting.

Be sure your presentation includes the following details:

1.Estimate the sales growth rate for the company for the next annual accounting period. Explain each step of your estimation process.

a.Create proforma income statements and proforma balance sheets for your company for the next annual accounting period using the percent of sales method. Assume that all income accounts increase as a percent of sales, all asset accounts increase as a percent of sales, spontaneous liabilities increase as a percent of sales, and all financing accounts remain constant. The statements you create will be the initial round in order to determine the amount of working capital (cash, accounts receivable and inventory are the main categories of working capital) needed. Clearly identify what your statements indicate is the need for external short-term liabilities funds for the next annual accounting period (assume that current and quick ratios remain the same as prior years).

2.Estimate the sustainable growth rate for your organization. Assume that all income accounts increase as a percent of sales, all asset accounts increase as a percent of sales, spontaneous liabilities increase as a percent of sales, and all financing accounts remain constant. Also, assume that the company will pay the exact same dollar amount in dividends in the next annual accounting period that it paid during the most recent period. Be sure to describe all steps in the process and clearly indicate the growth rate (as a percentage) that you find.

b.Compare the sustainable growth rate you determined to the average annual growth rate in sales the company has had over the past 2 years. Is the average annual growth rate greater than or less than the sustainable growth rate? Assess this relationship.

3.Conduct a SWOT analysis of your company (much information about each of the SWOT elements will be found in the text description at the beginning to annual report). Use one of the many templates (tables) for SWOT that you can find online. Your SWOT analysis should include at least three entries for each element in the table. The entries should be some combination of microeconomic (related to demand for the product, cost functions, competition, etc.), macroeconomic (related to projected growth in the overall economy, inflation, unemployment, etc.), financial past (based on your analysis in week three), and projected financial future (based on your analysis in Week 4).

c.Write a one-paragraph description of each element in your SWOT table. Specifically indicate why you believe the chosen element is a Strength, Weakness, Opportunity or Threat.

Assume the chief financial manager for your public company has requested you prepare a PowerPoint presentation, which will be used to develop the structure of the optimum resource for your organization for the future. In the report, you are to address each of the critical considerations below for inclusion of a specific level of debt and equity to create the structure of the optimum resource for the balance sheet.

Create a PowerPoint presentation by incorporating explanatory notes below each slide, and then, develop a report on the financing decision that a publicly-traded corporation faces. Be sure your report addresses each of the following:

1.Evaluate the leverage implications of using different levels of debt to finance an organization. Include as a chart illustrating the impact of an increasing debt ratio on ROE (return on equity) for a given ROA (return on assets) and on risk, as represented by an increase in debt costs.

2.Explain the expected impact and importance of including each of the following in the capital structure debate: signaling theory, the constraining managers’ theory, the pecking order hypotheses, and the windows of opportunity theory.

3.Compare and contrast the level of debt choices that organizations tend to make during times of growth in GNP (Federal Reserve rates are relatively low) and times of GNP contraction (The Federal Reserve usually will increase interest rates in times of inflation, leading to a contraction in GNP usually). How do these choices often differ across a high growth industry (health care, energy, and high tech) and low growth industry (food, utilities)?