Conduct Financial Analysis
You will compose an Industry Financial Analysis Target (TGT), relative to the industry peer group and over time. It should not look as though it was divided up and then stapled together. You should be able to begin your analysis based on the calculations provided. (uploaded under file name CalculationsRatios)
The Task
Analyze the performance of Target (TGT) over time and versus the peer group using only the ratios, CAGRs and common size financials that you have constructed (the ratios and peer groups to be used have been uploaded), along with the provided industry peer group numbers. Do not use management’s or analyst’s interpretation or anything from the management discussion in the annual report. We want for you to do your own analysis first before you expose yourself to the “spin” that management is trying to sell. When you start with management’s interpretation, you are gullible to uncritically accepting the first interpretation that you encounter. This analysis is “strictly by the numbers”.
Discuss the firm’s strengths and weaknesses in each ratio category (profitability, asset turnover, leverage, solvency, and market), although not necessarily every ratio in a category. You will need the peer group comparison to make this analysis, as well as the changes in them over the analysis period to identify any trends (improvement or deterioration) in the firm’s performance. Use the common-size financials to gain additional insights into the firm’s performance as you “drill-down” behind interesting relationships. For example, if based upon the ratio you were to find that the firm’s profitability has changed over the last four years, use the common size financials and CAGRs to shed light on how and what has changed over time.
Finally, based on your analysis, identify the areas where you think that management should concentrate its efforts. These should be broad areas. Please note that I am looking for a descriptive diagnosis of the company’s financial condition and effectiveness of operations over time and compared to the industry peer group, not strategic prescription. In fact, any strategic prescriptions will be frowned upon.
Submission Specifications
The write-up should be a Word document in the following format (don’t play games):
- include a team name and assignment header
- single spaced;
- 12 point Times New Roman, Ariel or other standard font;
- one inch margins;
- no more than 5 pages in length, excluding attachments
- there is no need to attach ratios etc that were part of the requirements in Step #2, but if you do some other calculations, place those calculations in an attachment as part of the word document — do not send me a spreadsheet file.
- No introductory section describing your company is needed. You may assume that the reader is already familiar with the company
Make sure that you have a final section with a very few “residual messages” or “takeaways” — what do you want me to remember about your analysis?.
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