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Memo
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.
Comparative
Financial 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 (see
Discourse 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 (see
Discourse 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 (see
Discourse 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 (see
Discourse 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 (see
Discourse 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 on
projected 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 the
instructions for creating an index and graph; see the
sample 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.:
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company Value Line sheets
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company Income Statements
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company Balance Sheets).
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table
with ratio calculations of the two companies' financial performance
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Relative Valuation Exhibit.
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index and graph of your company's stock price performance vs. the S&P
500.
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copy of the event/announcement that affected the company's stock price.
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extra credit: Auditors' opinion
©
Christine Bauer-Ramazani
This page was last updated:
Monday, April 15, 2013
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