analyze different aspects of corporate finance policies and to assess

analyze different aspects of corporate finance policies and to assess

Subject: Business    / Finance   
Question

What is this project?

The purpose of this project is to analyze different aspects of corporate finance policies and to assess the effect of these policies on the value the managements of these firms create for their shareholders.

This project also provides an opportunity to get some hands-on experience applying corporate finance theory and models to real firms. In the process, you will get a chance to:

a) evaluate its investment decisions, and decide whether the investment has created value to the firm
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

How is the project structured?

This is a group project.
Your group will pick TWO companies to analyze. The companies should be publicly traded and have at least two years of trading history and one set of annual financial statements. The company can be listed in any market.
The chosen companies must be in the same industry for valid comparison.
Your group will be responsible for doing the entire analysis for the company that the group has chosen.
At the end of the process, the group will write one report for all the firms involved in the analysis. In this report, the firms will be compared and contrasted and the results will be presented as a whole rather than as separate parts.

How will the project be graded?

Each group will receive one grade and every group member will receive the same grade.
No attempt will be made to allow for intra-group differences in effort.

Project Description

This project covers everything we will be doing in class. I have listed some of the key questions that you will be answering. Note that these questions are not meant to be comprehensive and you can add on interesting questions that need further explanation.

Executive Summary
•Summarize all three major items in this project (investment decisions, capital structure and dividend policy) as per analysis.

Introduction
•Provide brief descriptions of the companies (their background, type of business and industry in which they operate, financial performance etc)

Investment Decisions
• What are the different investments that this company has undertaken in the previous years?
• Do these investments are considered as good or bad investments?
• Given this firm’s characteristics, would you recommend any particular investments that could give more returns for the firm?
• How does this firm's investment return compare to those of its peer group and to the rest of the market?

Capital Structure Choices

• What are the different kinds or types of financing that this company has used to raise funds? Where do they fall in the continuum between debt and equity?
• How large, in qualitative or quantitative terms, are the advantages to this company from using debt?
• How large, in qualitative or quantitative terms, are the disadvantages to this company from using debt?
• From the qualitative trade off, does this firm look like it has too much or too little debt?

Dividend Policy

• How has this company returned cash to its owners? Has it paid dividends, bought back stock or spun off assets?
• Given this firm's characteristics today, how would you recommend that they return cash to stockholders (assuming that they have excess cash)?

A Framework for Analyzing Dividends

• How much could this firm have returned to its stockholders over the last few years? How much did it actually return?
• Given this dividend policy and the current cash balance of this firm, would you push the firm to change its dividend policy (return more or less cash to its owners)?
• How does this firm's dividend policy compare to those of its peer group and to the rest of the market?

Example of the industry you can analyze:

1) An Analysis of the Technology Companies
2) An Analysis of the Beverage Industry
3) An Analysis of the Computer Industry
4) An Analysis of the Materials Industry
5) An Analysis of Oil Companies
6) An Analysis of Food Companies
7) An Analysis of Entertainment Companies
8) An Analysis of Airlines Companies
9) An Analysis of Automobile Companies

 

the project has to contain

more that 20 pages