{"id":426108,"date":"2018-09-15T20:18:53","date_gmt":"2018-09-15T20:18:53","guid":{"rendered":"https:\/\/acemystudy.com\/?p=2537"},"modified":"2018-10-24T08:56:43","modified_gmt":"2018-10-24T08:56:43","slug":"financial-management-you-are-the-head-of-financial-analysis-for-a-holding-company-with-significant-liquidity-and-a-strong-appetite-for-portfolio-acquisitions","status":"publish","type":"post","link":"https:\/\/www.benedictsol.com\/blogs\/financial-management-you-are-the-head-of-financial-analysis-for-a-holding-company-with-significant-liquidity-and-a-strong-appetite-for-portfolio-acquisitions\/","title":{"rendered":"Financial management. You are the head of financial analysis for a Holding Company, with significant liquidity, and a strong appetite for portfolio acquisitions."},"content":{"rendered":"<p>&nbsp;<\/p>\n<p><strong>Overview<\/strong><\/p>\n<p>You are the head of financial analysis for a Holding Company, with significant liquidity, and a strong appetite for portfolio acquisitions. \u00a0Your mandate is to either take control of a company, or purchase enough shares to get representation on the board.\u00a0 You have been told to analyze a potential acquisition.<\/p>\n<p>&nbsp;<\/p>\n<p>Please analyze and discuss the company and its industry, from the perspective of a potential shareholder.<\/p>\n<p>&nbsp;<\/p>\n<p>Your final product will be a report that shows your various analyses, discusses the pros and cons, and ultimately recommends either going ahead with the acquisition, or not. (Please see discussion of Content, below.)<\/p>\n<p>&nbsp;<\/p>\n<p>You will be rewarded by your senior manager based on the logic of your conclusion, and how well supported it is.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Guidelines<\/strong><\/p>\n<ul>\n<li>This is an individual assignment.<\/li>\n<li>You must choose one of the companies from the attached list.<\/li>\n<li>You must use the most recent, publicly available information and financial statements. This information should be readily available online, as well as or from industry reference books, such as Dun\u00a0&amp;\u00a0Bradstreet, Moody\u2019s or Value\u00a0Line. Refer to the Bobst Library for additional resources.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Content<\/strong><\/p>\n<p>The following items are <strong>required<\/strong> to be incorporated into your report, each in a section of its own.<\/p>\n<p>&nbsp;<\/p>\n<ol>\n<li>Present a <strong>high-level overview<\/strong> of your target company and its industry. <u>Focus on the key drivers of success (i.e., shareholder value maximization), including products, markets, ability to capture market share and competition.<\/u> (5% of Term Paper grade)<\/li>\n<\/ol>\n<p><em>The purpose of this section is only to provide <strong><u>context<\/u> for your financial analysis<\/strong>. <u>It may not exceed 1\u20112 pages<\/u>.<\/em><\/p>\n<p>&nbsp;<\/p>\n<ol>\n<li>Perform a detailed <strong>ratio analysis<\/strong> of your target company, <em>specifically from the perspective of a shareholder.<\/em> (30% of Term Paper grade)<\/li>\n<\/ol>\n<ul>\n<li>Perform both <u>trend<\/u> (company historical) and benchmarking (<u>industry<\/u>) analyses. Present 2 or more ratios for <u>each<\/u> of the five types of ratio, showing the three most recent years for your target company, and the industry average for at least the most recent of those years. You do NOT need to calculate the ratios, if you can find them elsewhere.<\/li>\n<li>Explain the <u>implications<\/u> of these ratios on the company, and comment critically on the <u>direction<\/u> of the trends, and <u>why<\/u> the company\u2019s ratios may differ from the industry average. <strong><em>This is the most important element of the ratio analysis<\/em>.<\/strong> Cite specific examples from the analysis above to support your comments. For instance, \u201cThe company\u2019s liquidity seems adequate, as both the Current Ratio and Quick Ratio have been relatively steady over the last three years, and are currently slightly above industry averages of 2.4 and 1.3, respectively.\u201d<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<ol>\n<li>Develop <strong>projected Income Statements<\/strong> for each of the next <u>three years<\/u>. (25% of Term Paper grade)<\/li>\n<\/ol>\n<ul>\n<li>Project annual revenues based on any reasonable sales forecast, but <strong>explain<\/strong> your thinking. For example, \u201cI expect sales to grow 1.4% per year, compared to the average growth over the last three years of 1.2% per annum, due to the recent expansion into Sweden and Norway.\u201d Be sure to explain your rationale.<\/li>\n<li>Project the major Expense lines, <u>based on what should be driving the expenses<\/u>. For example: \u201cCost of Goods Sold is expected to rise at the same rate as the increase in Sales.\u201d \u201cAdministrative Expense is expected to grow at the overall rate of inflation, which I project to be 1% per year.\u201d \u201cIncome Tax is expected to remain at the same rate as the previous year of 36.2% of Pre-Tax Income.\u201d<\/li>\n<\/ul>\n<p><strong><em>Your explanations of the revenue and expense drivers are the most important element of the income statement projection.<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<ol>\n<li>Use the Dividend Growth model to calculate a <strong>valuation for the company\u2019s stock<\/strong>. (15% of Term Paper grade)<\/li>\n<\/ol>\n<ul>\n<li>Assume the dividend will grow at the <em>average rate of change<\/em> in your projected Net Income over the next three years.<\/li>\n<li>Assume the required return is 3% <u>higher<\/u> than the dividend growth rate. Thus, if the calculated growth rate of Net Income over the next three years is 6.2%, then assume a required return of 9.2%<\/li>\n<li>Compare your calculated valuation to the Company\u2019s <u>current<\/u> stock price, and comment on any significant variation.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<ol>\n<li>Finally, make a specific investment recommendation regarding the acquisition of the target\u2019s <u>bonds<\/u>, <u>stock<\/u>, <u>neither<\/u>, or <u>both<\/u>? You should <u>primarily base this on the financial analyses<\/u> you\u2019ve done. <em>Please give your reasons, with specific references to all the above analyses<\/em>. For example, \u201cThe Company\u2019s profitability ratios handily exceed the industry average, and the company\u2019s liquidity seems adequate, based on its Current Ratio of \u2026Therefore, I recommend acquisition of the company\u2019s bonds. However, the projected Income Statements show declining profitability, and the current stock price is 12% higher than the valuation of the Dividend Growth model\u2026Therefore, I do not recommend acquiring the Company\u2019s stock at the current price\u201d (20% of Term Paper grade)<\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<p>An additional 5% of Term Paper grade is for Presentation (professionally written, lack of typos; use of supporting tables and graphs, as appropriate; etc.)<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Administrative Items<\/strong><\/p>\n<ul>\n<li>Please keep the paper<strong> finance\u2011oriented.<\/strong><\/li>\n<li>The paper can be a <strong>maximum<\/strong> of 20 pages long, <em>including<\/em> tables, charts, graphs, and appendices.<\/li>\n<li>Please double-space, using Arial 12\u2011pt. font, to make the paper more manageable.<\/li>\n<li>You may include an Executive Summary of your report on the first page (<em>optional<\/em>).<\/li>\n<li>Please include any tables, charts and graphs you wish. You must include a bibliography stating your sources. <em>Everything except the Bibliography is included in the 20 page maximum<\/em>.<\/li>\n<li>Please upload your completed term project to the <strong>Term Paper<\/strong> assignment by the posted due date and time. Please name your file \u201c<strong>Lastname, Firstname Term Paper<\/strong>\u201d.<\/li>\n<li>Your paper must be in either PDF or Word format.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>&nbsp; Overview You are the head of financial analysis for a Holding Company, with significant liquidity, and a strong appetite for portfolio acquisitions. \u00a0Your mandate is to either take control of a company, or purchase enough shares to get representation <a href=\"https:\/\/www.benedictsol.com\/blogs\/financial-management-you-are-the-head-of-financial-analysis-for-a-holding-company-with-significant-liquidity-and-a-strong-appetite-for-portfolio-acquisitions\/\" class=\"read-more\">Read More &#8230;<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-426108","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/426108","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=426108"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/426108\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=426108"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=426108"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=426108"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}