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Please use Google, ChatGPT or Bing whenever you see a word in bolde to learn mor
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Consulting Assignment
Your supervisor needs some help performing financial analysis concerning two companies—General Motors Company (GM) and Alphabet Inc. (GOOG). She asked you to:
1. Download each company’s annual income statements, balance sheets and cash flow statements for the last four fiscal years. Your supervisor suggested you get the financial statements on MarketWatch (https://www.morningstar.com). Enter each company’s stock symbol and then go to “Financials.” Export the statements to Excel by clicking the export button. Of course, you can always use other reliable sources and cite them accordingly.
2. Find historical stock prices for each firm for the dates of each financial statement. Your supervisor recommended you get the historical stock prices for each firm on Yahoo! Finance (https://finance.yahoo.com/). Enter the stock symbol, click “Historical Prices” in the left column, and enter the proper date range to cover the last day of the month corresponding to the date of each financial statement. Use the closing stock prices (not the adjusted close prices). To calculate the firm’s market capitalization (or market value of equity) at each date needed below, multiply the number of shares outstanding by the firm’s historical stock price. To get the number of shares outstanding (see “Basic” on the income statement under “Weighted Average Shares Outstanding”) by the firm’s historical stock price also on MarketWatch (www.morningstar.com).
3. For each of the four years of statements, compute the following ratios for each firm:
Profitability Ratios
Operating Margin equals Operating Income divided by Sales.
Operating Margin=Operating IncomeSales
Net Profit Margin equals Net Income divided by Sales.
Net Profit Margin=Net IncomeSales
Return on Equity equals Net Income divided by Book Value of Equity.
Return on Equity=Net IncomeBook Value of Equity
Financial Strength Ratios
Current Ratio equals Current Assets divided by Current Liabilities.
Current Ratio=Current AssetsCurrent Liabilities
Book Debt-to-Equity Ratio equals Total Debt divided by Total Equity.
Book Debt-to-Equity Ratio=Total DebtTotal Equity
Interest Coverage Ratio equals EBIT divided by Interest Expense.
Interest Coverage Ratio=EBITInterest Expense
Valuation Ratios
Price-Earnings (P/E) Ratio equals Market Capitalization divided by Net Income. Another way of calculating the P/E Ratio is by dividing the Share Price by Earnings per Share (EPS). Note: for EPS, use Diluted EPS Total.
P/E Ratio=Market CapitalizationNet Income=Share PriceEarnings per Share
Market-to-Book Ratio equals Market Value of Equity divided by the Book Value of Equity.
Market-to-Book Ratio=Market Value of EquityBook Value of Equity
Enterprise Value-to-EBITDA equals Enterprise Value divided by Earnings Before Interest, Taxes, Depreciation and Amortization.
Enterprise Value-to-EBITDA=Enterprise ValueEBITDA
Where EBITDA equals EBIT (Earnings Before Interest and Taxes) + Depreciation and Amortization.
EBITDA=EBIT+Depreciation and Amortization
While Enterprise Value = Market Capitalization + Debt – Cash. For Debt, include Long-Term Debt and Short-Term Debt. For Cash, include Marketable Securities.
Enterprise Value=Market Capitalization+Debt−Cash
4. Your supervisor told you she must conduct a comparative analysis using your calculated values. Thus, she asked you to obtain industry averages for each firm from Reuters.com (www.cnbc.com). Search for the stock symbol, click the “Peers” tab, then the “Key Measures” tab. (She told you to ignore the company’s column as your calculations will differ.) You wanted to impress her for future employment or letters of recommendation, so you told her you wanted to give the comparative analysis a shot to learn more about it.
NOTE: For GOOG, use GOOGL instead (Alphabet’s Class A stock vs. Class C). There is no data showing for GOOG Key Measures.
So, she asked you to:
Compare each firm’s ratios for the most recent year to the available industry ratios (automobile manufacturers and systems software).
Analyze each firm’s performance versus the industry and comment on trends in each firm’s performance. Identify any strengths or weaknesses you find in each firm.
Examine the Market-to-Book ratios you calculated for each firm. Which of the two firms can be considered “growth firms,” and which can be considered “value firms”?
Compare the valuation ratios across the two firms. How do you interpret the difference between them?
Consider the enterprise value of each firm for each of the four years. How have the values of each firm changed over time?
Your upload must consist of a well formatted, coloured, and labeled Excel workbook with formula present for all questions where calculations are expected (no static values) and a Word document written in the form of a letter to your supervisor and a draft letter for their client.
Hints given by the professor: Question 1: Set up your spreadsheet
Follow the instructions in the case study to obtain/download the financial data.
Create a new spreadsheet with a tab for each company’s data. Import the financial data for each company into the respective sheets/tabs, inserting income statements, followed by balance sheets, followed by cash flow statements.
Using the template as a guide (see suggested template), create two more tabs, one for each company.
You will reference any applicable values from the “data” sheets in your “template” sheets to perform your calculations and analysis.
Question 2: Use the template and the instructions in the case study to calculate the historical stock price and market capitalization.
Question 3: Use the template and the case study instructions for the financial calculations. Use Google or chatGPT to help identify the appropriate line item in the financial statements for for the calculations if needed.
Question 4: Follow the instructions in the case study to obtain industry average for the requested ratios. Enter the information in your template to assist with comparison. NOTE: For GOOG, use GOOGL instead (Alphabet’s Class A stock vs. Class C). There is no data showing for GOOG Key Measures
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