Explain the company’s value proposition and how it makes or will make money

Part 1(1page): Overview and competitive landscape

Briefly explain the company’s history. What is the business model of the company? Explain the company’s value proposition and how it makes or will make money. Analyze its main success and risk factors. Discuss the nature of barriers to entry, either to close competitors (to be named) or potential competitors that may penetrate the market. Discuss its recent strategic orientation or any current strategic choice/debates it is currently facing. What is its main strategic challenges?

Part 2 (1 page): Capital structure

Discuss the financial structure of the firm: how much debt relative to equity is the company using? What  is,  in  your  opinion, the  optimal  amount  of  debt  that  the  company  should  use? In  certain  cases,  for example, a company may be very close to being non-investment grade (check its debt rating) and be at risk of losing  its  investment  grade  status;  or  it  may  be  more  highly  levered  than  its  peers  or  relative  to  its  free  cash flows  or  cash  flow  from  operations.  These  may  indicate  situations  in  which  the  company  may  be  better-off reducing leverage.

 In other cases, a company  may have very  favorable credit ratios which  may indicate under-utilization of debt. Consider  whether  the  company  is  in  a  position  to  borrow  more  without  severely  hurting  its  debt  rating? Compare  ratios  in  lecture  3  and  evaluate  how  much  extra  debt  the  company  may  use.    You  may  want  to reconnect your recommendation about debt capacity to your forecasted business plan for the next 5 to 10 years –will the company have enough cash on hand to pay the extra debt?

 Is the company growing? If it is growing, evaluate how much capital it will need and discuss a financing plan (which  may  include  equity).  If  the  company  is  not  growing  or  is  mature,  examine  how  much  cash  it  is generating and discuss its planned uses of cash? How much of it should it invest, how much should it return to shareholders in dividends or share repurchase?