Selected company is 3M. The purpose of this paper is to help glean important com
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Selected company is 3M.
The purpose of this paper is to help glean important competitive information from a company’s financial statements in your chosen industry. You will read the financial statements, calculate ratios, analyze your findings, and draw some conclusions based on your analysis.
Write a 4 page paper using a business in your chosen industry from which you can get the balance sheet, income statement, and cash flow statement. All publicly traded companies must publish their financial statements. If you cannot find a publicly traded company in your industry, and you have no access to financial statements from a privately held company, broaden the scope of your industry and choose a publicly traded business that is similar in some ways to the one you wanted to research. Begin your paper with an introduction
Explain which company you are analyzing, in what industry this company belongs, and why you chose this one. Explain that this paper will use financial statements and ratios to create a financial analysis.
Use section headings throughout the rest of the paper as indicated:
Key financial information
For each of the following terms, look on the most recent annual financial statement of your company where the requested term is found, state the amount and the amount from one year prior. Write two or three sentences about the numbers, whether they increased or decreased, and what that tells you about the company.
Net Profit or Loss
Review the classification of ratios in Chapter 3. Choose three ratios that would be important for analyzing a company in your industry and say why. Give a brief definition of each of the three ratios you chose, and explain how the ratio is calculated (e.g. “divide the cost of goods sold, found on the income statement, by the inventory, found on the balance sheet”). Calculate in your paper each of the three ratios using the financial statements you found for the company. Show your work. You should come up with a quotient (the answer to the division problem) for each ratio that you can compare to the industry average.
In analyzing a company’s financial health, remember that you are providing an analysis for the investors or the owners to see whether their investment is a good one. Compare your calculation of each ratio with the industry average. If you cannot find an average for your industry, find 2 other similar businesses, calculate their ratios, and average them. That can be used as your industry average. Discuss possible reasons for the variance, whether higher or lower than yours. The notes section of the financial statements often shed light on increases and decreases.
Using your ratios, discuss what you have learned about the company based on these ratios. Additional Information
Numbers don’t tell the whole story. What other information would you want to know in order to complete your analysis? Think about anything that could affect the company, from new competition moving in to changing demographics, to the economic situation, new regulations or a change in insurance or even newly announced potential acquisitions. Look for articles in the Wall Street Journal or another credible business publication that would shed some light on these areas.
Bring a key point of each of your sections into the conclusion, showing how the ratios tie in with the key financial information as well as the additional information you were able to find. Make your best recommendation as to whether this company is worthy of investment. Make the conclusion robust and support your recommendation. The conclusion is not a summary; it is a synthesis of the components of your analysis. Please use and cite your textbook, the financial statements of the company you researched, and at least one additional source, using correct APA format. This paper should be written exclusively in the third person. Important note: Do not simply look online for a professional analysis of the company you chose. You must demonstrate in your paper that you did your own analysis, thought critically about the story told by the information, and drew your own conclusions.