Question

Southern New Hampshire University FIN 325 Final Project Milestone Four Guidelines and Rubric Overview: The final project for this course is the creation of a financial statement analysis. A business's financial statements offer important insights into its performance and financial health that help guide internal managers' and external investors' resource allocations. For a financial analyst, being able to accurately read and interpret these statements is a critical tool in making sound recommendations to clients or company executives. Analysts also need to understand how the limitations of these statements and the legal and ethical obligations that underpin them impact business decisions. Prompt: For this milestone, you will submit a draft of a portion of the analysis step, Section F: Benchmarks. You will analyze your chosen company's performance relative to the industry. You will be expected to find one peer company that operates in the industry of your chosen company and perform a side- by-side analysis of the same ratios you performed in Milestone Three. You may use the Yahool Finance and the U.S. Securities and Exchange Commission websites to gather the information for the peer company. Specifically the following critical elements must be addressed: Analysis. Use this section to present your findings based on quantitative and qualitative analysis of the financial statements. Include a copy of the II. financial statements and any ratios or analysis in an appendix as support for your discussion. In particular, this section should cover: Benchmarks. Analyze the company's performance relative to the industry average. The average should refer to the same period as the financial statements being analyzed (or as close as possible). Specifically, you should answer: 1. Why is benchmarking important in analyzing financial statements and evaluating a company's overall performance? In other words, does analyzing a specific company's financial statements in isolation provide you with sufficient information for analyzing its overall performance? Why or why not? 2. What do benchmarking comparisons tell you about how the selected company is performing relative to industry peers? Support your answer with specific examples from your analysis and industry research. 3. How do your company's financial statements compare to industry standards in terms of legally and ethically communicating necessary information to stakeholders? Justify your response using specific examples and referencing relevant legal and ethical guidelines.

Oracle Corporation (ORCL) Income Statement

All numbers in thousands

Revenue	5/31/2018	5/31/2017	5/31/2016	5/31/2015
Total Revenue	39,831,000	37,728,000	37,047,000	38,226,000
Cost of Revenue	8,081,000	7,469,000	7,479,000	7,532,000
Gross Profit	31,750,000	30,259,000	29,568,000	30,694,000
Operating Expenses
Research Development	6,091,000	6,159,000	5,787,000	5,524,000
Selling General and Administrative	9,720,000	9,373,000	9,039,000	8,732,000
Non Recurring	-	-	-	-
Others	-	-	-	-
Total Operating Expenses	25,512,000	24,452,000	23,943,000	23,937,000
Operating Income or Loss	14,319,000	13,276,000	13,104,000	14,289,000
Income from Continuing Operations
Total Other Income/Expenses Net	-1,428,000	-1,759,000	-1,662,000	-1,455,000
Earnings Before Interest and Taxes	14,319,000	13,276,000	13,104,000	14,289,000
Interest Expense	-2,025,000	-1,798,000	-1,467,000	-1,143,000
Income Before Tax	12,891,000	11,517,000	11,442,000	12,834,000
Income Tax Expense	9,066,000	2,182,000	2,541,000	2,896,000
Minority Interest	498,000	386,000	501,000	435,000
Net Income From Continuing Ops	3,825,000	9,335,000	8,901,000	9,938,000
Non-recurring Events
Discontinued Operations	-	-	-	-
Extraordinary Items	-	-	-	-
Effect Of Accounting Changes	-	-	-	-
Other Items	-	-	-	-
Net Income
Net Income	3,825,000	9,335,000	8,901,000	9,938,000
Preferred Stock And Other Adjustments	-	-	-	-
Net Income Applicable To Common Shares	3,825,000	9,335,000	8,901,000	9,938,000

Oracle Balance Sheet

All numbers in thousands

Period Ending	5/31/2018	5/31/2017	5/31/2016	5/31/2015
Current Assets
Cash And Cash Equivalents	21,620,000	21,784,000	20,152,000	21,716,000
Short Term Investments	45,641,000	44,294,000	35,973,000	32,652,000
Net Receivables	6,081,000	6,094,000	6,201,000	6,435,000
Inventory	398,000	300,000	212,000	314,000
Other Current Assets	-	-	-	-
Total Current Assets	75,964,000	74,515,000	64,313,000	62,520,000
Long Term Investments	29,000	40,000	122,000	74,000
Property Plant and Equipment	5,897,000	5,315,000	4,000,000	3,686,000
Goodwill	43,755,000	43,045,000	34,590,000	34,087,000
Intangible Assets	6,670,000	7,679,000	4,943,000	6,406,000
Accumulated Amortization	-	-	-	-
Other Assets	4,949,000	4,397,000	4,212,000	4,130,000
Deferred Long Term Asset Charges	1,491,000	1,143,000	1,291,000	1,458,000
Total Assets	137,264,000	134,991,000	112,180,000	110,903,000
Current Liabilities
Accounts Payable	529,000	599,000	504,000	806,000
Short/Current Long Term Debt	4,498,000	9,797,000	3,750,000	1,999,000
Other Current Liabilities	12,379,000	11,816,000	10,988,000	10,562,000
Total Current Liabilities	19,195,000	24,178,000	17,208,000	15,206,000
Long Term Debt	56,279,000	48,303,000	40,323,000	39,959,000
Other Liabilities	15,566,000	8,264,000	6,859,000	6,640,000
Deferred Long Term Liability Charges	-	-	-	-
Minority Interest	498,000	386,000	501,000	435,000
Negative Goodwill	-	-	-	-
Total Liabilities	91,040,000	80,745,000	64,390,000	61,805,000
Stockholders' Equity
Misc. Stocks Options Warrants	-	-	-	-
Redeemable Preferred Stock	-	-	-	-
Preferred Stock	-	-	-	-
Common Stock	28,950,000	27,065,000	24,217,000	23,156,000
Retained Earnings	18,412,000	27,598,000	23,888,000	26,503,000
Treasury Stock	-1,636,000	-803,000	-816,000	-996,000
Capital Surplus	-	-	-	-
Other Stockholder Equity	-1,636,000	-803,000	-816,000	-996,000
Total Stockholder Equity	45,726,000	53,860,000	47,289,000	48,663,000
Net Tangible Assets	-4,699,000	3,136,000	7,756,000	8,170,000

Oracle Cash Flow

All numbers in thousands

Period Ending	5/31/2018	5/31/2017	5/31/2016	5/31/2015
Net Income	3,825,000	9,335,000	8,901,000	9,938,000
Operating Activities, Cash Flows Provided By or Used In
Depreciation	2,027,000	1,791,000	1,950,000	2,861,000
Adjustments To Net Income	1,116,000	1,116,000	1,205,000	768,000
Changes In Accounts Receivables	-117,000	18,000	96,000	208,000
Changes In Liabilities	-90,000	498,000	663,000	902,000
Changes In Inventories	-	-	-	-96,000
Changes In Other Operating Activities	-276,000	-24,000	-2,000	-387,000
Total Cash Flow From Operating Activities	15,386,000	14,126,000	13,685,000	14,580,000
Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures	-1,736,000	-2,021,000	-1,189,000	-1,391,000
Investments	-2,165,000	-8,252,000	-3,315,000	-11,417,000
Other Cash flows from Investing Activities	-	-	-	-
Total Cash Flows From Investing Activities	-5,625,000	-21,494,000	-5,154,000	-19,047,000
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid	-3,140,000	-2,631,000	-2,541,000	-2,255,000
Sale Purchase of Stock	-	-	-	-
Net Borrowings	2,643,000	13,638,000	1,750,000	18,342,000
Other Cash Flows from Financing Activities	-34,000	-258,000	-85,000	-196,000
Total Cash Flows From Financing Activities	-9,982,000	9,086,000	-9,980,000	9,606,000
Effect Of Exchange Rate Changes	57,000	-86,000	-115,000	-1,192,000
Change In Cash and Cash Equivalents	-164,000	1,632,000	-1,564,000	3,947,000

Liquidity Ratios　

1. Current Ratio = Current Assets / Current Liabilities　
2. Quick Ratio = (Current Assets − Inventory) / Current Liabilities

Leverage Ratios

1. Long-term Debt/Equity Ratio = Long-term Debt / Equity

2. Total Debt/Equity Ratio = (Short-term Debts + Long-term Debts) / Equity

Profitability Ratios

1. Net Profit Margin = Net Profit after Taxation / Sales
2. Operating Profit Margin = Operating Profit / Sales
3. Return on Equity = Net Profit after Taxation / Equity
4. Return on Total Assets = Net Profit after Taxation / Total Assets
5. Return on Capital Employed = Net Profit after Taxation / (Total Assets − Current Liabilities)

Efficiency Ratios

1. Inventory Turnover = Sales / Inventory
2. Assets Turnover = Sales / Total Assets

　

Market Value Ratios

1. Price Earning Ratio = Current Stock Price / Earnings Per Share (EPS)

Other Fundamental Indicators

1. Earnings Per Share (EPS) = Net Profit after Taxation / Issued Common Shares
2. Net Asset Value (NAV) = (Total Assets − Total Liabilities) / Issued Common Shares

****The calculations that need to be done are for the following date/year: For the year ending 12/31/2018, no need to calculate the ratios for any other years*****

Answer 1

I would share the analysis details with short and crisp way. You may present it the way you need. I would run out of time to go in detail for the stock, I would love to as this is the area of my research. Comment down below in case you need any more help on this.

Stock Analysis:

Revenue: up 5.57% : +ve

Gross Profit: up 4.7% : +ve

Operating Profit: up 7.5% : +ve

EBT: up 12.17% : +ve

EAT or NI: down 60% : +ve (as the net borrowing in Cash Flow is down by 80% that means the interest expense is gonna come down heftily adding on to the NI from next FY)

Liquidity Ratios:

Current ratio: (75.96/19.2) = 3.95 : +ve

Quick Ratio: ((75.96 - 3.98)/19.2) = 3.75 : +ve

- Company is having sufficient cash to handle the liquidity crunch

Leverage Ratios:

LT Debt/Equity: (56.28/45.72) = 1.23 : +ve

Total D/E: ((4.5+56.28)/45.72) = 1.33 : +ve

- Company is having sufficient Debt and Equity proportion

Profitability Ratios:

NProfit Margin: (3.83/39.83) = 9.62 : Not so impressive when looked with respect to previous year. When the borrowing taken into consideration, then it is good enough.

OProfit Margin: (14.32/39.83) = 35.95 : +ve highly impressive. Company is operating at almost 35% of the cost that it is charging to its client.

RoE: (3.83/45.73) = 8.37 : +ve. This states the company is at maturity level and maintaining its dignity in the market.

RoA: (3.83/137.26) = 2.80 : -ve. This means the company is not generating enough revenue from the assets. Remember for a company in IT industry its major assets are its employees.

RoCE: (3.83/(137.26-19.2)) = 3.24 : This again shows the company is in the maturity stage. Well the company is capable enough to generate a two digit return on capital when checked previous year's data.

Efficiency Ratios:

Inventory TO: (39.83/3.98) = 10 : +ve. This states the sales team of the company is putting significant effort.

Asset TO: (39.83/137.26) = 29 : Not so impressive. This states the company is not utilizing its assets efficiently.

Market Value Ratios:

PE Ratio: Information Not Available

Other Ratios:

EPS: Information Not Available

NAV: Information Not Available

Hope this helps. In case you find it helpful then give a thumbs up.