Measuring a Firm’s Health

Project Overview

Financial analysis is about measuring the progress of a business. You  will need to be familiar with the various forms of financial  statements, analysis, and metrics. With financial analysis, you are able  to, for example, evaluate the firm’s financial performance against its  competitors’. This project will introduce some of the common components  that go into financial analysis.

Due Date

Your final project is due in Module 06. There will be individual assignments along the way. The module they are due is noted in the time line below.

Time Line





Measuring a Firm’s Health through Financial Metrics


Valuing Bonds and Stocks 


Risk and Return


A Firm’s Investment Policy


Evaluating a Firm’s Health


You will pick a company of your choice to analyze. Select a company  that has been public for at least three years. ( a company like walmart, microsoft, target, etc) Assume that your role is a  financial analyst and your boss asked to evaluate the company’s health.  Your project will be the report you will submit to your boss.

Your final paper must be 5 – 10 pages long, with additional pages for the data. The sections to include are:

  • A brief description of your company
  • Financial statement analysis, including ratio analysis and industry comparison
  • Capital investment strategies (stocks and bonds)
  • Risk management
  • Capital structure
  • M&A
  • Summary

Each section should be at least one page. Include both in text  citations and a References page (minimum of three distinct sources; a  mix of web pages, journals, and databases, for example) in APA format.  Also remember that your final paper should have a cover page and table  of contents.

Part 1)   Measuring a Firm’s Health through Financial Metrics..

Knowing how to work with the numbers in a company’s financial  statements is an essential skill for financial managers. In this part of  the course project assignment, explain your company’s financial  statements.

There are three main financial statements: (1) balance sheets, (2)  income statements, and (3) cash flow statements. Balance sheets show  what a company owns and what it owes at a fixed point in time. Income  statements show how much money a company made and spent over a period of  time. Cash flow statements show the exchange of money between a company  and the outside world also over a period of time.

In this assignment, briefly describe your company. Using the lectures  and any available resources as your guide, describe what information  you can glean from your company’s financial statements. You can include,  for example, the trend over the last few years, the profit generator  (which assets?) and the use of debt and equity. At least three metric  calculations should be included. Be sure you touch on all three  statements.

Your submission should be at least a page.

Part 2)   Valuing Bonds and Stocks..

Dividend policy of a company can tell you a lot about what the  management thinks of the current situation and what it sees upcoming in  the future. Many companies use debt to finance operations. By using  leverage, a company can invest in its operations without increasing its  equity.

In  this section of your course project, describe the sources of  financing  available for your company. What does it  tell you? Do agree  or disagree that your company makes use of the best possible  source of  financing? Why? Explain your reasoning backed up with data or   calculations.

Your submission should be at least one page of written analysis and additional page(s) for the data and calculations.

Part 3)  Risk and Return..



Risk analysis is important in making capital investment decisions  because of the large amount of capital involved in many facets of the  business. For example, an investment in properties and equipment  involves decisions based on the long-term prospect of the business.

For this section, describe some of the risks to which your company is  exposed. What is the nature of the risk? What are some of the firm’s  risk management plans?

Also include your CAPM calculations and analysis.

Your submission should be at least one page.

Part 4)  A Firm’s Investment Policy..


Cost of capital is the rate of return required to make an investment  in a project worthwhile. Financial managers must know the cost of  capital to make capital budgeting decisions and to establish the optimal  capital structure. The module covered the computation of the cost of  capital as the weighted average of various capital components.

For this assignment, describe your WACC computation. Explain how you  found the rate of each element of the capital (rate of return on stock,  for example). Comment on the value of the WACC.

Capital structure is the mix of resources used by the firm. The  primary objective is to maximize the market value of the firm through an  appropriate mix of long-term resources, thus minimizing the firm’s cost  of capital. Examine your company’s capital structure. Is the firm  mixing the resources well? Explain.

Your submission should be at least one page long. Include the calculations and relevant data.