Building a Financial Analysis of an Organization

I. Preparation a. Find your industry on Standard and Poor’s Net Advantage website. Read carefully the “Key Industry Ratios and Statistics” and “How to analyze……” sections. b. Print your organization’s most recent annual report and read through it carefully, including the footnotes to the financial statements. c. Read the “Analyst’s Research” page on your organization available on Morningstar Library Edition.

II. Assemble/Compile Raw Materials a. Spread and common-size three years of FYE financial statement data b. Identify 6-10 financial ratios that you believe are relevant to understanding the organization’s financial condition. There should be at least one ratio for each of the categories identified in your text. Calculate (or find) the ratios for the organization for the last three FYEs. Place these on an easily understood chart. c. Identify at least three industry specific metrics that are important to helping you understand the organization. Document the three metrics for, at least, the most recent fiscal year end in an easily understandable chart – more if you can capture it. Among other places, this data is often available on the “Key Industry Ratios and Statistics” page on the Standard and Poor’s Net Advantage” website

III. Examine and Explore Raw Materials a. Before you start, make sure that you are ready to ask the question “why” every time you discover a factor “of interest.” Factors “of interest” are anything that stands out to you as important such as a recent change in an important account from year to year (e.g. changes in revenues, long term debt, etc.), or other metrics that concern you. For each of these factors you should research “why” or “what has happened that has caused this?” b. Spend time