Finance and Accounting Accounting Sustainability Financial Analysis

Finance and Accounting Accounting Sustainability Financial Analysis Project

 

Project description
Accounting Sustainability Financial Analysis Project
Each group should consist of 4 members. You may choose your own group members. Group member names, in alphabetical order, should be turned in to me at the beginning of class on Monday or Tuesday, January 20th or 21st depending on when your section meets. The only restriction is that your group should consist of members in the same lecture section.

For this project each team will choose two firms in the same industry to follow during the remainder of the semester. One firm MUST be listed on the DOW Jones Sustainability Index http://www.sustainability-index.com/ . Specifically, the firm should be part of the DOW Jones Sustainability United States Index.

This project should be completed as follows:

Each team should prepare a report that is approximately 12 – 18 pages long that incorporates the following information:

DOW Jones Sustainability Index: (3-4 Page Maximum)
Describe what the DOW Jones Sustainability Index (DJSI) is and its relationship to the SAM Indexes. Explain what criteria a company must meet to be included in the DJSI and what corporate sustainability is all about. Determine what factors are analyzed in selecting companies for inclusion. Explain what the “Triple Bottom Line” refers to and how non-financial aspects are measured. Specify the company you have chosen to analyze from the index, the industry they belong to and what sustainability measures they have implemented. Identify the non-DJSI company within the same industry that you will be comparing them to.

Industry Analysis: (1-2 Pages Maximum)
Describe the economic factors that drive the industry’s profitability. For example, average profit potential is often influenced by rivalry among competitors, ease of entry into the industry, substitute products etc. Consider these factors and other factors that may be unique in your discussion. This information can be found in your companies’ 10-K and annual reports. The Gale database and other research databases are also very helpful. An analysis of Porter’s Five Forces is a good tool for this section.

Company Business Strategy Analysis: (1-2 Pages Maximum)
Describe how your companies plan to compete in their industry and other success and risk factors that may exist in your industry. Highlight sustainability measures implemented by the DJSI firm selected. The Annual Report should contain most of this information. A SWOT analysis is another great tool to accomplish this.

Stock price performance: (1-2 Pages)
Track and compare your companies’ stock price for at least the past 5 years. Highlight the years when your DJSI Company was put on the index. Graphs and charts should be included explaining individual firm performance and a comparison of the 2 firms selected. Industry benchmark comparison are also important. If there are significant changes in stock price for a particular period, you should be able to explain why. (I.e. what is the reason for the change?) News stories released on or around the date of significant stock peaks and dips will help explain the reasons for the changes.

 

 

Significant Accounting Policies: (2 Pages)
Significant accounting policies can be found in the notes to the financial statements. They are usually found in the earlier notes. Explain what these significant policies mean based on your accounting knowledge and contrast how the policies differ between the companies you are researching. Focus on those of depreciation, revenue recognition and inventory, and any other topics relevant to performance. Describe the specific sustainability measures that your DJSI firm has put into place. Other significant policies that are beyond the scope of this course do not need to be covered so do not be concerned with them. You may want to use your textbook as a source in explaining and summarizing basic terminology in conjunction with your findings in the financial statements that you’re researching.

Conclude your report with a detailed analysis that incorporates the following information:
Ratio Analysis: (2-3 Pages) SHOW YOUR CALCULATIONS IN AN EXCEL WORKSHEET
Ratio analysis involves assessing how various line items in a firm’s financial statements relate to one another. Though not all of them were discussed in detail in class, as a group you should research what the basic ratios are and how to apply them. Focus on the performance of the DJSI Company as compared to the non-DJSI firm. Analyze how both compare against industry benchmarks. Highlight whether or not the DJSI Company has been hurt or helped financially by the implementation of sustainability measures. Measure relative impact on performance of the DJSI firm to the non-DJSI firm.

You need to compute the necessary ratios and explain what they mean in regards to the financial state of your companies. You must attach a computation sheet showing your work after your references. Which ratios you use is a team decision however; they must provide you with a fundamental basis for making your investment decision.
Investment Decision: (3-4 Page Maximum)
Based on the background information and your financial statement analysis (be sure to incorporate support from the ratio analysis performed), how would you allocate $100,000 between the two company stocks? Why? Did any of the other “Triple Bottom Line” factors impact your decision? Was there a significant net cost to becoming a sustainable enterprise? Support whether or not the benefit of being a sustainable enterprise justifies the corporate investment in these practices.

BASIC REFERENCE SOURCES:
There are numerous reference sources that you can use for this project. You must document in your reports ALL sources used using the APA citation method.

Below are some recommended sources to get you started:

1.) Annual reports of your companies. These reports can be downloaded off of corporate websites free of charge under the “investor relations” section of the site.
2.) Web sites:
i. http://www.sustainability-index.com/
ii. quicken.com,
iii. cnbc.com,
iv. cbs.marketwatch.com,
v. finance.yahoo.com
3.) Library databases: Pro Quest, Gale, ABI Inform

If you have an online brokerage account with Charles Schwab, Fidelity, TD Waterhouse, E-Trade etc., the research features that you have access to on the site as an account holder can also be a good resource.

The final paper will be due on Monday or Tuesday, April 28th or 29th (depending on when your section meets) at the beginning of lecture. No late submissions will be accepted and no exceptions will be made, this includes computer malfunctions and any other emergencies. It is responsibility of your team to do whatever is necessary to have the project done and ready for submission by the due DATE and TIME or your group will receive a zero. NO E-mail submissions will be accepted or graded. Your group’s submission must be a hard copy. References should be in the APA style format – including in-text and supporting reference sheet.

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The comapnies that we chose were Mcdonal’s and KFC, while KFC does not have its own stock, it is one of the branches of YUM, so just use YUM’s stock performance if you need it. All you have to do is to finish these two parts:
Stock price performance: (1-2 Pages)
Significant Accounting Policies: (2 Pages)

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