Sound financial decisions are the foundation of business success. Financial managers, analysts, and consultants must continually adjust to changing market conditions and make well-informed, strategic choices regarding where and how to best allocate companies resources to produce and position products and increase value.
The capstone will have two components. For the first component, you will develop a financial analysis and planning report for the executive management team at a large, publicly traded, multinational company where you will assume that you work. You will examine market conditions, the financial performance of the organization, and its projected growth, and then, based on your analysis, recommend strategies for risk management and potential investment over a three-year time horizon. In the second component, you will communicate the major findings of your report to the executive management team of the company through a brief PowerPoint presentation or equivalent (with speaker notes). Together, these capstone components will demonstrate your unique abilities, talents, and expertise in finance as well as your capacity to improve an organizations performance through well-supported financial decisions.
Assume you are a senior financial manager at a major multinational corporation. (You may select any major multinational corporation of interest as long as it is publicly traded on a major U.S. stock exchange. Your choice should be approved by the instructor.) In preparation for an upcoming strategic planning meeting, you have been asked to review the companys financial performance, analyze market conditions to predict its future performance, and make recommendations regarding potential investment opportunities and managing risk. To prepare for the meeting, you will create two artifacts to share with the rest of the executive management team: a background financial analysis and planning report, supported by appropriate data analysis and forecasting, and a brief presentation (with speaker notes) highlighting your key findings and recommendations. You may make reasonable assumptions regarding company details, as needed, to inform your suggestions. However, you must specify these assumptions and explain why they are reasonable clearly in your report and presentation.
Capstone Component 1: Financial Analysis and Planning Report
For Component 1 of your capstone, you will develop a comprehensive financial analysis and planning report that lays out your firms current and projected financial performance in light of market conditions. Your report should also suggest potential investment opportunities and strategies for managing risk for the executive management team to discuss in strategic planning.
In order to provide an appropriate context for your analysis and recommendations, you should look at your companys financial performance over the past three years. (You may also include historical information prior to this time horizon if relevant. However, keep in mind that the report is not intended as a historical analysis of the company, but rather as a tool for strategic planning.) You should also project forward at least three years in your modeling and recommendations for the future. Remember that you are communicating to the executive leadership team, so your report should be succinct, clear, and well supported throughout by credible research and evidence, including relevant spreadsheets, charts, and graphs.
Specifically, the following critical elements must be addressed:
I. Executive Summary: Briefly provide the bottom line of your financial analysis and key recommendations to a busy executive audience.
II. Current Financial Status: Analyze the position of the firm and whether the company regressed or improved financially over the past three years. Be sure to situate your company within the broader economy and its specific industry, particularly with respect to major competitors and industry and market trends. Your analysis, supported by relevant spreadsheets and graphs, must include, but need not be limited to, the following:
D. Market Value
III. Projections: Based on the companys financial statements, your analysis, and any additional evidence, project the companys performance for the next three years. Are there any areas of concern? Is the company in good financial shape for moving forward? Discuss a best-case, worst-case, and most likely scenario, including a sustainable growth rate for sales based on existing financial statements and any macroeconomic and financial market conditions that might impact the firms strategic objectives. You must thoroughly address the assumptions behind your predictions, supported by spreadsheet calculations. At a minimum, your analysis must cover:
A. Weight of equity
B. Weight of debt
C. Cost of debt
D. Cost of equity
E. Tax rate
F. Value of the companys stock compared to your forecasted value and free cash flow
IV. International Market Analysis: Articulate the companys position with respect to at least one of the foreign markets in which it operates. Use statistical regression to predict the exchange rates for the next year. How does the company manage foreign exchange risks, and what, if anything, might it do differently?
V. Recommendations: Provide high-level, strategic recommendations for your company for the upcoming three years, based on your analysis and interpretations. Where are there opportunities for growth? What risks does the company face, and how might it mitigate them? Apply relevant principles of asset allocation and portfolio diversification in making your suggestions, and assess the risks and returns for each individually, as well as the group of suggestions as a whole. You should also consider how changing market conditions might affect your recommendations and how the recommendations fit with the companys investment needs and priorities.
Capstone Component 2: Presentation to Executive Management Team
For the second and final component of your capstone, you will create a summary presentation that conveys the key points of your analysis and recommendations to members of the executive management team. The summary presentation will take the form of a visual presentation with speaker notes, such as a PowerPoint presentation or other instructor-approved medium, designed to reinforce the presentation skills you will need as a finance professional and in showcasing your skills in job interviews.
Like the executive summary for your paper, your presentation should provide fellow members of the executive team with a concise overview of the companys current and projected financial performance. In particular, you should focus on key assumptions and findings that will help the company navigate complex international financial environments and how your findings and assumptions impact future planning and stakeholder value.
Remember that while your audience wants to know you have thoroughly analyzed the companys finances, they do not want a verbatim or lengthy repetition of the information in the background paper. Instead, you should strategically select the key messages and level of detail based on your audience, bearing in mind the key information they will want to know and the types of concerns they are likely to have, and anticipating the types of questions they are likely to ask.