Research Project: Shareholders’ Equity
Locate recent annual reports for three companies in the same industry. If such reports are not conveniently available, use a business reference service, such as Moody’s, Standard & Poor’s, Compustate, or the SEC’s EDGAR database to obtain the following information:
• Company name and industry designation
• Preferred stock (number of shares outstanding and dollar amount)
• Common stock (number of shares outstanding and dollar amount)
• Retained earnings
• Total shareholders’ equity
• Total current liabilities
• Total long term liabilities
• Total assets
• Earnings per share
• Market price (year end or representative price)
Required
a. For each company, compute the financial leverage ratios.
b. For each company, prepare a vertical analysis (percentage composition) of its balance sheet.
c. For each company, compute the price to earnings ratio and the market tobook value ratio.
d. Write a short memo comparing and contrasting the financial structure and risks associated with the three companies.