Financial Research Project

 

ProjectDescriptions

FINC 330Financial Research Project Report– Worth 20% of the course grade.

This group project is assigned online in LEO on the beginning of Week 1 (02/24/14) of the course and is due, submitted online via LEO, not later than the close of Week 7 (04/13/14).

The students will be randomly assigned into project groups of three or four students each for the purpose of preparing and submitting a group financial research project. All team members will receive the same grade for the project.

The purpose of this assignment is to test your ability to research, analyze and present financial information. The students will be required to research key financial data, analyze the information, apply the appropriate financial concepts and formulas and prepare a credible management level financial report.

This report must be 7 to 8 double-spaced typewritten pages, excluding any attached tables and graphs.The Financial Research Report must be posted to the LEO Student Assignments as attachments. Note the Attachments are limited to amaximum of two filesin either word or excel.

Objective

The specific objective of this graded written research project is to prepare an “executive level financial report” to the Chief Financial Officer (CFO) of Hyper Theory Incorporated (HTI), amythical companyin which you are employed as a senior financial analyst. This report will pertain to the financial evaluation of a real, publicly-traded, company,MicroStrategy, which will require: independent research (web-based or library), careful financial analysis, and the proper application of key financial theories and formulas.The company that is to be analyzed for this project is MicroStrategy, a publically traded software company headquartered in Tyson Corner, VA.

Situation

You are a financial analyst with the mythical Hyper Theory Incorporated (HTI.) HTI is an established manufacturer of a line of fully-integrated wireless communication products, which services an international market. A competitive technical and economic product evaluation has determined that MicroStrategy is the best potential candidate for a long-term software security partnership. MicroStrategy is offering a competitively favorable deal. However, based on some serious general concerns about the fallout of companies in the software industry in general, the CEO has asked your CFO to conduct a financial analysis of MicroStrategy to determine if it is prudent to commit to this company’s software systems. The cost of cutting over to the new software system is significant and any interruption in support during the next few years would adversely affect HTI’s performance and profit. Specifically, the question is what is the financial viability of MicroStrategy?

Specific Assignment

Your specific assignment is to research, analyze, and prepare a report for the CFO on the actual financial performance of MicroStrategy for the last three years. In addition to reviewing the traditional financial performance indicators, you are also to review MicroStrategy’s past and current stock performance for the last one year.

Your report is to consist of three parts:

(1) An evaluation of MicroStrategy’s financial performance for the last three years.

(2) An evaluation of MicroStrategy’s stock performance for the last one year.

(3) Finally, a specific recommendation,with supporting rationale, as to whether or not MicroStrategy’s recent trend in financial and stock performance is of sufficient financial strength to warrant entering into a long-term commitment.

To assist you in your task, the CFO has provided the following general guidance:

1. Since it is widely recognized that the Software industry is undergoing a major adjustment, it is very important to comparatively evaluate MicroStrategy’s financial and stock performance trends against its Industry.
2. You will likely need to include all necessary and relevant financial performance and stock information, trends, and projections in supporting your recommendation. To include: financial ratio trends with industry comparatives, capital spending, stock growth, Beta values, credit rating service valuations, bond rating valuations, and management and investment reports – when and where such documents are available.

Report Requirements

YOUR SPECIFIC ASSIGNMENT

Research and analyze the following information for MicroStrategy

• Annual Balance Sheets for the last three years.
• The Income Statements for the last three years.
• The Cash Flow Statements for the last three years
• Annual reports, 10K or 10Q SEC Reports
• Industry Performance Statistics
• Analyst’s Stock and Bond Performance Evaluations
• Analysts’ reports on past performance and projected performance
• Management reports or press releases

Outline for the Financial and Stock Analysis of MicroStrategy (85% of Total Project Grade)

Using the above financial research information, develop an evaluation of the financial performance and stock performance of MicroStrategy using the outline guidelines and rubric presented below.

Introduction – A Summary of MicroStrategy’s Background and Industry – (1/2 page)

1. A Financial Statement Analysis of the MicroStrategy’s Income Statement and Balance Sheet – (10% of Grade; 1 page)Analyze MicroStrategy’s most significant Income Statement and Balance Sheet financial operating results over the last three years, compared to a major competitor and the industry. Consider revenue, cost of sales, period costs, current assets, long term assets and other performance measures of your choice. Present a summary table with this information in your report. Write about a one page of the analysis of these financial performance results. Detail information may be included in the enclosures.
2. A Comparative Financial Ratio Trend Analysis of MicroStrategy Versus a Key competitor and the Industry Averages – (10% of total Grade; 1 page)Find and comparekeyfinancial ratios for MicroStrategy, a major competitor and the industry averages. Present a summary table with this information in your report. Write about a one page analysis of thekeyratio results you selected. Detail information may be included in the enclosures.
3. An Analysis of MicroStrategy’s Current Net Working Capital and Recent Trends- (10% 0f Total Grade; 1/2 page)Analyze the current net working capital position and recent trends; be sure to identify any significant components of the current assets and liabilities that stand out as significantly affecting working capital performance.
4. Develop a cash flow Analysis of MicroStrategy current cash position and recent trends – (10% of Total Grade; 1 page)Analyze the source and use of funds statement to determine the main factors contributing to the current cash low and the three year trends. Present a summary table with this information in your report. Write about a one page of the analysis of cash flow performance results. Detail information may be included in the enclosures
5. Develop an Analysis of MicroStrategy’s investment Performance – (10% of Total Grade; ½page)

   Prepare and present an analysis of MicroStrategy’s long term investments, in capital spending, product development, and research against a major competitor and industry standards.

6. Develop an Analysis of MicroStrategy’s Capital Structure – Debt and Equity – (10% of Total Grade; ½ page)Prepare and present a comparative analysis of MicroStrategy’s debt and equity capital structure against a major competitor and industry standards. Where possible, consider the following: cost of capital, dividend programs, and bond rating valuations.
7. Analyze MicroStrategy’s Stock Performance Trend with Emphasis on the Last Year – (10% of Total Grade; 1 page)Collect and evaluate key data about the stock performance trend of MicroStrategy for the last three years, with emphasis on the last year. Compare the results that you received against the industry average or a major competitor. Consider the following in your evaluation: stock price

   Earnings per share, market valuation and Beta

8. Conclusion – Develop and Present a Specific Recommendation as to MicroStrategy’s Financial Strength – (15 % of Total Grade; 1page)Present a clear concise recommendationwith supporting rationale, as to whether or not the assigned company’s recent trend in financial and stock performance is of sufficient financial strength to warrant entering into a long-term commitment.

Presentation of the research paPer And Writing – (15% of the Total project Grade)

Your final report is to be an executive-level financial report, directed to the CFO. This report must be a 7 to 8 page, double-spaced typewritten report (excluding any attached tables and graphs). Include suitable comparative, quantitative and qualitative analyses and conclude with a specific and supported recommendation on the projected financial viability of MicroStrategy. The basic report must be submitted in one word document file. Enclosures can be submitted in a second file (Word or Excel). Note only two files can be submitted

Essential research data, financial calculations and other documentation as necessary to support your recommendation should be referred to in summary form in your report and attached in detail as enclosures. All major sources should be referenced. There is no set limit to the size of the enclosures, but it is recommended that only essential enclosures be attached and all the enclosures must be included in one file either word or excel.

Using the following outline to guide the design and preparation of your financial research report on MicroStrategy:

1. The overall organization, format and presentation style of the research paper including: the Title page, Introduction, Body, and Summary —- (4% of the project grade)
2. Use of tables, figures and other graphics to summarize and support the analysis presented in the research paper—–(3% of the project grade)
3. Logical and smooth flowing transitions and relationships among concepts of the research report(3% of the project grade)
4. Research sources and significance of the research information and data; use of APA citation methodology(5% of the project grade)

The group research project must be posted to the LEO Student Assignments as attachments. The attachments are limited to a maximum two files in either doc, docx, xls, xlsx, or rtf formats. All OTHER FORMATS ARE NOT ACCEPTABLE, and will not be reviewed and graded.Pdf. files will not be accepted or graded.

All works must be Word processed; handwritten and scanned work will not be accepted and graded.

This report is a group effort and must be researched, developed and prepared by your group. All questions related to this assignment, should be referred to the mythical CFO (i.e., your instructor).

Project Rubric

Financial and Stock Performance Analysis	85% of Grade
1. Financial statements analysis of the MicroStrategy Income Statement And Balance Sheet (10 %of Grade)	Virtually no effort to develop a financial statements analysis. Not worthy of credit.	Only a superficial effort to develop a financial statements analysis	The report contains some financial statements analysis but requires considerable more development	Good effort is made to develop a financial statements analysis	An Excellent and very thorough development and articulation of financial statements analysis
2. A comparative financial ratio trend analysis of MicroStrategy versus a key competitor and the industry averages (10 %of Grade)	Virtually no effort to develop comparative financial ratio trends. Not worthy of credit	Minimal effort to develop comparative financial ratio trends analysis	Some effort made to develop comparative financial ratio trends analysis, however, the result are not fully explained	A good effort to develop comparative financial ratio trends analysis and the result are well explained	An excellent and successful effort to develop a comparative financial ratio trends analysis with a very clear interpretation of financial ratio results;
3. An analysis of MicroStrategy’s current net working capital and recent trends (10 %of Grade)	Virtually no effort to develop an analysis of net working capital trends. Not worthy of credit	Minimal effort to develop an analysis of net working capital	Some effort made to develop an analysis of net working capital however, the result are not fully explained	A good effort to develop an analysis of net working capital and the result are well explained	An excellent and successful effort to develop an analysis of net working capital with a very clear interpretation of the results
4. A cash flow Analysis of MicroStrategy current cash position and recent trends (10 %of Grade)	Virtually no effort to develop a cash flow analysis not worthy of credit	Minimal effort to develop a cash flow analysis	Some effort made to develop a cash flow analysis, however, the result are not explained	Good effort to develop a cash flow analysis and the result are well explained	Excellent and successful effort to a develop a cash flow analysis with a very clear interpretation of the results
5. An analysis of MicroStrategy’s long term investments, in capital spending , product development, and research (10 %of Grade)	Virtually no effort to develop an analysis of long term investments. Not worthy of credit	Minimal effort to develop an analysis of long term investments	Some effort made to develop an analysis of long term investments but gaps are obvious	Very good effort to develop an analysis of long term investments with explanation of results	Outstanding effort to develop an analysis of long term investments with explanation of results
6. An analysis of MicroStrategy’s financial structure – debt and equity (10 %of Grade)	Virtually no effort to develop the analysis of financial structure. Not worthy of credit	Minimal effort to develop the analysis of financial structure	Some effort made to develop the analysis of financial structure but gaps are obvious	Very good effort to develop an analysis financial structure with explanation of results	Outstanding effort to develop an analysis financial structure with explanation of results
7. The evaluation of the MicroStrategy’s stock performance with emphasis on the last year. (10 %of Grade)	No effort to evaluate stock performance. Not worthy of credit	Some effort made to develop an evaluation of stock performance but the analysis is very short and limited	Good effort made to develop the evaluation stock performance result are not fully explained and analyzed.	Good effort made to develop the evaluation stock performance and the results are well explained and analyzed	Excellent and accurate evaluation of the stock performance, and the results are well explained and analyzed
8. Develop a specific recommendation, with supporting rationale, as to whether or not MicroStrategy’s recent trend in financial and stock performance is of sufficient financial strength to warrant entering into a long-term commitment. (15 %of Grade)	No specific recommendation, or little or no solid supporting rationale for the recommendation	A specific recommendation is made however the supporting rational is weak and lacking credibility.	A specific recommendation is made however the supporting rational has several significant omissions or errors	A specific recommendation is made and the supporting rational is generally complete and sound	A specific recommendation is made and the supporting rational is complete, financially sound and compelling
PRESENTATION OF PAPER AND WRITING	15% 0f Grade
9. Organization, Format and Presentation of Paper including Introduction, Body, and Summary	There appears to be no logical organization of the paper’s contents	Presentation has numerous blemishes and there may be a general lack of organization	Paper has some blemishes in presentation and may have some weaknesses in organization	Paper is neatly presented without major blemishes and is generally well-organized	Paper is extremely neat and has no blemishes; its organization is outstanding and very easily followed
10 Use of Tables, Figures and Other Graphics to Summarize and Support Analysis Presented in the Paper	Use of tables, figures and other graphics in support of paper is unworthy of credit	Tables, figures and other graphics do not provide much support for the paper; they may have inadequate labels; and numbering sequence is inadequate	Tables, figures and other graphics provide marginal support for the paper; some labels may be incomplete; there may be some problems with the numbering sequence	Tables, figures and other graphics are descriptive and provide solid support for the paper; they are properly labeled and numbered	Tables, figures and other graphics are very descriptive and provide exceptionally strong support for the paper; there are no errors in labels or in the numbering sequence
11. Logical and Smooth Flowing Transitions and Relationships Among Sections of the Written Report	No effort made to provide appropriate transitions	Paper makes minimal use of transitions	Some transitions used in paper	Good transitions used in most sections	Very effective transitions are used throughout the written analysis
RESEARCH APPROACH AND USE OF APPROPRIATE PROFESSIONAL SOURCES OF INFORMATION AND DATA
12. Research Sources and Significance of Research Information and Data, Use of APA Citation Methodology, use of double spaced, with one-inch margins, and use 12-point Times New Roman font.	No obvious effort to use professional and supporting research sources	Little effort made to use appropriate professional and supporting research sources which may be accompanied by inadequate documentation	Some effort to identify and use appropriate and professional and supporting research sources with some documentation	Good effort to identify and use appropriate and professional and supporting research sources; appropriate and professional use of APA documentation, use of double spaced, with one-inch margins, and use 12-point Times New Roman font.	Excellent and successful effort to identify and use appropriate and professional research sources including Library Search Engines, Websites, S&P, SEC, stock exchanges, Morningstar, NYSE, Competitors, 10K Report, analyst reports, news releases, articles, etc.; appropriate and accurate documentation