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Create a 4–6 page report that analyzes financial ratios for a company, uses the data to tell the financial story of that company, and concludes with a recommendation on whether the company would be a viable partner based on its financial condition.
Introduction
It’s essential for senior management to know the financial condition of an organization in order to make strategic decisions. In this assessment, you will apply the financial management skills learned thus far.
Tell the financial story based on financial statements.
Conduct a financial analysis and identify focus areas for enhancing shareholder value.
Interpret ratio computations that are meaningful and inform business decisions and strategies.
Make three recommendations that maximize shareholder value.
Scenario
Maria Gomez is founder and president of ABC Healthcare Corporation, a company that owns hospitals, ambulatory surgical centers, urgent care centers, and outpatient clinics. She has called on you to review various financial documents and to make recommendations to maximize shareholder value.
Your Role
You are one of Maria’s high-performing financial analyst managers at ABC Healthcare Corporation and she trusts your work and leadership.
Requirements
Here is what your report should provide for Maria:
A summary of the financial strength of the company through your analysis of the price/earnings and price/book ratios.
The CFO for ABC Healthcare Corporation assessed the market value by reviewing its price/earnings ratios. The price/earnings ratio determines the market value of a stock as compared to the company’s earnings. The price/earnings ratios are listed in the chart below. To calculate the price/earnings ratio, the CFO took the earnings per share and divided that into the market value. As an example, this means that in 2023 investors were willing to pay $12.10 for $1 of earnings.
Price/Earnings Ratio 2023 2022 2021
Market Price 83.62 81.62 80.02
Earnings Per Share 6.91 7.87 9.15
Price/Earnings Ratio 12.10 10.63 9.14
To further assess market value, the CFO looked at book value per share. The book value per share ratio is the per share value of a company in terms of the equity available to stockholders. The book values per share over the past three years are listed in the chart below:
Price/Ratio Ratio 2023 2022 2021
Market Price 83.62 81.62 80.02
Book Value per Share 199.1 209.05 226
Price to Book Ratio .42 .40 .37
The price-to-book ratio (P/B ratio) compares a firm’s market capitalization to its book value. It’s calculated by dividing the company’s stock price per share by book value per share.
Here, for fiscal year 2023, the book value per share ratio was 0.42. This explains that investors were willing to pay $0.42 for $1 of book value equity. Price to book value is an important measure to see how much equity shareholders are paying for the net assets value of the company. P/B ratios under 1 are typically considered solid investments.
Based on your analysis, what is your general perception of the company’s financial strength? Is it performing well given industry standards? How does it compare to its closest rival, HCA Healthcare? What information do you need in order to conduct such an analysis?
Given your review, how can it maximize shareholder value? What are focus areas for enhancing shareholder value for the long term? What short-term steps might be necessary for longer-term gains?
In your analysis you may choose to look at competitive data. You may calculate ratios to gain a true comparison.
After conducting your analysis, provide at least three recommendations to Maria that maximize shareholder value.
Deliverable Format
Create a report that tells the financial condition of this company. Your report should provide information on the following:
Analysis of the financial statements.
Evaluation of the true condition and valuation of the company.
Recommendation of actionable items for the company based on the financial analysis.
Financial Condition Analysis Report Requirements
Remember that you’re preparing a professional document meant for executive leadership with limited time.
Title Page. Executive Summary.
Company Background. Overall Financial Analysis. Financial Ratio Analysis. Trend Analysis.
Competitive Comparative Analysis. Recommendations.
Conclusion. References.
Appendix (if you have additional data, reports, charts, et cetera, to support your analysis).
Additional Requirements
Your report should follow the corresponding MBA Academic and Professional Document Guidelines, including single-spaced paragraphs.
Ensure written communication is free of errors that detract from the overall message and quality.
Format your paper according to APA style and formatting. Use at least three scholarly resources.
Length: Between 4–6 pages of content, beyond the title page, references, and appendices.
Use 12 point, Times New Roman
Evaluation
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies through corresponding scoring guide criteria:
Competency 1: Apply the theories, models, and practices of finance to the financial management of an organization.
Analyze financial ratio analysis, trend analysis, and competitive average analysis.
Competency 3: Apply financial analyses to business planning and decision making.
Evaluate the provided financial statements of the firm to find its true condition and valuation.
Competency 4: Use data to support evidence-based financial decisions.
Develop actionable items and conclusions, based on the analysis, recommending at least three ways to maximize shareholder value.
Competency 5: Communicate financial information with multiple stakeholders
Tell the current financial story as to the overall health of the firm as it relates to current valuation and the future prospects of the company. Identify focus areas for enhancing shareholder value for the long term. Note what short-term steps might be necessary for longer-term gains.
Your course instructor will use the scoring guide to review your deliverable from the perspective of Maria Gomez. Review the scoring guide prior to developing and submitting your assessment
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