A fictional company, has hired you as an outside consultant to its investment committee, and has requested that you thoroughly analyze a company of your own choosing as a potential investment for the company. You are to use an Annual Report or a 10K from your selected company as the basis for your analysis as well as any other information that might be available – newspapers, magazines, the Internet including peer group data from Dun & Bradstreet, Moody’s, Standard & Poor’s. Don’t overlook other SEC disclosures such as information included in 8K and DEF 14A proxy filings. A company’s Investor Relations page is another good source of information.
You are to assume that the Salamanca Corporation is a national, publicly owned food products company, which is based outside Dallas, Texas. For 2019, it earned approximately $84,000,000 on sales of $600,000,000. At 12/31/19, its investments in marketable securities were $40,000,000 which represented 8% of total assets of $500,000,000.
The final product to be delivered to the investment committee of the Salamanca Corporation shall consist of the following:
Part I
A letter to the investment committee of the Salamanca Corporation with a recommendation as to whether the company that you have analyzed would be considered a safe and viable investment option. The letter should summarize the main reasons for your conclusion with detailed support to follow. In the letter speculate on the amount of earnings/loss for your company that you would expect to see in the near future. Also, give your impression of the three most important issues your company will face in the coming year. These are not restricted to the financial arena, but could be the result of changes in technology, the environment, health care, the legislative process, etc.
Part II
A thumbnail sketch or brief overview of the company you have selected to include who the CEO and CFO are (a little of their background), headquarters, year founded, fiscal period, independent auditors, related parties etc.
Part III – Main Support
A. Financial statement analysis to include horizontal and vertical analysis and ratios and trends Select only those ratios that are relevant. Your financial statement analysis should include a summary highlighting positive and negative trends or strengths and weaknesses that you have identified.
B. Footnote analysis – comment on areas of concern based on your understanding of the
footnotes. (Hint – you may need to “read between the lines”.