IX. Use of networked computers:
Due to time limitations in class, we need to be somewhat broad in our
coverage of topics and we may miss a topic of particular importance to you or
your business. Even for topics we
cover, we may not delve as deeply into some issues as you might like.
The purpose of this required project is to have you apply what you’ve
learned by analyzing the financial statements of two companies – presumably
your own (or a study group member’s) company versus a competitor.
Hopefully, the project will help you fill in some important gaps in
your knowledge.
Project
description:
In thinking about and preparing the report, you should adopt the
perspective of a specific user of
the company’s financial statements. Most
commonly, students select the perspective of a specific external user.
Another approach would be to adopt the perspective of an internal user
(e.g., top management evaluating a recently adopted competitive strategy by
comparing the company's performance with, say, the industry leader).
At
a minimum,
your report should include:
a)
the perspective adopted;
b)
a brief discussion of the competitive environment and each firm's key
drivers for success;
c)
a description of any important
and/or unusual accounting policies
adopted by the management of each company,
d)
discussion of each company's change in profitability and financial
condition over the last five (5) years as compared to each other.
(If possible, position each company within the industry.
You may use industry benchmarks and/or individual companies.
Also consider using a chart to display these comparisons over time);
e)
a forecast of
next fiscal year's financial statements (meaning fiscal 2001, not 2000) in the
context of the firm’s competitive environment.
(This analysis should be done in connection with reviewing the
company's intermediate or long-range strategies and include any significant
assumptions that underlie your forecast.)
How does your forecast compare to those of professional analysts
(assuming you can locate an analyst forecast)?
When reviewing each company's annual report or 10-K, it is important to
consider the big picture as well as the financial reporting details.
For example, you should find this project a good opportunity to apply
what you are learning in your Competitive Economics course.
Look for clues regarding competitive strategy, corporate strengths and
weaknesses, and the character of management.
Be aware of strategic shifts or new initiatives (e.g., adoption of
Economic Value Added, Total Quality Management, Theory of Constraints).
This project should be a vehicle for helping you synthesize what you've
learned during the quarter in both courses.
Identifying
a topic and forming groups:
If possible, your study group
should meet as a whole to discuss companies that could be the subject for your
report. In the course of these
discussions, each of you should learn something about your study group
member’s firms. The cases and
readings represent examples of potential financial reporting issues you should
be aware of, so, in order to open up your thinking, you may want to skim over
topics to be covered later in the course.
Also, see “alternatives to your own company” below for a list of
other companies you might find interesting.
You may want to organize your study group into two (2) subgroups of
approximately equal size with each subgroup will being primarily responsible
for studying one of the two companies.
Midway through the quarter, I’ll ask for a brief description of the
companies and perspective you have chosen.
You can list more than one comparison/topic if you would like me to
provide advice on your choice.
At the end of the quarter, your study group as a whole will be
responsible for presenting the project to the class.
You can decide what you want to emphasize in the project presentation,
e.g., one of the two companies may be far more interesting and you may choose
to emphasize it in your presentation.
***WARNING:
This project may take longer than you expect, so get started early!***
What
should the written report include?
The written report should be
professional, as if submitted to senior management or the Board of Directors.
As in a work situation, everything counts, including the originality of
your ideas, your analysis, and your written presentation (e.g., neatness,
grammar, graphics, references, etc.). Other
details include:
•
The final report should be no longer than 7 pages (double-spaced, 12
point times roman type) not including the cover page, executive summary or
appendices. The length
restriction may seem difficult at first but part of preparing a good report is
learning to express the important ideas in a concise manner.
•
Include a “title page” with the study group name, study group
member names, the names of the two companies being compared, fiscal years
covered in report, pro forma year, date of report, etc.
•
Include an “executive summary” before the main body of the text. This should be no longer than one page.
•
Submit two complete copies. One
copy should include the most recent financial statements of each company on
which you are reporting. I will
return one copy with comments. The
other I will keep for my records.
•
Due date: Except for highly unusual circumstances, there will be no
extensions to the due date.
PROJECT
PRESENTATION:
Talking to the class about how a
company's financial performance and objectives fit in with overall corporate
strategies will embellish the course material and provide you an opportunity
to practice your presentation skills before a friendly group.
Presumably, your study group will meet to decide what project material
should be presented to represent your group.
Note that I do not expect you to convey everything that is in
the written report in your presentation. Rather, the presentation should convey a useful message
related to the course. It can
also be “creative, unusual, and fun.”
(This will be appreciated on the last day of class.)
Based on past presentations I have observed, here are a few hints:
•
Don't assume your audience understands the business or its jargon.
•
Have a theme for your talk; tell us what the theme is.
•
Use visual aids but try to keep the quantity of information on a
PowerPoint slide or transparency within reason.
(If you do put too much data on a slide, don't ask your audience to
read it -- paraphrase the main points.)
•
Consider using a handout that covers your major points.
•
At the beginning (and at least occasionally throughout your talk), look
at the projected image on the screen -- it may be out of focus or have slipped
out of view. It's often better to
point out items on the screen rather than pointing to the slide (because you
will be less likely to obstruct the view).
•
If you've planned for a 10 minute presentation, it will probably take
15-30 minutes, so you may want to allow for this natural “expansion.”
SOME
IDEAS and SOME ALTERNATIVES TO YOUR OWN COMPANY?
As discussed above, some of you may
want to select a company other than your own or one of a study group member.
In addition to competitors, customers, or suppliers of your company,
consider the list below to stimulate your thinking:
•
Immunex, NeoRX, Icos, or some other local biotech firms
•
Grocery wars: Safeway, QFC, Whole Foods, PCC, HomeGrocer.com, Webvan,
etc.
•
Walmart vs. Costco vs the Internet: discount mega-retailers vs. on-line
retailing
•
Other Internet companies (except ones we discuss at length in class
such as Amazon.com)
•
U.S. versus international competition: auto companies, telecom, etc.
such as
>Infineon (Germany) vs. Intel and/or Texas Instruments
>Reckitt Benckiser (United Kingdom) vs. Procter & Gamble and/or
Unilever
>Samsung Electronics (South Korea) vs. Philips (The Netherlands) vs.
U.S. electronics co.
>BP Amoco (United Kingdom) vs. U.S. oil company
>Takeda (Japan) vs. U.S. pharmaceutical company
•
Harley Davidson fended off Japanese competition with new manufacturing
techniques
•
Foreign companies taking international market share?, e.g., Boeing
versus Airbus (note that accounting standards can vary considerably across
countries)
•
Any company that is having their financial reporting critically
“discussed” in the press, e.g.,
“SEC holds meetings to discuss accounting woes,” WSJ,
8/12/98 (attached)
“How Whistle-Blowers set off a fraud probe that crushed Cendant,” WSJ,
8/13/98, p A1.
***WARNING:
Again, this project may take longer than you expect, so get started
early!***
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