Expert answer:Imagine that you are a financial manager researchi

Expert answer:Provide a rationale for the stock that you selected, indicating the significant economic, financial, and other factors that led you to consider this stock.Suggest the primary reasons why the selected stock is a suitable investment for your client. Include a description of your client’s profile.Select any five (5) financial ratios that you have learned about in the text. Analyze the past three (3) years of the selected financial ratios for the company; you may obtain this information from the company’s financial statements. Determine the company’s financial health. (Note: Suggested ratios include, but are not limited to, current ratio, quick ratio, earnings per share, and price earnings ratio.)Based on your financial review, determine the risk level of the stock from your investor’s point of view. Indicate key strategies that you may use in order to minimize these perceived risks.Provide your recommendations of this stock as an investment opportunity. Support your rationale with resources, such as peer-reviewed articles, material from the Strayer Learning Resource Center, and reviews by market analysts.Use at least five (5) quality academic resources in this assignment. Note: Wikipedia and other similar websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
Critique financial management strategies that support business operations in various market environments.Analyze financial statements for key ratios, cash flow positions, and taxation effects.Review fixed income strategies using time value of money concept, bond valuation methods, and interest rate calculations.Estimate the risk and return on financial investments.Apply financial management options to corporate finance.Determine the cost of capital and how to maximize returns.Formulate cash flow analysis for capital projects including project risks and returns.Evaluate how corporate valuation and forecasting affect financial management.Analyze how capital structure decision-making practices impact financial management.Use technology and information resources to research issues in financial management.Write clearly and concisely about financial management using proper writing mechanics.
fin_534_financial_research_report.docx

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Name Seliman Corder
Date November 28, 2017
Subject- Fin 534
Instructor- Dr. Michael S.
I am a financial manager researching investments for my clients. My client is looking at a
long-term investment strategy which I will cover the important investments goals of 1. Capital
Appreciation 2. Income Dividends 3. Time Horizon and 4. Risk Tolerance.
First, I will advise my clients that stocks are not a guaranteed success rate but on average
the large stock has returned close to 10% a year. Stocks are the best way to save money for long
term goals.
I will advise that when a stock is own, he or she is part owner in the company with a claim, on
every asset and every penny in earnings. As the company’s earning improve investors are willing
to pay more for the stock. (money.cnn.com2015)
Going back to the investment goal of capital appreciation Capital appreciation is an
increase in the price of or value of assets. It may refer to appreciation of company stocks or
bonds held by an investor, an increase inland valuation, or other upward revaluation of fixed
assets. It is distinguished from a capital gain which is the profit achieved by selling an asset.
Depending on the stocks that my client wishes to choose I would advise my client to narrow
down their choices since they are thousands of stocks to choose from. The investor can usually
put stocks to choose from. The investor can usually put stocks into different categories such as
size, style, and sector. (money.cnn/com 2015)
The number of factors is that a company’s size refers to its market capitalized which is the
current share price times the total number shares that is large stock. Companies that have large
markets capitalizations or “large cap” tend to be established and stable because they have lower
growth potential than small cap. However, if the long run small cap stocks have tendency to run
at a faster pace. Mid-cap or medium sized companies fall somewhere in the middle.
‘For a growth company it is normally expanding at an above average rate, like the tech
companies of the 1990’s the flip side of this is the greater the potential the bigger the risk. The
flip side of this is the greater the potential the bigger the risk. The opposite of growth is value
and if traces at lower than average earning is multiple than the overall market.
A cyclical makes in thing that isn’t in constant demand throughout the business cycle.
A
cyclical company is a firm whose share prices is closely aligned with economic fluctuations For
example, during periods of economic growths cyclical companies will do well but doing
downturns they will see their earning decline.. For example companies that provide Steel makers
see sales rise when the economy heats up and spurring builders to put up new skyscrapers and
consumer stop buy a new one. There are more than 6,000 publicly treaded companies and I
recommend that the core of my stock portfolio should consist of financially strong companies
with above-average earning growth.
The second investment goal is income dividends. Dividends are a form of investments
income and are usually taxable to the recipient in the year they are paid. This is the most
common method of sharing corporative profits with the shareholders of the company. For each
share owned, the declared amount of money is distributed.
The advisement of making an educated guess of a strong stock portfolio of determining
dividends is utilizing the theory of selecting a company with “strong” fundamental analysis is
often a great starting point to picking good companies. Determining basic fundamental values is
normal and straight forward since it takes just a little time and energy, The goal of analyzing a
company’s fundamental is to find stock is intrinsic value, which is a fancy term for what is a
stock worth.
The third goal is Time Horizon. Time Horizon is the length of time over time horizon is
the length of time over which an investment is made or held before it is liquidated. Time
horizons can range from seconds, in the case of a day trader, all the way up to decades for a buyand-hold investor or an individual who is investing in a retirement plan. Investment time
horizons are determined more by an investor’s goals for the funds rather than the mechanism
itself. https://www.investopedia.com (2017)
The fourth goal is risk tolerance Risk tolerance is the degree of variability in investment
returns that an investor is willing to withstand. Risk tolerance is an important component in
investing. You should have a realistic understanding of your ability and willingness to stomach
large swings in the value of his investments; if you take on too much risk, you might panic and
sell at the wrong time. https://www.investopedia.com (2017)
Another thing that I would advise my client is to be mindful of the six rules to follow
when investing in stock. Rule number one is to invest in stock that offer an easy to understand,
fairly straightforward way company business model. I would recommend McDonald’s over
BurgerKing simply because of their business model. Other companies such as Coca-Cola,
Berkshire , Apple , and Starbucks actually fit this mold.
Rule number two is invest in companies that are best in breed. This includes companies
that have established brands or that have extremely strong emerging brands or that they have
strong emerging brands. These stocks may be best of breed in one of the sectors they work in,
but the investor is may actually be getting a company that only pulls a minority share of its
revenue from that sector. This may not be a big issue as well-managed companies tend to do well
in all their business lines, but the investor buying on a narrowly focused best of breed
recommendation isn’t getting the full picture of what he or she is buying.
https://www.investopedia.com/terms/b/best_of_breed.asp
Rule number three it that it has to be a strong past performer. This includes current assets,
cash and receivables, that can be converted to cash quickly. This should be as twice as much as
much as current liabilities. This actually means that the company should have no trouble paying
its near- term debts over the next year. The earnings over the past ten years is positive net
income in every quarter within the past ten years.
Rule number four is invest in mid-cap and large -cap communities and try to avoid smallcap names. This rule should not be a problem if you are investing in the best of breed companies
and preeminent brands.
Rule number five is to try to focus on companies that does pay out dividends
Rule number six is that ideally you want to buy stocks that fit this framework, either on
an significant market pullbacks or when the stock is breaking out from a large consolidation area
or base. (Forbes.com2012)
Some of the things that needs to be observed is management. It is noted that the backbone of any
successful company is a strong management. This means that the individuals at the top are
ultimately make the strategic decisions. As a result of making decisions this can serve as the
crucial factor in determining the fate of the company This means that in order to assess the
strength of management I will ask my client to consider the five W’s of investing, who, where,
what, what, when and why?
Do the necessary research for the question who simple research to find out who is running the
company and among other things my client should know the Chief Executive Officer, the Chief
Financial Officer, Chief Officer of Operations and Chief Information Officer.
For the question where, it is important to find out where these people actually comes
from which includes their educational and employment backgrounds. It is important to have my
client to ask the questions if these backgrounds makes the people suitable for directing the
company in its industry. A management team consisting of individuals coming from completely
unrelated industries should raise questions. For example, if the Chief Executive Officer of a
newly-formed mining company previously worked in the industry. I n addition, asked whether he
or she has the necessary qualities to lead a mining company to success.
The question who and when should be what is the management philosophy? In other
words what style of management do this individuals posess intend to manage the company.
Some managers are more personable, promoting an open,transparent and more excellent of
running the business. Keep in mind that other management philosophies are more rigid and less
adaptable, valuaing policies and establishing logic above all in the decision- making process. It is
possible to discern this style of management by looking at its past actions or by reading the
annual’s report management, discussion & analysis (MD&A) section. It is also important to have
my client to ask his or herself if they will agree with this philosophy, and if it works for the
company, given it’s size and the nature if the business.
Once the style of the managers has been determined, it is important to find out when the
team actually took over the company. For example, Jack Welch was the CEO of General Electric
for over 20 years. His long tenure is good indicator that he was a successful and profitable
manager, otherwise the shareholders and the board of directors would not have kept him around.
It is important to note that if a company is performing poorly then one of the first actions is that
is normally taken is management restructuring. This actually means that a change of
management is due to poor results and if an company continually changing managers, then it
may be a good sign to invest elsewhere.
On the flip side of the coin Al Dunlap is now a retired CEO of SunBeam and he earned
the nickname “Chainsaw Al” and Rambo in pinstripes. He spent his career hopping from one
corporate boardroom to the next. During his stint at Scott Paper, in 1994 Dunlop engineered a
corporate restructuring that put 35% of the workforce for 11,000 people out of a job. The move
simultaneously brought a rise in share of value of 225% and resulted in Kimberly Clark buying
out Scott Paper the year after Dunlap took the helm ( http://content.time.com/time/specials 2010
For the last question, why the final factor is to investigate why these people have become
managers . I also advise my client to examine the manager’s employment history, and try to see
if these reasons are clear. Does this person have the necessary qualities you believe are needed to
make someone a good manager for the company Has that individual been hired because of past
sucessess and achivements as well as the individual has acquired the postion through
questionable means such as self- appointment after inheriting the company.
However, a second factor to consider when analyzing the company’s qualitive products
or services . Remember to ask such questions such as, how does this company makes money and
more important “what is the company’s business model. If the individual are not sure how the
company will make money, you really cannot be sure that the stock will bring a return. One
example of this is the dot com business from the late 1990’s
For instance, many individuals did not actually understand how the dotcom business was
making money, or why the trading was so high. As a matter of fact these companies was not
making any money, but many individuls thought that they growth potential was thought to be
really enormous. This lead to overjealous buying based on a herd mentality which in turn led to a
market crash. The bottom line is that the individual actually needs a solid understanding of how a
company generate revenue in order to evaluate whether management is making the right
decision.
ROE = Return on Equity NETING /SE (Capital Total Debt Ratio = Liability /Assets (Leverage
Risk) Times Interest Ratio= E Before Interest Taxes (OP INC) Current Assets CA CURRENT
ACCENT = CASH, In defining A/R INVENTORY The cash conversion cycle (CCC) is one of
several measures of management effectiveness. It measures how fast a company can convert cash
on hand into even more cash on hand. The CCC does this by following the cash as it is first
converted into inventory and accounts payable (AP), through sales and accounts receivable (AR),
and then back into cash. Generally, the lower this number is, the better for the company.
Although it should be combined with other metrics (such as return on equity and return on
assets), the cash conversion cycle can be especially useful for comparing close competitors
because the company with the lowest CCC is often the one with better management. In this
article, we’ll explain how CCC works and show you how to use it to evaluate potential
investments. .investopedia.com (2017)
In defining the LIQUIDITY CURRENT RATIO C LIASS A/P ST DEBT QUICK ACID
RATIO= (CA-INVENTORY /CLIAB
The quick ratio is an indicator of a company’s short-term liquidity, and measures a company’s
ability to meet its short-term obligations with its most liquid assets. Because we’re only
concerned with the most liquid assets, the ratio excludes inventories from current assets. Quick
ratio is calculated as follows:
Quick ratio = (current assets – inventories) / current liabilities, or
Quick ratio = (cash and equivalents + marketable securities + accounts receivable) / current
liabilities
The quick ratio is also known as the acid-test ratio.
www.investopedia.com/terms/q/quickratio.asp#ixzz4zvgdtdYL
ASSET TURNOVER RA asset turnover ratio measures the value of a company’s sales or
revenues generated relative to the value of its assets. The Asset Turnover ratio can often be used
as an indicator of the efficiency with which a company is deploying its assets in generating
revenue.
Asset Turnover = Sales / Average Total Assets Investopedia
https://www.investopedia.com/terms/a/assetturnover.asp#ixzz4zvijVm2E
What is ‘Asset Turnover Ratio’
Asset turnover ratio measures the value of a company’s sales or revenues generated relative to
the value of its assets. The Asset Turnover ratio can often be used as an indicator of the
efficiency with which a company is deploying its assets in generating revenue.
Asset Turnover = Sales / Average Total Assets
BREAKING DOWN ‘Asset Turnover Ratio’
Asset turnover ratio is typically calculated over an annual basis using either the fiscal or calendar
year. The total assets number used in the denominator can be calculated by taking the average of
assets held by a company at the beginning of the year and at the year’s end.
Generally speaking, the higher the asset turnover ratio, the better the company is
performing, since higher ratios imply that the company is generating more revenue per dollar of
assets. The asset turnover ratio tends to be higher for companies in certain sectors than in others.
Retail and consumer staples, for example, have relatively small asset bases but have high sales
volume and, thus, often yield the highest asset turnover ratio. Conversely, firms in sectors, such
as utilities and telecommunications, which have large asset bases will have lower asset turnover.
Since this ratio can vary widely from one industry to the next, considering the asset turnover
ratios of a retail company and a telecommunications company will not make for an accurate
comparison. Comparisons are only meaningful when they are made for different companies
within the same sector. www.investopedia.com/terms/a/assetturnover.
SALES /ASSETS
INVENTORY TURNOVER RATIO
COST OF GOODS SOLD /INVENTORY
DIVIDEND DISCOUNT MODEL
1year DIVIDENDS +EXPECTED STOCK PRICE -10%
(1+ EXPECTED GROWTH RATE
$4 + $106 (IN 1 Year) = 110
= $100
1.1.0

2 YEARS $ 4 +_ 4,24+ 112.36) = 3.64 + 116.60 = 1 + 1! +
2
2!
+
3
3!
+ ⋯ , −∞ < < ∞ C LIASS A/P ST DEBT The CONSTANT GROWTH MODEL or Gordon growth model is used to determine the intrinsic value of a stock based on a future series of dividends that grow at a constant rate. Given a dividend per share that is payable in one year, and the assumption the dividend grows at a constant rate in perpetuity, the model solves for the present value of the infinite series of future dividends. Where: D = Expected dividend per share one year from now k = Required rate of return for equity investor G = Growth rate in dividends (in perpetuity) Gordon Growth Model https://www.investopedia.com 2015) Pv = DIV v=EXP RATE OF RETURN (r-g) g= GROWTH RATE CONSI. GROWTH DIV= 2/ sh EXP= 8.33% GROWTH =5.0% 2 .0835−.05 = $60 References https://www.investopedia.com/terms/t/timehorizon.asp https://www.investopedia.com/terms/r/risktolerance.asp https://www.forbes.com/sites/benzingainsights/2012 https://www.investopedia.com/terms/b/best_of_breed.asp http://content.time.com/time/specials/packages/article/0,28804,2025898_2025900_2026107,00.h tml www.investopedia.com/articles/06/cashconversioncycle.asp#ixzz4zvereOVN The quick ratio is an indicator of a company | Investopedia https://www.investopedia.com/terms/q/quickratio.asp#ixzz4zvgdtdYL Gordon Growth Model https://www.investopedia.com/terms/g/gordongrowthmodel.asp#ixzz4zvldB5bb ... Purchase answer to see full attachment

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