Final Paper
The Investment Analyst Recommendation for Acquisition Report
Prior to beginning work on this assignment, review Chapter 18 of the textbook, and read the Earnings Manipulation and Expected Returns article.
The purpose of the Final Paper is for you to incorporate the learning achieved in this course by analyzing a selected public company’s financial statements and developing a recommendation as to whether this company is a good candidate for acquisition by the private equity fund you work for. For this paper, your instructor will provide you with a publicly traded company to analyze. Obtain the 10-K reports for this company for the most recent five fiscal years.
In your paper,
- State the purpose of your report.
- Analyze your company’s financial operations for the previous five years
- Categorize the earnings quality of the organization.
- Consider quality of financial reports, earnings quality, cash flow quality, and balance sheet quality.
- Determine appropriate analyst adjustments to earnings and cash flow.
- Calculate adjusted after-tax earnings and cash flow for each of the past five years.
- Adjust for the impact of any acquisitions completed in the previous five years; specifically adjust earnings and cash flow for the full year impact of any acquisitions.
- Adjust for the impact employee pension plans.
- Adjust for the impact of foreign currency and hedging transactions.
- Determine the impact of accounting assumptions for pension plans, employee stock compensation plans, and intercorporate investments on the company’s financial statements.
- State the impact of any other changes in accounting assumptions over the past five years on the financial statements.
- Analyze the company’s effective tax rate
- Determine the likelihood and timing of realization of any deferred tax liabilities or assets.
- Explain the availability and potential use of any tax loss credits and carryforwards.
- Identify significant risks that would impact the investment recommendation. This could be industry concerns, potential changes in accounting standards, or current economic events that may impact the company in the future.
- State your recommendation of (1) Strong buy candidate; (2) Potential buy candidate, subject to specific issue resolution; or (3) not a potential acquisition candidate.
- Calculate adjusted after-tax earnings and cash flow for each of the past five years.
The Investment Analyst Report paper
- Must be 10 to 12 double-spaced pages in length (not including title and references pages and formatted according to APA style as outlined in APA Style (Links to an external site.) resource. Within these 10 to 12 pages, provide data tables and calculations. These tables and calculations should be approximately 40% to 50% of the total work product.
- Must include a separate title page with the following:
- Title of paper
- Student’s name
- Course name and number
- Instructor’s name
- Date submitted
