ACC 345 Milestone Two Guidelines and Rubric Overview: This milestone will help you to complete Sections II and III of the final project. You will review balance sheets, statements of cash flows, and income statements. You will also analyze different valuation standards and focus on the difference in standards used for recording revenue, expenses, and fair values of assets and liabilities. Prompt: Produce a financial statement analysis and valuation report that summarizes the financial health, projected future performance, and estimated value of the publicly traded (S&P 500) company that you selected at the beginning of the course. As an independent financial accounting analyst working for a major trade journal, your report is intended to inform a general audience about the overall financial well-being of the company and how it compares to a major competitor. Your report should cover information of interest to both internal and external stakeholders—summarizing major findings, suggesting ways to improve operational performance, and assessing investment potential. Keep in mind that brief, clear communications are essential in effectively reaching business and media audiences. Specifically, the following critical elements must be addressed: I. Balance Sheet Analysis. In this section, use financial statements and accompanying notes to: A. Analyze what the company’s current and prior year liquidity and debt-to-equity ratios say about the company’s financial health, justifying your response. Consider the appropriate level of debt and how this year’s performance compares to the previous year’s. B. Consider normalization adjustments when adjusting the balance sheet to be comparable to competitors, when creating the prospective balance sheet, and when calculating the final company valuation as either a premium or discount. (Include your analysis spreadsheet in Excel as an appendix.) C. Analyze the company’s balance sheet for the current and previous year using a horizontal analysis. (Include your horizontal analysis spreadsheet in Excel as an appendix.) Explain your findings. D. Comparison. Analyze the competitor’s balance sheet indicators for opportunities for the selected company to improve its own performance. Justify your response using the financial statements of both the company and its competitor. II. Income Statement and Cash Flow Analysis. In this section, use financial statements and accompanying notes to: A. Analyze the profitability of your selected company using appropriate profitability ratio(s) and a vertical analysis of the company’s current and prior year income statement. (Include your vertical analysis spreadsheet in Excel as an appendix.) Be sure to explain your findings. B. Normalization adjustments. Analyze historical income statements to determine whether there were any non-recurring or extraordinary items that should be removed from the income statement. An example would be aggressive expense recognition or conservative revenue recognition, which could either depress or inflate earnings. Adjusting these items will make the target company more comparable to the others. C. Free cash flow. Analyze what your selected company’s free cash flow figures for the current and prior year say about the company’s financial health. Consider other sources or uses of available discretionary cash. D. Dividend paying capacity of the company. Determine if the company is on track to pay out dividends this year and whether the dividend payout ratio increase or decrease. Rubric Guidelines for Submission: Your milestone should be completed using the Financial Analysis Section of the Business Valuation Report template. Sources should be cited according to APA Style. For the analysis, use and submit the pertinent sections of the Business Valuation Model Excel file. Include a link to the chosen company’s financial information for confirmation purposes. Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value Balance Sheet Analysis: Liquidity and Debt-toEquity Ratios Analyzes what current and prior year liquidity and debt-to-equity ratios say about the company’s financial health, justifying response Analyzes what ratios say about the company’s financial health, but does not justify response Does not analyze what the ratios say about the company’s financial health 12 Balance Sheet: Normalization Adjustments Analyzes the company’s balance sheet using horizontal analysis and includes analysis spreadsheet in appendix, explaining findings Analyzes the balance sheet using horizontal analysis but does not explain findings, or does not include spreadsheet in appendix Does not analyze the company’s balance sheet using horizontal analysis and include analysis spreadsheet in appendix 12 Balance Sheet Analysis: Horizontal Analysis Analyzes the company’s balance sheet indicators for opportunities for selected company to improve its own performance, justifying response using company and competitor financial statements Analyzes company’s balance sheet indicators for opportunities for selected company to improve, but does not justify response Does not analyze company’s balance sheet indicators for opportunities for selected company to improve 12 Balance Sheet Analysis: Comparison Analyzes the competitor’s balance sheet for other opportunities for the selected company to improve its own performance, justifying response using financial information for both companies Analyzes competitor’s balance sheet for other opportunities for improvement but does not justify response Does not analyze competitor’s balance sheet for other opportunities for improvement 12 Income Statement and Cash Flow Analysis: Profitability Analyzes profitability of company using appropriate profitability ratio(s) and vertical analysis of company’s current and prior year income statements and includes vertical analysis spreadsheet in appendix, explaining findings Analyzes profitability using appropriate profitability ratio(s) and vertical analysis but does not explain findings, or does not include spreadsheet in appendix Does not analyze profitability using appropriate profitability ratio(s) and vertical analysis nor include vertical analysis spreadsheet in appendix 12 Income Statement and Cash Flow Analysis: Normalization Adjustments Analyzes historical income statements and determines any non-recurring or extraordinary items that should have been removed from the income statement Analyzes historical income statements, but response is illogical or contains inaccuracies Does not analyze historical income statements 12 Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value Income Statement and Cash Flow Analysis: Free Cash Flow Analyzes the selected company’s free cash flow figures for the current and prior year and determines how they inform the company’s financial health Analyzes the selected company’s free cash flow figures for the prior and current year but does not determine how they inform the financial health of the selected company Does not analyze the selected company’s free cash flow figures for the current and prior year 12 Income Statement and Cash Flow Analysis: Dividend Paying Capacity Determines if the company is on track to pay out dividends this year and whether the dividend payout ratio will increase or decrease Determines if the company is on track to pay out dividends this year but does not address whether the payout ratio will increase or decrease Does not determine if the company is on track to pay out dividends this year 12 Articulation of Response Submission has no major errors related to citations, grammar, spelling, syntax, or organization Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas 4 Total 100% – essay bishop business writers ~~~For this or similar assignment papers~~~