ACC 345: Financial Statement Analysis/Business Valuation Milestone One

Overview

Accountants must be familiar with the amount of data required in the  Annual Form 10-K filing and the Annual Proxy filing for publicly traded  companies because they will use the data from these filings to research a  company’s competitors. Accountants can even use the data from these  filings in their personal life to research investment opportunities.

Scenario

In this milestone, you will prepare a valuation for a 1% minority  shareholder on the assumption that your company is a “going concern”  company, meaning that the company will be able to pay its financial  obligations as needed for the foreseeable future.

[Note: Replace all bracketed text with your responses before submitting this completed template
for grading. Remove this note before you submit your paper.]
Tesla; Valuation and Analysis
Collette Bistodeau
Southern New Hampshire University
ACC 345: Financial Statement Analysis/Business Valuation
Elliott Chester
September 3, 2023
Milestone One: Introduction …………………………………………………………………………………………….. 3
Links ………………………………………………………………………………………………………………………….. 3
History and Overview ………………………………………………………………………………………………….. 3
Summary ……………………………………………………………………………………………………………………. 5
Milestone One References ……………………………………………………………………………………………. 5
Milestone Two: Financial Analysis …………………………………………………………………………………… 5
Balance Sheet Analysis ………………………………………………………………………………………………… 5
Income Statement and Cash Flow Analysis …………………………………………………………………….. 6
Normalization Adjustments Analysis …………………………………………………………………………….. 8
Summary ……………………………………………………………………………………………………………………. 8
Milestone Two References ……………………………………………………………………………………………. 8
Milestone Three: Economic Outlook …………………………………………………………………………………. 9
Microeconomic Industry Analysis …………………………………………………………………………………. 9
General Macroeconomic Analysis ……………………………………………………………………………….. 10
Summary ………………………………………………………………………………………………………………….. 11
Milestone Three References ………………………………………………………………………………………… 11
Project …………………………………………………………………………………………………………………………. 12
Assumptions and Rationale …………………………………………………………………………………………. 12
Analysis ……………………………………………………………………………………………………………………. 12
Project References ……………………………………………………………………………………………………… 12
Valuation Team Report ………………………………………………………………………………………………. 12
Milestone One: Introduction
Links
1. Provide the most recent SEC Form 10-K Filing link for the company.
https://www.sec.gov/Archives/edgar/data/1318605/000095017023001409/0000950170-23-001409index.htm
2. Provide the most recent SEC Proxy Filing link for the company.
https://www.sec.gov/Archives/edgar/data/1318605/000119312523094075/0001193125-23-094075index.htm
History and Overview
1. Provide a brief company history overview based on external research of the company.
Consider the following questions to guide your response:
A. How long has the company been in business?
B. Who was the original founder of the company?
C. What significant changes to company leadership have occurred?
D. How has the company changed since its beginning? Consider expansion of
locations or products/services, etc.
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2. Identify all of the company’s major locations for their facilities and/or other properties.
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3. Identify all of the customers recognized by the company.
Find this information in the annual Form 10-K filing, in Part 1, Item 1: Business.
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4. List all of the names of the executive management team of the company.
Find this information in the annual Form 10-K filing, in Part 3, Item 10:
Directors, Executive Officers and Corporate Governance or in the Annual Proxy filing,
under “Executive Officers,” or “Officers Compensation.” You may copy and paste a
chart into this section from the annual Form 10-K filing. Be sure to add your own
explanation of the information in the chart along with an attribution and a citation in the
References section at the bottom of this template.
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5. Identify all of the competition recognized by the company.
Find this information in the annual Form 10-K filing, in Part 1, Item 1: Business.
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6. Identify all of the major shareholders of the company.
Find this information in the Annual Proxy filing, under “Beneficial Ownership.”
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7. Describe business risks recognized by the company.
Find this information in the annual Form 10-K filing, in Part 1, Item 1A: Risk Factors.
Item 1A in the annual Form 10-K will be lengthy. Do your best to summarize the risks
the company has identified.
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8. Explain how the company is committed to Environmental, Social and Governance (ESG)
efforts and sustainability.
Find this information in the annual Form 10-K filing, in Part 1, Item 1: Business or in
Part 2, Item 7: Management’s Discussion and Analysis of Financial Condition and
Results of Operations. If your company does not provide this information in its SEC
filings, you will need to do external research to determine your company’s commitment
to ESG efforts and sustainability. Be sure to add your own explanation of the information
you researched. Include appropriate attributions in your explanation and a citation in the
References section at the bottom of this template.
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9. Describe the company’s Leadership in Energy and Environmental Design (LEED) status.
Consider the following questions to guide your response:
A. Is the company currently LEED certified?
B. If the company is not currently LEED certificated, is it working towards
becoming LEED certified?
Review the Form 10-K filing to see if your company is LEED certified or if it discusses
its certifications. If your company does not provide this information in its SEC Filings,
you will need to do external research to determine your company’s LEED status. Be sure
to add your own explanation of the information you researched. Include appropriate
attributions in your explanation and a citation in the References section at the bottom of
this template.
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Summary
1. Summarize your findings for the valuation team. Include the following details in your
response:
A. Explain what you learned as you researched the company.
B. Identify the key points the valuation team needs to be aware of.
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2. Create at least one effective visualization that supports key points. Include the following
detail in your response:
A. Appropriate labels for the visualization(s).
Create an effective visualization(s) based on your research to support your summary
report. Examples of ideas for your visualization(s) include creating a timeline of the
company history, creating a map of the company’s locations, creating a chart of major
shareholders showing ownership and broken down by percentages, etc.
[Insert visualization(s).]
Milestone One References
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Milestone Two: Financial Analysis
Balance Sheet Analysis
1. Explain the findings regarding the company’s asset accounts for the previous five years.
Include the following details in your response:
A. Describe in detail the material changes in the asset accounts, including changes in
cash, AR, inventory, property, plant and equipment, and goodwill.
B. Explain what these changes might be related to.
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2. Explain the findings regarding the company’s liability accounts for the previous five
years. Include the following details in your response:
A. Describe in detail the material changes in both current and long-term liabilities.
B. Explain what these changes might be related to.
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3. Explain the findings regarding the company’s equity accounts for the previous five years.
Include the following details in your response:
A. Describe in detail the changes to equity accounts, including common stock,
treasury stock, or additional paid in capital (i.e., whether the company raised
funds or retired stock).
B. Explain how the changes compare to the net income or other sections of the
balance sheet.
C. Identify whether the company is paying out dividends.
D. Describe in detail how that the company’s dividend payouts have changed over
the past five years.
E. Describe in detail the changes in “total equity” (representing the current “book
value” of the company).
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4. Explain what the company’s current and prior year liquidity and debt-to-equity ratios say
about the company’s financial health. Consider the following questions to guide your
response:
A. What is an appropriate level of debt?
B. How does this year’s performance compare to the previous year?
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Income Statement and Cash Flow Analysis
1. Explain the profitability ratios that are included in the company’s financial statements.
Include the following detail in your response:
A. Explain any trends and relate any changes back to the balance sheet and income
statement accounts used in the ratio calculation.
Use appropriate profitability ratio(s) and a vertical analysis (using the common-size
analysis in the Project Workbook Template).
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2. Explain the profitability of the company for the prior and current years. Consider the
following questions to guide your response:
A. What does a vertical analysis of the company’s gross revenue show you? What is
the percentage (%) of change year over year for these past five years?
B. How are the company’s COGS and gross profit margin being managed?
C. How are the company’s sales, general, and administrative expenses being
managed as a percentage of sales? What does this tell you about the company’s
current business cycle? Remember, it is normal for this percentage to rise when
sales are dropping and fall when sales are rising. If this is not happening, what
might be the reason?
Use appropriate profitability ratio(s) and a vertical analysis (using the common-size
analysis in the Project Workbook Template).
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3. Describe what free cash flow is and how it is calculated.
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4. Explain the free cash flow history for the company.
Search the company’s most recent 10-K filing first for a discussion from management on
their free cash flow. If there isn’t anything in the filing, do an internet search for the
company’s free cash flow history.
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5. Explain the data reported in the cash flow statement for all five years reported. Include
the following details in your response:
A. Identify the amount of cash flow reported from operations.
B. Identify the amount of cash flow reported from investments.
C. Identify the amount of cash flow reported from financing.
D. Explain the correlation between each of these categories of cash flow for the past
five years.
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Normalization Adjustments Analysis
1. Define the term normalization adjustment.
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2. Identify three examples of balance sheet normalization adjustments that might appear.
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3. Identify three examples of income statement normalization adjustments that might
appear.
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Summary
1. Summarize your findings for the valuation team. Include the following details in your
response:
A. Explain what you learned as you researched the company.
B. Identify the key points the valuation team needs to be aware of.
Use the common-size analysis in the Project Workbook Template to inform your
summary. Include key identifiers from your research in your summary.
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2. Create at least one effective visualization that supports key points. Include the following
detail in your response:
A. Appropriate labels for the visualization(s).
Examples of ideas for your visualization(s) include a line chart showing sales growth and
gross profit margin and other expenses or a graph of the ratio analysis data.
[Insert visualization(s).]
Milestone Two References
[Insert text.]
Milestone Three: Economic Outlook
Microeconomic Industry Analysis
1. Explain the industry outlook for the company. Include the following details in your
response:
A. Identify the primary industry the company operates in.
B. Provide a general overview of the size of the industry both domestically and
internationally.
C. Explain current industry trends and emerging technologies that might impact the
company’s industry in the future.
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2. Explain how the supply and demand for the company’s industry may affect consumer
behavior. Include the following details in your response:
A. Explain major events have impacted supply and demand for the company’s
industry.
B. Identify if there have been any supply chain issues. If so, explain how these issues
have affected overall supply and demand.
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3. Evaluate the competitive landscape for the company. Include the following details in
your response:
A. List the company’s current percentage of the market share in this industry.
B. List the company’s top three competitors and what percentage of the market share
each competitor holds.
C. Explain how the percentage of market share changed over the last three years for
the company and its competitors.
D. Explain the new competitors entering this industry.
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4. Identify key data from the SWOT analysis for the company and its primary competitor.
Include the following details to your response:
A. Provide the citation for SWOT analysis from a reputable source for the company.
B. Provide the citation for SWOT analysis from a reputable source for the
company’s primary competitor.
C. Identify the company’s major strengths and weaknesses compared to the
company’s primary competitor.
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5. Evaluate the impact of new or recently changed regulations specific to the company’s
industry. Include the following details in your response:
A. Provide a citation to the specific new regulation.
B. Explain the advantages and/or disadvantages of the new regulation(s) for the
company’s industry.
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6. Identify potential international issues with the company expanding into global markets.
Consider the following questions to guide your response:
A. What historical data may affect the company as it expands?
B. What potential future issues may arise based on current economic conditions?
Search the company’s most recent 10-K filing first for information on protentional
international issues. Search in Part 2, Item 7: Management’s Discussion and Analysis of
Financial Condition and Results of Operations. If there isn’t anything in the filing, do an
internet search for news stories and/or issues regarding the company’s experience with
expanding into global markets.
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7. Describe labor market trends in the company’s industry.
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8. Explain how labor market trends might impact the company’s operations.
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General Macroeconomic Analysis
1. Explain macroeconomic trends that might impact the company and/or its industry now or
in the future. Consider the following questions to guide your response:
A. How could economic output and consumption trends impact the company and/or
its industry?
B. How have interest rate changes impacted the company?
C. How might the current Gross Domestic Product (GDP) and its projected future
movement impact the company’s future operations?
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2. Identify changes in monetary policy trends that impacted the domestic and/or global
economy the company’s operates in.
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3. Explain how monetary policy changes have affected the company and/or its industry.
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4. Identify changes in trade policy trends that impacted the domestic and/or global economy
the company operates in.
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5. Explain how trade policy changes have affected the company and/or its industry.
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Summary
1. Summarize your findings for the valuation team. Include the following details in your
response:
A. Explain what you learned as you researched the external factors for the company.
B. Identify the key points the valuation team needs to be aware of.
[Insert text.]
2. Create at least one effective visualization that supports key points. Include the following
detail in your response:
A. Appropriate labels for the visualization(s).
Create an effective visualization(s) based on your research to support your summary
report. Examples of ideas for your visualization(s) include a graph showing any of the
key economic indicators over the past five years, showing changes in market share of key
competitors over the past 3-5 years, or showing the industry outlook projections.
[Insert visualization(s).]
Milestone Three References
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Project
Assumptions and Rationale
Address rubric criteria 1-7 in this section.
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Analysis
Address rubric criteria 8-10 in this section.
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Project References
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Valuation Team Report
This Valuation Team Report will be submitted separately. Refer to the Project Guidelines and
Rubric for submission guidelines.