Financial Advisory Analysis

Please see the attached file name "Work 1"

As a financial consultant, you have been hired by a wealthy client who wants to invest in a publicly-traded company. They are seeking your expertise to analyze and interpret financial statements and information, and to make recommendations based on your comprehensive review.
Section 1: Financial Overview

In this section, you will select a company on which you would like to focus: Use the company is Pepsi
⦁ Analyze the industry utilizing a site such as the Forbes (Links to an external site.) website or Yahoo! Finance (Links to an external site.).
⦁ Describe two competitors of the company.
⦁ Assess the company’s business and risk factors.
⦁ Identify a major accounting-related issue the company faces.
⦁ Develop an appropriate technique to solve the quantitative financial accounting problem.
⦁ Assess the importance of business interests in foreign countries (if any) and how they impact accounting-related policies.
⦁ Analyze the structure of the business accounting cycle.
⦁ Discuss the company’s bad debt expense.
⦁ Explain how the company recognizes revenue.
⦁ Describe what inventory methods are used.
Section 2: Evaluate Profitability, Inventory, and Debt

In this section, you will evaluate the company’s profitability, inventory, and debt. In your evaluation,

⦁ Summarize accounting processes for short-term liquid assets, long-term assets, current liabilities, long-term liabilities, and stockholders’ equity.
⦁ Evaluate the company’s profitability for the most recent fiscal year versus the prior year.
⦁ Compute the following ratios (show all calculations): asset turnover, return on assets, return on equity, gross margin percentage, earnings per share, inventory turnover, days’ inventory outstanding (DIO), current ratio, and debt ratio.
⦁ Describe what these ratios indicate.
Section 3: Evaluate Cash Flow for the Most Recent Fiscal Years

In this section, you will evaluate the company’s cash flow for the most recent two fiscal years. In your evaluation,

⦁ Assess two main sources of cash for the company.
⦁ Determine if the net cash flow from operations was greater than or less than net income.
⦁ Describe the primary cause of the difference.
⦁ Determine if the primary source of cash was from investing activities.
⦁ State the primary source if the source is NOT the same as the prior two years.
⦁ Determine if the primary source of cash was from financing activities.
⦁ Describe the primary source if the source is NOT the same as the prior two years.
⦁ Summarize the major trends you have detected from conducting this cash flow analysis.
Section 4: Other Financial Analysis

In this section, you will examine the 10-K report for your selected company. In your examination,

⦁ Compute the following common-size percentages for the past three years: sales, gross profit, operating income, and net income.
⦁ Explain your computations.
⦁ Compute the trend percentages for the past three years, using the earliest year, base year, total revenues, and net earnings.
⦁ Explain your computations.
⦁ Formulate the multiple-step income statement, a retained earnings statement, and a classified balance sheet for the upcoming fiscal year.
⦁ Document the key assumptions your selected company used in creating the Pro-forma financial statements.
Section 5: Evaluate the Company Stock as an Investment

In this section, Determine how the company stock performed over the past three years.
⦁ Evaluate the company’s stock as a “buy,” “hold,” or “sell” based on your overall financial analysis.
⦁ Explain your rationale.
⦁ Evaluate the trade-off between risk and return in investment.
⦁ Justify your recommendation.
Summary

The summary is intended to showcase the key decision-making elements of primary interest to your client and to make a recommendation to your client on whether or not to invest in the company. In this section,

⦁ Summarize your findings.
⦁ Provide evidence to support your recommendations to the client on whether or not to invest in the company.
⦁ Provide a succinct description of the key factors you considered when determining your recommendation.