To prepare, reread the Morningstar Analyst’s Report and the most recent annual reports for both companies with a particular focus on the Income Statementand Statement of Cash Flows.
A. Complete the Assignment 2 Worksheet to compare key performance metrics and ratios for both companies in order to see how performance can be impacted by manipulating certain financial levers. The guidance for this is found on pages 78-100 of The CFO Guidebook.
B. Summarize your Analysis and Recommendations by answering the following questions:i. Performance Metrics:a. Which company is a more efficient generator of income? b. Which company is growing faster? c. Using financial health ratios, which company is more profitable?d. Which company has stronger valuation ratios? e. Overall, which is the better run company and why?ii. Merger Synergies:a. If there was an acquisition, which company is the most likely acquirer? Why?b. Would you recommend a merger or acquisition to increase the moat strength of the combined companies? Why or why not? •If you support a merger or acquisition, identify 3 performance metrics that could be improved by a merger and explain how they would be improved. Guidance for this is found on pages 101-110 of The CFO Guidebook.
Sample Solution