Exelis company

 

1. The Chief Executive Officer

Who is the CEO of the company? How long has he or she been CEO?

If it is a family run company, is the CEO part of the family? If not, what career path did the CEO take to get to the top? (Did he come from within the organization or from outside?)

How much did the CEO make last year? What form did the compensation take? (Break down by salary, bonus and option components)

How much stock and options in the company does the CEO own?

2. The Board of Directors

Who is on the board of directors of the company? How long have they served as directors?

How many of the directors are insider directors? (i.e. employees or managers of the company)

How many of the directors have other connections to the firm (as suppliers, clients, customers..)?

How many of the directors are CEOs of other companies?

Do any of the directors have large stockholdings or represent those who do?

 

3. Share Voting Structure

Are there differences in voting rights across shares?

If so, do incumbent managers own a disproportionate share of the voting shares?

To understand the relationship between the firm and financial markets, try asking the following questions:

1. Financial Market Concerns

How many analysts follow the firm?

How much trading volume is there on this stock?

To understand the relationship between the firm and society try answering the following questions:

1. Societal Constraints

Does the firm have a particularly good or bad reputation as a corporate citizen?

If it does, how has it earned this reputation?

If the firm has been a recent target of social criticism, how has it responded?

II. Financial Statements Analysis (Deliverable Two)

To understand who the goal of financial management which is to take actions that will maximize the value of a firm’s stock is achieved, try answering the following questions:

1. Did the company made and expansion last two years?

What effect did the expansion have on sales, after –tax operating income, net operating working capital and net income?

What effect did the company’s expansion have on its free cash flow?

Construct the company’s statement of cash flow show

2. Ratios analysis

Why are ratios useful? What are the five major categories of ratios?

Calculate the company’s 2013 or 2012 current and quick ratios based on the latest available financial statements? What can you say about the company’s liquidity position in 2011, 2012?

Calculate the 2012 inventory turnover, day’s sales outstanding, fixed assets turnover, and the total assets turnover? How does your company utilization of assets stack up against other firms in your group companies?

Calculate the 2012 debt-to-assets time-interest-earned ratio. How does your company compare with your group with respect to financial leverage? What can you conclude from these ratios?

Use the DuPont equation to provide a summary and overview of your company financial condition. What are the firm’s major strengths and weaknesses?

III. Risk and Return (Deliverable Three)

To understand the risk profile of the company, estimate risk parameters and the hurdle rates for the firm, try answering the following questions:

 4. Estimating Default Risk and Cost of Debt

If your company is rated,

What is the most recent rating for the firm?

What is the default spread and interest rate associated with this rating?

If your company has bonds outstanding, estimate the yield to maturity on a long term bond? Why might this be different from the rate estimated in the last step?

If your company is not rated,

Does it have any recent borrowings? If yes, what interest rate did the company pay on these borrowing?Can you estimate a synthetic rating? If yes, what interest rate would correspond to this rating?)

5. Estimating Cost of Capital

Weights for Debt and Equity

What is the market value of equity?

Estimate a market value for debt. (To do this you might have to collect information on the average maturity of the debt, the interest expenses in the most recent period and the book value of the debt)

What are the weights of debt and equity?

Cost of Capital

What is the cost of capital for the firm?

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