Select the company, Precision Castparts Corporation (PCP) and monitor their stock market activity from this past year.
Perform a BRIEF history of the stock performance of Precision Castparts Corporation (PCP) representing the companies climb as a Fortune 500 company.
Make sure to make note of the industry that the company is in.
Throughout the period of January 28, 2017 to current day, make note of any significant events that have taken place for Precision Castparts Corporation (PCP) and its industry.
Complete an analysis of the Precision Castparts Corporation (PCP) and its industry.
Use the ratios outlined in the below bulleted points.
Prepare a 6 page paper showing your ratios and their analysis. Make sure to include the ratios and analysis for Precision Castparts Corporation (PCP) and its industry. Managerial finance focuses on the assessment and the student’s need to demonstrate an assessment of both to receive a good grade on this paper.
Your paper must be formatted in APA format with an Intro, Body (containing bulleted ratios and show all calculations using Precision Castparts Corporation’s (PCP) financial information) and Conclusion
An abstract/executive summary is not necessary.
Good spelling and grammar must be used.
The student must have at least 2 sources.
A well written paper will include the calculations and accurate analysis of all of the ratios in the following bullets for the Precision Castparts Corporation (PCP) and the industry of the company. The paper will also note any major events. For instance, if the paper were focused on Apple and the company declared a dividend, this should be noted in the student’s paper.
Conclusively determine if the Precision Castparts Corporation (PCP) is a good investment or a not so good investment from all of the ratios provide in the bullets. If the company is lacking in certain performances when compared to the industry standards then hypothesis a solution for each instance in the conclusion.
The essay will include in (paragraph form) and is not limited to the following bulleted points (all of these equations must be performed on Precision Castparts Corporation (PCP) with the calculations shown in the essay) (DO NOT USE ACRONYMS):
Ratio Analysis
Liquidity
Current Ratio (CR)
CR=(current assets)/(current liabilities)
industry average CR=4.2
Quick Ratio (QR)
QR=(current assets-inventories)/(current liabilities)
industry average QR=2.2
Asset Management Ratios
Inventory Turnover Ratio (ITR)
ITR=sales/inventories
industry average ITR=10.9
Days Sales Outstanding (DSO)
DSO=recievables/((Annual Sales)/365)
industry average DSO=36 days
Fixed Assets Turnover ratio (FAT)
FAT=sales/(net fixed assets)
industry average FAT=2.8
Total Assets Turnover ratio (TAT)
TAT=sales/(total assets)
industry average TAT=1.8
Debt Management Ratios
Debt ratio (DR)
DR=(Total Debt)/(Total assets)
industry average FAT=40.0%
Times interest earned ratio (TIE)
TIE=EBIT/(interest charges)
industry average TIE=6.0
Profitability Ratios
Operating Margin (OM)
OM=EBIT/Sales
industry average OM=10.0%
Profit Margin (PM)
PM=(Net Income)/Sales
industry average PM=5.0%
Return on Total Asset (RTA)
RTA=(Net Income)/(Total Assets)
industry average RTA=9.0%
Basic Earning Power ratio (BEP)
BEP=EBIT/(Total assets)
industry average BEP=18.0%
Return on Common Equity (ROE)
ROE=(Net Income)/(Common Equity)
industry average ROE=15.0%
Market Value Ratios
Price/Earnings ratio (P/E)
P/E=(price per share)/(earnings per share)
industry average P/E=11.3
Market/Book ratio (M/B)
M/B=(market price per share)/((common equity)/(shares outstanding))
industry average M/B=1.7
Tying together the ratios to form the DuPont Equation
ROE= ROA x Equity Multiplier
The DuPont Equation
ROE = ROA
X Equity Multiplier
= Profit Margin
X Total Assets Turnover X Equity Multiplier
= (Net Income)/Sales X Sales/(Total assets)
X (Total Assets)/(Total Common Equity)
Industry
Standard = 5.0% X 1.8 times X 1.67 times =15.0%
Using the financial ratios to asses performance
Compare the ratios performed for Precision Castparts Corp to industry averages
Benchmarking
Benchmark Precision Castparts Corporation with:
Allegheny Technologies, Inc.
Reliance Steel & Aluminum Co
Carpenter Technology Corp.
Brush Engineered Metals, Inc.
Perform a trend analysis of Precision Castparts Corporation to estimate the likelihood of improvements or deterioration in its financial condition
Discuss if Precision Castparts Corporation is window dressing to make its financial condition look better than it really is