ESSAY: Principles of Business Finance

Evaluation of Corporate Performance
The Final Paper will involve applying the concepts learned in class to an analysis of a company using data from its annual report. Using the concepts from this course, you will analyze the strengths and weaknesses of the company and write a report either recommending or not recommending purchase of the company stock.
Research Tip: The “Mergent” database in the Ashford University Library contains company profiles and financial information for publicly traded companies and their competitors. To access this database enter the Ashford Library and select “Find Articles and More” in the top menu panel. Next, select “Databases A-Z” and go to section “M” for “Mergent”. For help with using Mergent, use Mergent Online Quick Tips.
For help with reading an annual report access this handy guide
(Links to an external site.)
Links to an external site.
from Money Chimp.
The completed report should include:
An introduction to the company, including background information.
A complete and thorough financial statement review.
Pro Forma financial statements (Balance Sheet and Income Statement) for the next fiscal year, assuming a 10 percent growth rate in sales and Cost of Goods Sold (COGS) for the next year.
Complete ratio analysis for the last fiscal year using at least two ratios from each of the following categories:
Liquidity
Financial leverage
Asset management
Profitability
Market value
Debt
Per-Share
Measures of relative value (P/E, P/B)
Activity
Cash Flow
A calculation of Return on Equity (ROE) using the DuPont system.
Assessment of management performance by calculating Economic Value Added (EVA).
A synopsis of your findings, including your recommendations and rationale for whether or not to purchase stock from this company.
Evaluate the financial risks associated with operating internationally. If your chosen company does not operate internationally, evaluate what the financial risks could be if they were to expand internationally.

ANSWER

Diageo plc is a company that deals with production and distribution of alcoholic beverages. This paper seeks to explain the background information of the company, perform a comprehensive financial statement review and ratio analysis for the last financial year ending 2017. In addition, a pro forma income statement and balance is provided assuming there is a 10% increase in both sales and cost of goods sold. The final section evaluates management performance through economic value added.

            Diageo plc is a British multinational alcoholic beverages company that was incorporated XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX company has its headquarters located in London, England. Diageo has been the world largest distiller over many decades though China’s Kweichow Moutai overtook it in 2017 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX operates in both beer and spirits markets with its geographic market segments including North American, European, Russia, African, South American and AsianXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX company’s’ brands consist of Johnnie Walker, Smirnoff, Captain XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXand Guinness. The principal products supplied by the company range from whisky from Scotland and America, Gin, Vodka, Rum, Beer products such as malt and lite, Cream Liqueur, Whisky from Canada, Brandy, Cachacha, Tequila, Raki, Adult XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX to Drink (RTD) brands such as Alvaro and Guarana (Diageo, 2017)

            Diageo company has established production plants in various locations across the world. The production facilities are grouped into maltings factories, distilleries XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX among other processing sites (Diageo, 2017). The beer key brewing plant is built in Dublin at St. James’s Gate (Diageo, 2017). This factory serves Europe markets and American countries. Diageo has established brewing plant in XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX African countries including Kenya, Nigeria among others. Production of Guinness is done in Ireland from where it is exported to the global markets. The Ready to Drink brands are manufactured XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXuntries in different continents such as England and XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX production is also distributed among the countries in the global market with Scotland leading in production of scot whiskeys (Diageo, 2017).

            Diageo plc was formed from a merge of Guinness and Grand Metropolitan in 1997. After the merger, Anthony Greener served as the first executive XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX shares were first traded in London Stock Exchange in 1997 and they were later listed in New York stock XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXto cement its market share through acquisition of competitor brands such as the acquisition of Indian Spirit Company and United Spirits in XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX also acquired tequila brand Don Julio through an exchange plan where it relinquished ownership of Bushmills Irish whiskey in 2014 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Board of Directors supported by its different committees governs the company. The board is mandated with setting strategic plans and targets, providing leadership, overseeing the management and reporting to the XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXUK Corporate Governance Code that outline the agreeable business practices in the country governs the XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX company is further guided by Companies Act of 2006 and the rules stipulated by London Stock Exchange (LSE)…