BUS-4072_FouchTashia_Week9Assignment

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Capella University *

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4072

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Business

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Apr 30, 2024

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pdf

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4

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Week 9 Assignment: Equity Analysis Tashia Fouch Capella University BUS-4072: Analysis for Financial Management Professor Robert Watson March 2024
ABC FIRM Tel 123-456-7890 Fax 012-345-6789 123 Main Street Anywhere, USA www.abcfirm.com tfouch@abcfirm.com 12.31.2013 Memo Comments: Greetings! Using the Price-earnings Ratio and the DuPont Model, I have performed an equity analysis for ABC for the years 2012 and 2013 using the below information: Revenue: $130,500,000 (2012); $202,560,000 (2013). Net Income: $22,740,000 (2012); $44,563,000 (2013). Assets: $210,000,000 (2012); $206,700,000 (2013). Shareholders' Equity: $146,500.000 (2012); $148,824,000 (2013). Market Value Per Stock Share: $23.15 (2012); $28.22 (2013). Earnings Per Share: $2.87 (2012); $4.10 (2013). Industry Average ROE: 22.5% (2012); 27.3% (2013). Industry Average Price/Earnings Ratio: 7.7 (2012); 8.2 (2013). The following is my analysis of the changes from 2012 to 2013, as well as my recommendations for the year 2014. The ABC Firm has shown improved performance in 2013 compared to the prior year (2012), which is evident from the changes in its ROE and P/E ratio in comparison to industry benchmarks (see attached for P/E ratio and ROE calculations). Higher returns and a reduced P/E ratio suggest that The ABC Firm is excelling and experiencing a positive trend in its performance. As we move into 2014, it is advisable for the company to reinvest its earnings instead of distributing them as dividends to shareholders. Given ABC's ability to generate returns surpassing the industry average, shareholders are inclined towards seeing the company expand. This strategy is expected to result in an increased share price in the coming years and enhanced earnings for shareholders. To ABC Senior Management From Tashia Fouch CC Prof. Robert Watson Re ABC Firm Equity Analysis for 2012+2013
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