Investing in products and
services should produce returns so that stockholders, stakeholders, and others
are interested in the organization.
In this assignment, you will learn about a new product or service.
Tasks:
For (“Understanding the
Numbers for Better Decisions”),you chose a publicly-traded company and analyzed its financial statements.
Use that company to do the following:
1.
Identify a new product or
service—either recently rolled out or about to be rolled out—in the company of
your choice (Note: Information about new
products or services can be found on a company’s website or in the management’s
discussion and analysis section of the company’s annual report).
2.
Analyze the quality of the
company’s existing projects. Try answering the following questions about
returns on the new product or service of your choice.
o
What is the return on equity
earned by the company? Based upon this return, is the company picking good
projects?
o
What is the return on capital
earned by the company? Based upon this return, is the company picking good
projects?
3.
Discuss how the company
financed the initiative and why it was perceived to be advantageous. To answer
this question, you might want to look at the following:
o
How sensitive has this
company’s value been to changes in macro-economic variables such as interest
rates, currency movements, inflation, and the economy?
o
How sensitive has this
company’s operating income been to changes in the same variables?
o
How sensitive is the sector’s
value and operating income to the same variables?
