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Investement decision by financial analysis

Your parents have been left a substantial amount of money and want to invest in a company. Your father trusts you to make a recommendation, but also wants to see the reasoning behind your choice

You have an idea of which company to choose, and you decide to prepare three sets of documents for your parents to consider: business analysis, combined income and cash flow statement, and trend analysis.

Business analysis

Select a public company that trades on either the NYSE or the NASDAQ. Perform a business analysis (both external and internal) for your company using various sources of information. Possible sources include the following:

Annual report and/or Form 10-K
Magazine or newspaper articles
Company website
Government information
Industry information
Value Line, Standard & Poor's, Moody's, etc.
Analyst reports
Internet articles
Your analysis should be approximately five pages long. Be sure to cite your sources using APA guidelines.

Combined income and cash flow statement

Download the company's annual report from its website, or the company's Form 10-K from the U.S. Securities and Exchange Commission (SEC) website [].

Confirm that the firm's income, dividends, and other capital transactions explain the change in equity for the most recent year. (You may need to consult the statement of shareholders' equity.)
Confirm that the firm's cash flow statement begins with the same net income amounts found in the income statement.
Confirm that the firm's cash flow statement shows a change in cash that is equal to the difference between cash shown on the balance sheet at the beginning and end of the year. In Excel, construct a combined income statement and cash flow statement.
Write 1-2 paragraphs that answers the following: what would you do if you found there was a huge difference in the net income amounts and the reported cash flow amounts? How could technology limit the likelihood of this happening again?
Trend analysis

Finally, prepare a trend analysis of operating ratios for at least three years' worth of financial data. Prepare the analysis in Excel. You may wish to create a common-sized income statement first, but it isn't required.

If you adjusted for any nonrecurring items in step (1), explain the adjustments in a separate Word document. Use any other information in your company's annual report to explain the change in revenues, gross margin percentage, and operating margin percentage. Add this information to the Word document.

Solution Preview




It is a report on Harley Davidson, which is primarily in the business of recreational vehicle. This report involves exhaustive analysis which involve preparation of three sets of documents business analysis, combined income and cash flow statement, and trend analysis.
Harley-Davidson had a strong domestic market share in the American motorcycle industry. Built on tradition and name recognition, Harley's are a part of American culture. Unique products and loyal customer's are the foundation of Harley-Davidson Inc. The only major obstacle the company faces is greater demand for their product than availability. Production has increased and profits are very good. Harley-Davidson has many Japanese competitors that have yet to hurt the sales of the core super heavyweight motorcycles.

Harley-Davidson, Inc. is primarily in the business of recreational vehicle. Harley-Davidson was incorporated in 1981 and is based in Milwaukee, Wisconsin.
It is the parent company for the group of companies doing business as Harley-Davidson Motor Company (Motor Company), Buell Motorcycle Company (BMC) and Harley-Davidson Financial Services (HDFS). The Motor Company produces heavyweight motorcycles and offers a line of motorcycle parts, accessories, apparel and general merchandise. The Motor Company manufactures five families of motorcycles: Touring, Dyna Glide, Softail, VRSC and Sportster. BMC produces sport motorcycles, including five v-twin XB models and the single-cylinder Buell Blast. BMC also offers a line of motorcycle parts, accessories, apparel and general merchandise. HDFS provides wholesale and retail financing and insurance programs primarily to Harley-Davidson/Buell dealers and customers. The Company operates in two principal business segments: Motorcycles and Related Products (Motorcycles) and Financial Services. HDI is a manufacturer of motorcycles based in Milwaukee, Wisconsin, making it one of the two remaining American mass-producer of motorcycles (along with Victory Motorcycles). The company emphasizes heavy bikes designed for cruising, bikes known for their distinctive exhaust noise.
The Motorcycles segment designs, manufactures, and sells primarily heavyweight, touring, custom, and performance motorcycles, as well as a line of motorcycle parts, accessories, clothing, and collectibles. It also offers police, fire, and rescue motorcycles. The Financial Services segment engages in financing and servicing wholesale inventory receivables and consumer retail loans primarily for the purchase of motorcycles in the United States, Canada, and Europe. It provides wholesale financial services to its dealers and retail financing to consumers. Its wholesale financial services include floorplan and open account financing of motorcycles, and motorcycle parts and accessories; real estate loans; computer loans; and showroom remodeling loans. Retail financial services include installment lending for its new and used motorcycles. The Financial Services segment also provides the brokerage of various motorcycle insurance policies and service warranty agreements.

Harley-Davidson also provides other services to its dealers, including service and business management training schools, customized dealer software packages, delivery of its motorcycles, a motorcycle rental program, and a rider training program. In addition, the company licenses the name 'Harley-Davidson' and other trademarks owned by it. Its licensed products include T-shirts, jewelry, small leather goods, and toys.


The company considers 1903 to be its year of founding, though the Harley-Davidson enterprise could be considered to have started in 1901 when William S. Harley, age 21, drew up plans for a small engine that displaced 7.07 cubic inches (116cc) and had four-inch flywheels. The engine was designed for use in a regular pedal-bicycle frame.
Over the next two years Harley and his boyhood pal Arthur Davidson labored on their little motor-bicycle using the northside machine shop of their friend Henry Melk. It was finished in 1903 with the help of Arthur's brother, Walter Davidson. Upon completion the boys found their little "power-cycle" unable to conquer Milwaukee's modest hills without pedal assistance. Bill Harley and the Davidsons quickly wrote off their first motor-bicycle as a valuable learning experiment.

Starting fresh, work was immediately begun on a new and much improved machine. This first "real" Harley-Davidson motorcycle would have a bigger engine of 24.74 cubic inches (405cc) with 9-3/4 inch flywheels weighing 28 pounds. The machine's advanced loop-frame was similar to the 1903 Milwaukee Merkel motorcycle. They also got help with their new engine from outboard motor pioneer Ole Evinrude. Elder brother William A. Davidson also lent a hand in the enterprise. The prototype of the new improved loop-frame model was assembled in a 10 by 15 foot (3 by 5 meter) shed in the Davidson family backyard. The machine was functional by 8 September 1904 when it was entered in a Milwaukee motorcycle race, the first known appearance of a Harley-Davidson motorcycle.

In January 1905, small advertisements were placed in the "Automobile and Cycle Trade Journal" that offered bare Harley-Davidson ...

Solution Summary

This explains the tools to make investment decisions