FIN 660 Strategic Financial Management
CFO PROJECT
For the CFO project, choose a company from the Fortune 500 list (at http://money.cnn.com/magazines/fortune/fortune500/) as the subject of your analysis and report. Choose a company, such that:
It is not a Fortune 100 company
It is not a bank or financial services company (including brokers and investment banks)
It is not a holding company
Company I have chosen is Foot Locker, Inc. ranked 378 on the Fortune 500 list.
Your mission is to develop a comprehensive report to your CEO. Your task is to analyze the company in this context and provide recommendations. You decide how each topic should be addressed and include research to make/support your strategy/policy recommendations. Your report should include an assessment of your company’s corporate governance “readiness” and provide suitable recommendations to ensure compliance with the Sarbanes-Oxley Act of 2002 and new regulations published by the regulatory bodies.
In the spirit of a Forensic Financial Analysis, you should analyze the firm’s financial statements and policies as a risk management exercise for the benefit of the company CEO. Look for any “bodies” buried in the statements and associated notes, as well as the types of information disclosed to the public (e.g., pro forma earnings). Your goal here is to identify any areas where the firm is vulnerable to SEC action (fraud or otherwise) and report these to the CEO as a preemptive risk mitigation action. The required text Financial Shenanigans should be used as a reference to guide your approach in this area. I recognize this is a difficult task, given the short exposure to forensics financial analysis and the restricted information available to you. Do the best job you can.
For your Corporate Governance Assessment, you are should assess the integrity and rigor of the firm’s corporate governance structure (Board, Audit Committee, stock options policies, pension fund policy, etc.) to identify any weaknesses you can find and provide recommendations to strengthen governance policy. The corporate governance readings and recommended text, Building Public Trust: The Future of Corporate Reporting provide a good framework for your analysis and research. I recognize this is a tall order, given the complexity of the task and your limited access to relevant information; however, there are several databases UMUC subscribes to that can be of use to you. In addition to the article databases, such as ABI/INFORM and Business Source Complete, the UMGC Library has:
1. D & B Key Business Ratios provides business ratios for industries in areas of solvency, efficiency, and profitability searchable by industry name and SIC code with reports that can be printed in spreadsheet format.
2. Business and Company Resource Center has industry rankings, financial data, and investment reports including company profiles, products and brand information, investment reports, statistics, company financial overviews, financial ratios, and business events and trends. Some sources from 1985 to the present.
3. Business and Industry has business, finance, strategy, planning, marketing, and international business journal articles from 1994 to the present.
4. Mergent Online has directory data, financial information from 1991 to the present, histories for companies worldwide, and industry reports for the North American, Asian, and European regions from 2003 to the present. A corporate and municipal bond, UIT, and dividend information. Comparative industry financial information and ratios.
You may also use topic areas covered in eCFO lecture notes posted at the links in the course schedule as target areas for improvement in your company, as well as topic areas for the sessions listed in the schedule. For example, you may address two topic areas from the eCFO lecture notes and two topic areas from the session topics as the focus of your analysis and improvement recommendations.
Your mission is to develop a comprehensive report for your CEO. Your task is to analyze the company in this context and provide recommendations. You decide how each topic should be addressed and include research to make/support your strategy/policy recommendations. Your report should include an assessment of your company’s corporate governance “readiness” and provide suitable recommendations to ensure compliance with the Sarbanes-Oxley Act of 2002 and new regulations published by the regulatory bodies.
In the spirit of a Forensic Financial Analysis, you should analyze the firm’s financial statements and policies as a risk management exercise for the benefit of the company CEO. Look for any “bodies” buried in the statements and associated notes, as well as the types of information disclosed to the public (e.g., pro forma earnings). Your goal here is to identify any areas where the firm is vulnerable to SEC action (fraud or otherwise) and report these to the CEO as a preemptive risk mitigation action. The required text Financial Shenanigans should be used as a reference to guide your approach in this area. I recognize this is a difficult task, given the short exposure to forensics financial analysis and the restricted information available to you.
For your Corporate Governance Assessment, you should assess the integrity and rigor of the firm’s corporate governance structure (Board, Audit Committee, stock options policies, pension fund policy, etc.) to identify any weaknesses you can find and provide recommendations to strengthen governance policy. The corporate governance readings and recommended text, Building Public Trust: The Future of Corporate Reporting provides a good framework for your analysis and research. I recognize this is a tall order, given the complexity of the task and your limited access to relevant information.
Your report should be between 15-20 double-spaced pages, not including attachments. See the course schedule for the submission date.
The following elements should be included in the report:
Executive Summary
Forensic Financial Analysis – the main section of your paper should include review the firm’s financial statements and do a ratio analysis of selected areas. Analyze the company based on the topics covered in this course. (Example: Management DCF – Valuation, Connecting Strategy and Operations, Risk, Cost of Capital in Strategic Context, Changing Role of the CFO, and Leveraging ERP investment in Support of Finance) A general comparison to other firms in the industry through ratio analysis should be completed; conduct an analysis of the company CEO. Look for any “bodies” buried in the statements and associated notes, as well as the types of information disclosed to the public (e.g., pro forma earnings); identify any areas where the firm is vulnerable to SEC action (fraud or otherwise) and report these to the CEO as a preemptive risk mitigation action. – the book financial shenanigans can be used as a reference to guide.
You should review such items as:
Shifting Financing Cash Flows to the Operating
Shifting Normal Operating Cash Flows to the Operating Section
Inflating Operating Cash Flows to the Investing Section
Inflating Operating Cash Flow using Acquisitions or Disposals
Boosting Operating Cash Flow Using Unsustainable Activities
Complete a meaning horizontal analysis of the firm’s recent performance with three years of data and two year-to-year changes of comparison. Be sure to provide a qualitive commentary.
Include a Corporate Governance Assessment of your company’s corporate governance “readiness”. Assess the integrity and rigor of the firm’s s corporate governance structure (Board, Audit committee, stock options policies, pension fund policy, etc.) to identify any weaknesses you can find and provide recommendations to strengthen governance policy. Note stories about your company in the media dealing with governance questions.
Provide suitable recommendations to ensure compliance with the Sarbanes-Oxley Act of 2002 and new regulations published by the SEC and other regulatory bodies.
Provide overall recommendations and a conclusion.
Provide a reference page. Make sure that you include some strictly academic references from academic journals.
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