© 2000 John Petroff
|
|
© 2000 John Petroff |
Assignments, Cases & Exercises
Research assignments:
R-5.1 Research the literature on business plans. Catalogue the recommended content of business plans. Compare this recommended content to the documentation required by banks in connection with loan application which was uncovered in assignment R-4.3.
R- 5.2 Take a commonly used source of financial comparative statistics such as Robert Morris Associates "Annual Statements Studies" or Dun and Bradstreet "Key Business Ratios". Verify for each that each of the ratios is constructed using matching components, is stated in identical units, and the items of numerator and denominator have a meaningful relationship.
R-5.3 Conduct a study of the impact
of ratio values on the prospects of companies.
Construct a schedule with columns for effects on 1) earnings,
2) risk and 3) growth. Enter into each cell whether the effect
is positive or negative when the ratio is uncommonly high, and
when the ratio is unusually low. Complete the schedule for all
the ratios used in RMA Annual Statements Studies.
R-5.4 Read the chapter of a textbook on econometrics that deals with ordinary least squares. Outline why t statistics and R2 are used to test the presence of a meaningful correlation. Indicate what values are desirable to support the hypothesis that the correlation is other than zero.
R-5.5 In the econometrics textbook, read the conditions for the OLS statistics not to be biased. Report on the statistical problems that may occur in OLS regressions and the methods available to detect if problems are serious.
R-5.6 In the econometrics textbook, study the methods recommended to deal with autocorrelation. Describe briefly the essence of generalized least squares, two stage least squares, three stage least squares and full information maximum likelihood estimation.
R-5.7 In the econometrics textbook, review the various nonlinear equations available. Report on cases where the nonlinear equations would be more representative of an existing relationship than a linear equation. Briefly indicate what needs to be done to conduct the regression analysis of a nonlinear equation.
R-5.8 Obtain a textbook on one of the major macroeconomic model (such as that of Michael Evans or the Brookings Institution). Outline the purpose of such model and how a system of equations similar to it could be used in financial analysis.
R-5.9 Read a textbook on time-series analysis. Review and summarize the three method of analysis of time series: autoregressive, moving average and trend. Indicate how the textbook recommends the selection of the appropriate method should be conducted.
R-5.10 Read how seasonal adjustment is conducted on macroeconomics data such as employment statistics or consumer price index. Report on its usefulness for analysis of corporate financial data.
R-5.11 Read an operations research textbook that deals with linear programming. Study examples of profit maximization and cost minimization present the textbook. Reproduce succinctly one of them and discuss its applicability to financial analysis.
R-5.12 In a marketing or operations management textbook find examples of expert opinion applications. Summarize what is done and show it can be useful for financial analysis for instance in the sale forecasting aspect.
R- 5.13 Find an example of a simulation in an operations research manual. Reproduce the model in a spreadsheet and run at least 100 of simulations recording the results each time. Study the distribution obtained and compare it to the results given in the manual. Comment on the applicability of the method for cases of financial result forecasting.
R-5.14 Imagine you would conduct a market research for the company where you work (or where a close relative works). Prepare a questionnaire, administer it among a sample group of at least 12 persons, and compile results. Review recommended methods of questionnaire preparation and market research in standard marketing textbooks. Compare your approach to the one recommended in the textbook and comment on the quality of the results. Based on this experience, tell how and when a market research procedure would be appropriate in the context of financial analysis.
R-5.15 Visit some the chartist web sites, or find literature in the library. Determine and report how the different charts are used. Study their predictions over time and indicate which method tends to be most accurate.
R-5.16 Read some of the technical analysis literature in a library or on the web. List the different indicators used and catalogue them as smart money, contrarian or other. By comparing the recommendation with actual market performance, study which of these techniques seems to be most robust, or whether a consensus of them would be more useful.
| Previous: Questions |
|
Next: Appendix 5A |