Welcome to Class 17Welcome to Class 17

Strategic Management: Performance Analysis:

Techniques & Tools

Strategic Management: Performance Analysis:

Techniques & Tools

Judging performance must be done carefully and methodically. Use the PSC software as a tool to organize and execute a complete quantitative and qualitative assessment.

Strategic analysis means analyzing corporate results from multiple perspectives.

It means thinking globally – taking a 360-degree view.

The PSC softwareThe PSC softwareWhat is the PSC software?What is the PSC software?

The PSC software is a copyright protected financial and general analysis program designed to accompany the Corporate Performance textbook. It is a powerful and versatile tool written as a template in Microsoft Excel. It will provide you with an automatic ratio analysis, informative bar charts, and performance statistics – both financial and non-financial. It will guide you in developing a platform for comparing competing companies of different sizes. Predictive ratios and comparisons will be highlighted.

Each critical cell contains a detailed explanation of the relevance of that item and supplemental information about its significance in performance measurements.

PSC

If you have difficulty:If you have difficulty:

(1)(1) Ask your team for helpAsk your team for help

(2) Ask your Professor for help(2) Ask your Professor for help

Do not let categorizing the numbers bug you.Do not let categorizing the numbers bug you.

Your job is to enter items from the annual report to your PSC template.

Each company has its own unique way of categorizing financial statement items, thus it is unlikely that the items on your annual report will neatly match the categories on your worksheets.

As you record data to your PSC Template it will automatically “common-size” the information by creating two columns of percentages. When you compare one company to another, you will compare the percentages NOT THE ABSOLUTE DOLLARS.

Your “PSC” has a red triangle red triangle in the upper right hand corner of many data cells. If you hold the cursor on that triangle it will reveal information about the meaning and relevance of that particular category of data.

You will also notice that there are certain cells with . These are the only cells that require your input.Yellow shading

DANGER!! If you skip the following steps – you will suffer!

BALANCE SHEET: FIRSTFIRST – Find the “total assets” on your target company’s statement and type that number into the total assets cell of your PSC template. Next transfer all the assets from the target’s financial to the PSC, followed by liabilities and lastly the equity.

INCOME STATEMENT: FIRSTFIRST – Find the revenue on your target’s statement and record this in the PSC.

SECONDSECOND – Find the net income on the target’s statement and record it in the PSC. Then you may transfer the remaining items from the target’s income statement to the PSC.

Your PSC template is a tool and like any other tool, it may be easier to use on some jobs (or companies) than others.

it is not perfect for all companiesit is not perfect for all companies. . .

Your PSC template is generic in nature and broadly structured to fit most companies. Some financial statements will match categories easily while others will require significant data reclassification.

Your Performance Scorecard Analysis software (PSC) is very powerful. It will automatically produce statistical analyses and create an array of bar charts that will assist in performance interpretation and help you to “spice up” the appearance of your Professional Summary (PS).

You can copy and paste the charts into your Professional Summary for a more visually interesting and informative report.

[Your PS is your semester project.]

The PSC is divided into five (5) distinct industries, each with a different analysis template. It is important that you select the template that most closely matches the industry in which your target company competes.

Remember, regardless of the template you select, you WILL have to reorganize some of the data from your target company’s annual report so that it fits into the PSC.

The five divisions are: (1) “M” basic merchandising and/or manufacturing (2) “M-2” conglomerates (3) “S” service type organizations (4) “B” banking corporations (5) “I” financial services

The “M” is for manufacturers and merchandisers that are not conglomerates such as WalMart, Coca Cola, Exxon, Marriott, etc.

The “M-2” PSC is specifically for conglomerates such as the GE, Siemens AG, Koninklijke Philips Electronics, ABB, Ltd, etc.

The “S” is for service businesses such as FedEx, WellPoint, Southwest airlines, etc.

The “B” is for basic banks such as M & T Bank, KeyCorp, JP Morgan etc.

The “I” is for financial institutions that are involved in more than just basic banking such as Morgan Stanley, Goldman Sachs, Deutsche Bank AG, etc.

The analysis template will guide the data entry. The cells containing a yellow tint are input cells and these will turn white once the data has been entered.

Cells without a yellow tint will not accept data.

The PSC is password protected so that you cannot inadvertently damage cells. If you try to enter data and get a password warning, simply move to the next cell.

There are several sources that you will need to access for INPUT data but the annual report of your target company will be the primary source. Other sources may include online financial websites and/or financial periodicals and newspapers.

When recording data to the PSC, try to do so in millions or thousands. That means omitting zeros whenever possible. Of course you must be consistent with number “rounding” throughout the process.

Never record cents (pennies) to the PSC!

Additional required information:

1) Basic EPS (Earnings Per Share)

2) Diluted EPS

3) Share Price (Market value of each share as of the date of the annual report)

4) Dividends per common share

You may not use a company that has a deficit.

Professional Summaries with deficit target companies will be

graded as “zero.”

After you have recorded the raw data in the PSC, charts and graphs will be automatically generated. These should be analyzed.

In order to enhance your understanding of the results, it is strongly advised that you carefully study Chapter 8: “Measurements & Measurements & MeaningsMeanings” because it will provide you with a deeper insight to the components, meaning, and essence of the individual ratios.

When you feel comfortable with your understanding of the data your next step will be to grade each category and enter these grades to the “grading section” of your PSC. [4th tab on the PSC called “Grade Sheet.”]

Once that is complete you should print ALL segments (EVERY TAB) of your PSC and begin your Professional Summary.

Be sure to include all printed Tabs of your PSC AND a copy of the target company’s balance sheet, income statement, and statement of cash flows in your final project.

If you do not, your grade will be significantly your grade will be significantly reduced.reduced.

Follow the simple Follow the simple steps, and please, steps, and please, relax. You will learn a relax. You will learn a great deal from this great deal from this important project and important project and HOPEFULLY have HOPEFULLY have some fun.some fun.