1CASE REPORT 1 INSTRUCTIONS: Company: BIIB Biogen Inc.Review Figure 1 “Analysis Using Financial Statements” and explanations on thefollowing pages. Case Report 1 will focus on the first step, Business Strategy Analysis for thecompany you have chosen this semester. Case Report 1 will consist of answers to the questionsbelow.The first step is to download the most recent three years of financial statements for yourchosen company. Access your company’s “10-K” Annual Reports. Students are to submit areport using SafeAssign before the due date. Late submissions are not accepted. The reportshould have a minimum length of 3 pages and a maximum length of 5 pages (excluding tablesand appendices), single-spaced using a 12-sized font and 1 inch margins.In Case Report 1, be sure to answer the following questions. Number the answer to eachquestion to clearly identify each answer. Your conclusions should be based on informationfound in the Annual Reports, and perhaps additionally on recent 10-Q or 8-K forms. In anappendix, provide summary financial statements (at a minimum, income statements andbalance sheets).Answer the following questions in your own words and DO NOT copy verbatim fromcompany reports. Please write concisely – business and technical writing is always “to-thepoint”and brief.1. Describe your company’s primary line(s) of business, their primary products andcustomers. Provide an overview of your company’s recent economic performance (overthe last 3 years).2. Using bullet points, briefly describe the key success factors and risks associated withyour firm’s chosen competitive strategy.3. Using bullet points, briefly list key strategic decisions taken by the company.4. Does the firm currently have the resources and capabilities to deal with the key successfactors and risks? Explain the reasons for your answer.5. Has the firm committed the resources to bridge the gap between its current capabilitiesand the requirements to achieve its competitive advantage? Explain the reasons for youranswer.26. Has the firm structured its activities (such as research and development, design,manufacturing, marketing and distribution, and support activities) in a way that isconsistent with its competitive strategy? Explain the reasons for your answer.7. Is the company’s competitive advantage sustainable? Are there any barriers that makeimitation of the firm’s strategy difficult? Explain the reasons for your answer.8. Are there any potential changes in the firm’s industry structure (such as new economicconditions, new technologies, foreign competition, changes in regulation, change incustomer requirements) that might dissipate the firm’s competitive advantage? Is thecompany flexible enough to address these changes? Explain the reasons for your answer.3CASE COMPANY ANALYSIS / CASE PRESENTATIONFigure 1Analysis Using Financial StatementsFinancial StatementsManagers’ superior informationon business activitiesNoise from estimation errorsDistortions from managers’accounting choicesOther Public DataIndustry and firm dataOutside financial statementsBusiness Application ContextCredit analysisSecurities analysisMergers and acquisitions analysisDebt/Dividend analysisCorporate communicationstrategy analysisGeneral business analysisANALYSIS TOOLSBusiness Strategy AnalysisGeneral performanceexpectations through industryanalysis and competitive strategyanalysis.Accounting AnalysisEvaluate accountingquality by assessingaccounting policies andestimatesFinancial AnalysisEvaluate performanceusing ratios and cashflow analysisProspective AnalysisMake forecasts andvalue business4Analysis Step 1: Business Strategy AnalysisThe purposes of business strategy analysis is to identify key profit drivers and businessrisks, and to assess the company’s profit potential at a qualitative level. Business strategyanalysis involves analyzing a firm’s industry and its strategy to create a sustainablecompetitive advantage. This qualitative analysis is an essential first step because itenables the analyst to frame the subsequent accounting and financial analysis better. Forexample, identifying the key success factors and key business risks allows theidentifications of key accounting policies. Assessment of a firm’s competitive strategyfacilitates evaluating whether current profitability is sustainable. Finally, businessanalysis enables the analyst to make sound assumptions in forecasting a firm’s futureperformance.Analysis Step 2: Accounting AnalysisThe purposes of accounting analysis is to evaluate the degree to which a firm’saccounting captures the underlying business reality. By identifying places where there isaccounting flexibility, and by evaluating the appropriateness of the firm’s accountingpolicies and estimates, analysts can assess the degree of distortion in a firm’s accountingnumbers. Another important step in accounting analysis is to “undo” any accountingdistortions by recasting a firm’s accounting numbers to create unbiased accounting data.Sound accounting analysis improves the reliability of conclusions from financial analysis,the next step in financial statement analysis.Analysis Step 3: Financial AnalysisThe goal of financial analysis is to use financial data to evaluate the current and pastperformance of a firm and to assess its sustainability. There are two important skillsrelated to financial analysis. First, the analysis should be systematic and efficient.Second, the analysis should allow the analyst to use financial data to explore businessissues. Ratio analysis and cash flow analysis are the two commonly used financial tools.Ratio analysis focuses on evaluating a firm’s product market performance and financialpolicies; cash flow analysis focuses on a firm’s liquidity and financial flexibility.Analysis Step 4: Prospective AnalysisProspective analysis, which focuses on forecasting a firm’s future, is the final step inbusiness analysis. Two commonly used techniques in prospective analysis are financialstatement forecasting and valuation. Both these tools allow the synthesis of the insightsfrom business analysis, accounting analysis, and financial analysis in order to makepredictions about a firm’s future.
