Question

Complete a thorough financial analysis of Goldman Sachs, a publicly traded corporation. The project deliverables should be a structured Word document and accompanying Excel spreadsheets. Requirements must include the following analysis: a. One page description of the Goldman Sachs: it’s products, markets, subsidiaries, risks b. Overall trend assessment of the company’s balance sheet and income statement for the last three to five years. c. Selected ratio trend analysis. The following ratio categories must be included, with three ratios (minimum) from each category: i. Short-term solvency ratios, also known as liquidity ratios ii. Long-term solvency ratios, also known as financial leverage ratios iii. Asset management ratios, also known as turnover ratios iv. Profitability ratios v. Market value ratios. A three-year ratio trend analysis is the minimum expectation. d. Analysis of the company’s stock price, PE (Price-Earnings Ratio) and EPS (Earnings per Share Ratio) trends for the last three to five years. Analysis must include comparison to key market competitors. e. Evaluation of the firm’s current Beta (trend not required) with comparison to key market competitors. f. Assessment of the firm’s capital structure (Debt to Equity Ratio) including any significant changes in the firm’s capital structure over the last three to five years. g. Calculate the WACC (weighted average cost of capital) using both the Security Market Line Approach and the Dividend Growth Model Approach. Compare the WACC for each approach, discussing the advantages and disadvantages of each. h. Assessment of the firm’s statement of cash flows for the last three to five years, including an assessment of the firm’s free cash flow over the last three to five years. i. Closing summary of the firm’s financial health in relation to the overall economy and within its industry, using analyst recommendations as a guide.

Answer 1

Introduction to goldman Sachss

The Goldman Sachs Group, Inc. is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in all major financial centers around the world.

Details with respect to key products, services, subsidiaries, history of Goldman Sachs are as follows.

1.advise companies on buying and selling businesses, raising capital and managing risks, which enables them to grow

2. transact for our clients in all key financial markets, including equities, bonds, currencies and commodities, so that capital flows, jobs are created and economies can grow.

3. help markets remain efficient and liquid, so investors and companies can meet their needs, whether to invest, raise money or manage risk

4.preserve and grow assets for institutions, including mutual funds, pension funds and foundations, as well as individuals.\

Coming to the history point,

Goldman Sachs | Established 1869

For more than 150 years, a culture of teamwork and client service has defined our firm. Today, nearly 40,000 Goldman Sachs colleagues work together to serve our clients and communities around the world, building upon a rich history of innovative ideas from extraordinary people.

Balance Sheet and relevant Data

Fiscal year is January-December. All values USD Millions.	2019	2018	2017	2016	2015	5-year trend
Total Cash & Due from Banks	12,570	10,660	10,790	11,150	6,470
Cash & Due from Banks Growth	17.92%	-1.20%	-3.23%	72.33%	-
Investments - Total	671,273	731,244	727,598	708,720	712,998
Trading Account Securities	355,332	336,161	315,988	295,952	293,940
Federal Funds Sold & Securities Purchased	85,691	139,258	120,822	116,925	120,905
Securities Bought Under Resale Agreement	221,762	139,258	120,822	116,925	120,905
Treasury Securities	24,162	-	-	-	-
Mortgage Backed Securities	757	-	-	-	-
Other Securities	16,570	135,938	191,527	185,282	172,680
Other Investments	5,323	119,887	99,261	110,561	125,473
Investments Growth	-8.20%	0.50%	2.66%	-0.60%	-
Net Loans	103,581	80,590	65,933	49,672	45,407
Commercial & Industrial Loans	44,353	37,283	30,749	24,837	20,740
Consumer & Installment Loans	34,545	4,536	1,912	13,828	13,961
Real Estate Mortgage Loans	22,058	35,944	30,812	8,626	7,587
Unspecified/Other Loans	4,066	3,893	3,263	2,890	3,533
Loan Loss Allowances (Reserves)	(1,441)	(1,066)	(803)	(509)	(414)
Investment in Unconsolidated Subs.	285	357	275	219	258
Loans - 1 Yr Growth Rate	28.53%	22.23%	32.74%	9.39%	-
Loans (Total) / Total Deposits	0.00%	0.00%	0.00%	0.00%	0.00%	-
Loans (Total) / Total Assets	0.00%	0.00%	0.00%	0.00%	0.00%	-
Net Property, Plant & Equipment	2,360	18,317	15,094	12,070	9,956
Other Assets (Including Intangibles)	83,173	89,099	93,358	72,784	80,758
Other Assets	78,336	85,017	89,320	68,689	76,610
Intangible Assets	4,837	4,082	4,038	4,095	4,148
Total Assets	992,968	931,796	916,776	860,165	861,395
Assets - Total Growth	6.56%	1.64%	6.58%	-0.14%	-
Return On Average Assets	0.88%	-	-	-	-

Liabilities & Shareholders' Equity

Coming to the other aspects

Fiscal year is January-December. All values USD Millions.	2019	2018	2017	2016	2015	5-year trend
Funds from Operations	12,899	11,487	13,208	11,061	9,737
Funds from Operations Growth	12.29%	-13.03%	19.41%	13.60%	-
Changes in Working Capital	81,340	35,985	(14,296)	(22,704)	(413)
Net Operating Cash Flow	94,239	47,472	(1,088)	(11,643)	9,324
Net Operating Cash Flow Growth	98.51%	4463.24%	90.66%	-224.87%	-
Net Operating Cash Flow / Interest Income	433.52%	247.59%	-8.65%	-128.88%	120.56%

Investing Activities

All values USD Millions.	2019	2018	2017	2016	2015	5-year trend
Capital Expenditures	(8,443)	(7,982)	(3,184)	(2,876)	(1,833)
Capital Expenditures (Fixed Assets)	(8,443)	(7,982)	(3,184)	(2,876)	(1,833)
Net Assets from Acquisitions	(803)	(162)	(2,383)	-	(1,808)
Sale of Fixed Assets & Businesses	6,632	3,711	574	15,303	228
Purchase/Sale of Investments	(80,874)	(30,430)	(24,092)	18,725	(1,344)
Purchase of Investments	(98,686)	(30,841)	(26,992)	-	(16,835)
Sale/Maturity of Investments	17,812	411	2,900	18,725	15,491
Increase in Loans	(9,661)	(14,865)	(16,693)	(4,669)	(16,180)
Net Investing Cash Flow	(93,149)	(49,728)	(45,778)	26,483	(20,937)
Net Investing Cash Flow Growth	-87.32%	-8.63%	-272.86%	226.49%	-
Net Investing Cash Flow / Interest Income	-428.51%	-259.35%	-363.87%	293.15%	-270.71%

Financing Activities

All values USD Millions.	2019	2018	2017	2016	2015	5-year trend
Cash Dividends Paid - Total	(2,104)	(1,810)	(1,769)	(1,706)	(1,681)
Common Dividends	(2,104)	(1,226)	(1,181)	(1,129)	(1,166)
Preferred Dividends	-	(584)	(587)	(577)	(515)
Cash Dividend Growth	-16.24%	-2.32%	-3.69%	-1.49%	-
Decrease in Deposits	(1,458)	-	-	-	-
Increase in Deposits	31,214	20,206	14,506	10,058	14,639
Change in Capital Stock	(5,337)	(3,941)	(6,357)	(5,940)	(1,883)
Repurchase of Common & Preferred Stk.	(6,435)	(3,979)	(7,859)	(7,249)	(4,135)
Sale of Common & Preferred Stock	1,098	38	1,502	1,309	2,252
Proceeds from Stock Options	1,098	38	1,502	1,309	2,252
Issuance/Reduction of Debt, Net	(23,802)	7,121	29,368	8,703	17,685
Change in Current Debt	(2,036)	2,923	(906)	(2,314)	(1,236)
Change in Long-Term Debt	(21,766)	4,198	30,274	11,017	18,921
Issuance of Long-Term Debt	29,638	50,923	65,748	54,949	54,944
Reduction in Long-Term Debt	(51,404)	(46,725)	(35,474)	(43,932)	(36,023)
Other Funds	3,396	1,176	(542)	2,317	358
Other Uses	(206)	(1,118)	(2,226)	-	(49)
Other Sources	3,602	2,294	1,684	2,317	407
Net Financing Cash Flow	1,909	22,752	35,206	13,432	29,118
Net Financing Cash Flow Growth	-91.61%	-35.37%	162.11%	-53.87%	-
Net Financing Cash Flow / Interest Income	8.78%	118.66%	279.83%	148.68%	376.49%
Net Change in Cash	2,999	20,496	(11,660)	28,272	17,505
Free Cash Flow	85,796	39,490	(4,272)	(14,519)	7,491
Free Cash Flow Growth	117.26%	1024.39%	70.58%	-293.82%	-
Free Cash Flow Yield	96.93%	-	-	-	-