Financial Analysis-General
The Risk Management Association (previously Robert Morris & Associates) sells Annual Statement Studies, the only source of comparative financial data derived directly from more than 150,000 statements of commercial bank borrowers and prospects. These annual statement studies provide a number of financial ratios sorted by industry and asset class.

The Data Warehousing Information Center provides links to vendors of financial analysis tools.

FEI Research Foundation Products:

• Financial Products for Medium-Sized Companies, February 1990
• Rating Industrial Bonds, January 1983

Activity Based Management
The following is a link to an Activity Based Management (ABM) article written by Tom Pryor, President of ICMS, Inc..

Financial Analysis Tools
The Research Foundation has compiled information on the Capital Asset Pricing Model from both a theoretical and practical standpoint.

• Investopedia provides a brief definition of CAPM.
• Business.com provides a portal to a number of Web sites dedicated to CAPM. The first link, "An Introduction to Investment Theory," is an online textbook by William Goetzman of the Yale School of Management. The second link is an academic, and theoretical lecture on CAPM, by Campbell Harvey of Duke.
• There is a 1998 interview with William Sharpe about the Capital Asset Pricing Model (CAPM). Sharpe developed the CAPM in 1960, for which he shared the Nobel Prize for Economics in 1990.
• MoneyChimp provides a brief academic explanation of the CAPM and Beta. Here is their CAPM calculator.
• Another CAPM calculator is available from CPA Advantage.
• An academic paper on "The CAPM Debate" is available also.
• The following provides a lecture on the Capital Asset Pricing Model.

The Research Foundation has accumulated information on the Weighted Average Cost of Capital (WACC) as follows:

• Investopedia provides an explanation of how to calculate the WACC. The major variables are the cost of equity and the cost of debt. Because it is based on prevailing market interest rates, the cost of debt is relatively straightforward. However, the cost of equity is more complex.
• Finance Outlook explains how to calculate the cost of equity. "There are many models to determine the cost of equity capital, one of the most significant of which is the capital asset pricing model (CAPM). Broadly, CAPM lays down that the cost of equity capital is equal to the return expected on the firm's common stock." See CAPM above for further information.

  The following was prepared by Heinrich H. Foerster of Stern Stewart & Co. in response to a member's question on the use of a capital charge:
  "In Stern Stewart & Co.'s EVA concept, we use book values of invested capital. We are interested in tracking the operational performance. Therefore, we compare the value of an asset at the time the investment decision was made, net of depreciation, with its periodic results. That means we compute the net operating profit after taxes (NOPAT), and subtract the cost of capital. Applying a market value would lead to wrong results, because market values incorporate all future expectations of performance.

  Goodwill is treated as part of the invested capital, because the acquirer has to pay for it. See, for example, Martin Ellis' article in the Fall 2001 issue of the "Journal of Applied Corporate Finance," "Goodwill Accounting: Everything Has Changed and Nothing Has Changed, (Volume 14, No 3). There you will find also some remarks about FASB 141 and 142.

  To calculate the capital charge we usually apply a weighted average cost of capital (WACC). To get to this WACC, we apply the Capital Asset Pricing Model to obtain the cost of equity. The cost of debt is incremental. Cost of equity and cost of debt are weighted with market values. Sometimes we apply different rates for the cost of capital. We do so when different divisions of the company have different underlying risk characteristics. For example Siemens is using 3 different rate for their cost of capital."

  To assist financial managers in using Microsoft Excel more effectively and to access some built-in financial calculators that are more robust than standard Excel functions, go to JEM Plus. According to CPA Advantage: "Add additional functionality to Microsoft Excel with JEM. JEM provides a unique blend of utilities and 205 worksheet functions that allows users to reduce or even eliminate repetitive procedures. JEM's collection of worksheet functions INCLUDES the CAPM calculator." JEM Plus costs $49.95.

  For calculating ROI (return on investment), the simple formula is the percentage of profit returned to the firm each year divided by the total investment cost.

  Also, a one-day seminar called "How to Perform a Cost-Benefit Analysis" is available in New York City. The workbook is available for $95. They also have an intermediate-level seminar.

  Franchises
  For references on evaluating a franchisee agreement or business proposal, the following are available:

• GE Capital provides a Glossary of Terms for Franchise Finance.
• Franchise Help Online is a Web site for the franchise industry.
• EntreMKT.com provides an article on "Financing Your Franchise" by Andrew Sherman, a Washington, DC-based attorney recognized as an authority on all legal and strategic aspects of franchising.
• Canadian Business Franchise Handbook, which costs $12.95.