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Kenneth McDonough Pages * & *, Cover Letter

** ******* **** ***** * & 4, Resume

Bethpage, N.Y. 11714

Phone: 516-***-****

acgbg8@r.postjobfree.com

Dear Sir:

The purpose of this letter is to introduce you to a person who can readily meet the challenges of todays rapidly changing business

environment. I am currently searching for a position as a Equity Research Analyst, Equity Research Associate or Investment

Banking Associate. I would welcome the opportunity to become a member of your organization.

I can implement stockholder equity valuation models including dividend discount models, free cash flow valuation models,

residual income models, and financial models based on an earnings multiplier approach. My knowledge of the following equity

valuation models in use at leading investment banks is excellent: Cash Flow Return on Investment - CFROI (Credit Suisse),

Modelware (Morgan Stanley), the UBS Value Creation Analysis Model, and Economic Value Added. My knowledge of the use of

these company specific, proprietary equity valuation models is purely academic. I can implement any one of ten stockholder

equity valuation models. More recently, I have developed a significant number of equity valuation models using Excel. I can

utilize a number of third-party databases such as Bloomberg, IBES and Compustat. I have made a fundamental error by taking to

much time off from work while living on Long Island with my parents. However, no unfavorable events or adverse situations

have come to pass during this time period. To the contrary, I have actually enhanced my analytical skills and capabilities.

Equity analyst will generally benefit by developing a thorough knowledge of a company’s relative competitive position. I can

consider the impact of competitive strategy as an essential element in financial model development. Industry evolution is

important strategically because evolution, of course, brings with it changes in the structural sources of competition. I can focus on

the process of industry evolution including long-run changes in growth, changes in buyer segments served, scale economies, input

cost, and product, process and marketing innovation. Imbedded in the underlying technology, product characteristics, and nature

of present and potential buyers, an industry might evolve in a variety of ways. I can evaluate the overriding strategic issues

encountered during the growth phase of an industry’s development including technological and strategic uncertainty, high initial

cost, an absence of product or technological standardization, first time buyers, and erratic product quality. Every industry begins

with an initial structure, the entry barriers, buyer and supplier power, and so on which exist when the industry comes into

existence. This structure will usually differ from the configuration the industry will take later in its development. I can evaluate

some of the probable tendencies for a mature industry such as slow industry growth, more competition for market share, sales to

experienced, repeat buyers, new products and applications that are harder to come by, and a topping out problem in adding

capacity. Capacity expansion is one of the most significant strategic decisions faced by firms. It is probably the central strategic

issue in commodity-type businesses. The tendency towards overbuilding capacity is most severe when there are economies of

scale, changes in production technology, first mover advantages, a large number of firms, and inflated future expectations.

Competitive superiority is revealed as product differentiation along attributes that are important to consumers. I can explore how

different brands may be perceived to differ and on what dimensions. I can summarize how customers perceive competitor brands,

especially with respect to benefits provided, brand-customer relationships, and existing brand image. The most important assets of

a firm, such as the value of a brand, are intangible in that they are not capitalized and thus do not appear on the balance sheet. I

can evaluate brand equity, which can be significant in terms of shareholder value creation. The brand equity concept can be

usefully grouped into the following four categories: brand awareness, customer loyalty, perceived quality, and brand associations.

The awareness factor is particularly important. In the absence of a motivation to engage in product attribute evaluations, brand

awareness may be enough. I can evaluate brand loyalty, a key consideration when placing a value on a brand. A preference may

be based upon an association with a product attribute, customer benefit, use experience, or perception of product quality. A brand

association can influence the recall of information, differentiate the product, create positive attitudes, and provide a basis for

brand extensions. Product positioning will be based on a number of brand associations that serve to summarize a set of facts and

incidents about a brand into a smaller number of dimensions. In most product classes there are two, three, or four such

dimensions. I can consider the significance of these summary dimensions as well as other brand positioning concepts, for a more

robust assessment of shareholder value. I can evaluate customer trends, motivations, and segmentation structure. I can consider

prevailing market conditions, target market needs, existing brand images, and the role of the brand identity. A brand identity will

help to establish a relationship between the brand and the customer by generating a value proposition involving functional,

emotional or self-expressive benefits. I can evaluate the sources of product differentiation by considering the core, extended, and

augmented components of the product. I can profile a brand based on the most relevant perceptual dimensions, and how it may

differ from the profile of competitor brands. I can identify the target segments, specify the competitive set, and present and

interpret brand profiles. I can consider brand position, the attitudes towards a brand, brand strength, market demand, and

competitive intensity. I can focus on the role of brand management, a key consideration when placing a value on a brand.

Industry structural analysis should reflect the basic, underlying, and often dominant forces that may prevail in an industry. I can

present a general framework for analyzing the structure of an industry and its competitors. I can evaluate the impact of five

competitive forces that affect an industry including the rivalry among existing firms, the threat of new entrants, the bargaining

power of buyers, the bargaining power of suppliers, and the threat of substitute products. The collective strength of these five

competitive forces determines the ability of firms in an industry to earn, on average, rates of return in excess of the cost of capital.

Rivalry among existing competitors takes the familiar form of jockeying for position using tactics such as price competition,

advertising battles, new product introductions, and increased customer service. Intense rivalry within an industry is the result of a

number of interacting structural factors including the impact of numerous or equally balanced competitors, slow industry growth,

a lack of differentiation or switching cost, capacity added in large increments, high strategic stakes, and high exit barriers. Buyers

compete with an industry by forcing down prices, bargaining for higher quality or more services, and playing competitors against

each other, all at the expense of industry profitability. The power of each industry’s important buyer groups depends on a number

of characteristics. Buyers without much intrinsic bargaining power, because they are good buyers, will enable the firm to earn

high returns when they purchase small quantities relative to the sellers sales, seek custom made or differentiated varieties, or lack

qualified alternative sources. Good buyers will also face high shopping, transactions, or negotiating cost, will seek an effective

product that yields major savings or improvements in performance, or are poorly informed about the criteria on which alternative

brands should be evaluated. Competitive advantage stems from the discrete activities a firm performs in designing, producing,

marketing, and supporting its product. The significance of any strength a firm possesses is ultimately a function of its impact on

relative cost or differentiation, which represent the major sources of sustainable competitive advantage. The cost leadership and

differentiation strategies seek competitive advantage in a broad range of industry segments, while focus strategies aim at a cost

advantage or differentiation in a narrow segment of the market. The crucial question in determining profitability is not only the

satisfaction of buyer needs, but industry structure, reflecting the basic, underlying characteristics of an industry.

Although the traditional financial statements provide us with valuable insight concerning firm profitability and assets in place,

they are not organized for robust assessments of economic performance and value. The balance sheet mixes together operating

assets, nonoperating assets, and sources of financing. The income statement similarly combines operating profits with the cost of

financing, such as interest expense. To prepare the financial statements for the analysis of economic performance, I can reorganize

the items on the balance sheet, income statement, and statement of cash flows into three categories: operating, nonoperating, and

sources of financing. I can search through the footnotes to the financial statements to separate accounts that aggregate operating

and nonoperating items. I can utilize the reorganized financial statements to develop free cash flow to the firm (FCFF) and

economic-profit based valuation models. The economic-profit based valuation model is gaining in popularity because of its close

link to economic theory and competitive strategy. I can utilize Economic Value Added, an economic-profit based equity valuation

modeling approach. I can tackle the accounting adjustments that are necessary to estimate net operating profit after taxes

(NOPAT) and invested capital. I can make adjustments to NOPAT and invested capital including operating leases, goodwill

amortization, capitalized R&D, gains or losses on asset sales, and restructuring charges. I can quantify operating taxes with an

analysis of marginal tax rates and tax reconciliation tables provided in the footnotes to the financial statements. To determine

enterprise value, I can add to the value of core operations the value of nonoperating assets such as excess cash, marketable

securities, and nonconsolidated subsidiaries. To convert enterprise value to equity value, I can subtract short and long term debt,

debt equivalents such as unfunded pension liabilities, and other more hybrid securities such as convertible debt. I can develop

dividend discount models, free cash flow to the firm, free cash flow to equity, and residual income valuation models.

I can implement a top-down approach to firm valuation, beginning with a valuation of the aggregate market and progressing

through to an examination of various industries, to a consideration of an individual company and the valuation of its stock. I can

project the future value for the S&P 500 index and various industry indexes using a dividend discount valuation model, free cash

flow to equity (FCFE) valuation model, or financial models based on an earnings multiplier approach. I can project sales per share

and components of the S&P 500 profit margin including the impact of EBITDA, depreciation expense, interest expense, income

taxes, and net income per share. I can also project industry profit margins. After an analysis of the economy, structural forces, the

industry, the company, and its competitors, I can estimate the intrinsic value of a firm’s common stock. I can develop an

understanding of the alternative competitive strategies available, determine each firm’s strategy, judge whether the firm’s strategy

is reasonable for its industry, and finally, evaluate how successful the firm is in implementing its strategy. I can build residual

income valuation models. Residual income valuation models have the appealing focus of measuring the impact of the economic

structure in the markets for a company’s major products. In residual income valuation, a stock’s premium over book value is

considered a reflection of various economic scenarios including monopoly, oligopoly in which a few sellers compete with similar

or differentiated products, and finally the case of perfect competition. I can condense cash flow statement line items from a

company’s annual report into appropriate categories for use in the development of both (1) free cash flow to equity and (2) free

cash flow to the firm valuation models. I can utilize the capital asset pricing model (CAPM). For example, to estimate a

company’s beta, I can use an industry derived unlevered beta relevered to a company’s target capital structure. I can project price

multiples such as price to earnings, price to book, enterprise value to EBITDA, and price to cash flow. I can utilize technical

analysis and momentum indicators including stock price trends, EPS surprise, EPS momentum, and relative strength indicators.

Macroeconomic relationships offer valuable guidance and can provide useful performance measures on such topics as consumer,

business, and financial market behavior. I can participate in the collection, analysis, presentation and interpretation of economic

data. I can identify the various phases of the economic cycle including initial recovery, early upswing, late upswing, slowdown

and recession. I can evaluate the national income and product accounts (NIPA), which contain data for various components of

aggregate demand and income. I can evaluate the key components of aggregate demand, employment and unemployment,

productivity, and various measures of labor cost. I can analyze foreign exchange rates, industrial production, the rate of capacity

utilization, and interest rates. I can evaluate economic growth, based on trends such as population growth and demographics, and

business investment and productivity. I can analyze economic indicators including leading, coincident, and lagging indicators. I

can evaluate the principal sources of data on consumer spending such as retail sales, miscellaneous store sales data, and consumer

consumption data. I can evaluate monetary policy concerning interest rates and the money supply, and fiscal policy including

taxation and government spending. I can develop microeconomic decision models. I can model shifts in demand due to changing

buyer incomes and consumer taste, and shifts in supply due to changing input prices and technological innovation. I can model

optimal, profit-maximizing economic decision alternatives using Excel. Managerial decisions should be based on the notion of

economic profit, and I can develop equity valuation models that depend on the economic profit concept as well.

KENNETH MCDONOUGH

27 Beverly Road

Bethpage, N.Y. 11714

Phone: 516-***-****

Equity Research – My cover letter documents my venture into equity research. I am proficient in the development of stockholder

equity valuation models including dividend discount models, free cash flow valuation models, residual income models, and

Economic Value Added (EVA), an economic-profit based valuation approach. My knowledge of the following proprietary equity

valuation models is excellent: Cash Flow Return on Investment – CFROI (Credit Suisse), Modelware (Morgan Stanley), and the

UBS Value Creation Analysis Model. I can participate in the collection, analysis, presentation and interpretation of economic

data. I have become fairly expert at describing and assessing competitive strategy and the specific action steps required to gain a

competitive advantage. I can analyze competitive strategy, link it to competitive behavior, and evaluate strategic concepts as part

of the equity valuation process. See my cover letter for details.

BUSINESS EXPERIENCE:

METRO-NORTH, 347 Madison Avenue, New York, N.Y.

June 1984 – March 1988

Senior Financial Analyst – Participated in forecasting a complete set of financial statements including the income statement,

balance sheet, and statement of cash flows. Responsible for the analysis of sales growth trends and sales volatility. Participated in

the preparation of the sales forecast. Based sales projections primarily upon trends in historical data and management

expectations. Decomposed historical data into identifiable trends including cyclical or seasonal factors, and based projections

primarily on nonrandom trends and relationships. Participated in forecasting the income statement by preparing preliminary

forecast information including the reporting and analysis of actual expense trends in salaries and wages, and trends in manpower

reporting. Analyzed the magnitude of changes in operating expenses for the income statement forecast. Developed financial

models encompassing differential revenue and differential cost, discounted cash flow, and income projections based on

incremental service improvements. Participated in the preparation of the balance sheet forecast including an analysis of conditions

and events expected to produce changes in various balance sheet line items. Estimated the magnitude of changes in balance sheet

line items for the forecast. Analyzed comparative balance sheets and balance sheet trends as related to sales growth and the level

of company operations. Measured the impact of changing business conditions, significant trends and financing policies, and

capital investment programs for the balance sheet forecast. Measured the impact of debt financing plans in the balance sheet

forecast. Analyzed debt financing including the funding of future growth and capital investment programs. Participated in

forecasting future cash flows under various economic scenarios including changing sales volume and prices to assess the ability

of the firm to meet debt obligations. Participated in budgeting a complete set of financial statements.

BANKERS TRUST COMPANY, 130 Liberty Street, New York, N.Y.

May 1983 – June 1984

Management Information Systems Analyst – Responsible for various aspects of internal and external financial reporting and

operations systems. Projects included the reformatting of information by type and system to meet informational requirements.

Performed detailed analysis of banks Monthly Profitability System comparing controllers area accounting to departmental

reporting to assure consistent report line definition and information content.

AVIS RENT A CAR SYSTEM, INC., 900 Old Country Road, Garden City, N.Y.

September 1979 – May 1983

Financial Analyst – Responsibilities included the analysis of business line profitability. Responsible for structuring reports to

meet financial reporting and analysis requirements. My accomplishments have included the following:

• Developed Business Line Income Statements by allocating general operating, selling, and administrative expenses to

determine profitability by line of business. Reports were by division’s three business lines and by location. This was a

system that I programmed with a software package that was integrated with the general ledger accounting system.

• Developed Lease Pricing System by reformatting the income statements previously developed into the form of a lease

contract for the purpose of setting prices by district location. System was integrated at the general ledger account level.

• Developed customer level reporting which established profitability reporting for all lease customer accounts. Utilized

field location information and expense allocations. Reconciled with the general ledger system.

Financial Analyst – Major responsibilities included financial reporting of division actuals, monthly forecasting, and the

coordination and preparation of yearly budgets. Responsible for divisions cash flow forecasting. The cash flow forecast consisted

of an analysis of balance sheet line items. Participated in budgeting a complete set of financial statements including the income

statement, balance sheet, and statement of cash flows. Participated in yearly planning cycle from initial profit plan through

general ledger account reporting. Budgeted balance sheet included supporting schedules for balance sheet line items. Responsible

for the preparation of budgeted income statements from thirty five district locations. Responsible for tracking modifications to

budgeted income statements by location. Responsible for the analysis of budget versus actual expenses. Budgeted information

was detailed at the general ledger account level. Participated in monthly forecasting including the monitoring of key variables,

operating characteristics, and the analysis of trends. Monitored reporting for new business, renewals, and expired business for

sales forecasting and budgeting. Prepared preliminary forecast information encompassing sales rate analysis, revenue per unit,

and fleet utilization reporting. Participated in forecasting a complete set of financial statements including the income statement,

balance sheet, and statement of cash flows. Responsible for financial modeling encompassing income projections and projected

earnings per share. Responsible for the analysis of division’s multi-location accounting. Reconciled divisions general ledger

account reporting. Responsibilities included reports for corporate and district management. Performed general ledger account

analysis in response to management inquires. Responsible for capital projects and for fixed asset accounting.

J.P. STEVENS & COMPANY, INC. -1185 Avenue of the Americas, New York, N.Y.

June 1977 – September 1979

Accountant – Participated in the preparation of Securities and Exchange Commission (SEC) reporting including the annual 10K

and 10Q quarterly reports. Participated in the preparation of the annual report. Responsibilities included the preparation of

consolidated financial statements which included domestic and foreign operations. Prepared adjusted trial balance work sheets

including parent company and subsidiaries to facilitate the preparation of combined consolidated financial statements.

Participated in accounting for consolidations including the journal entries necessary for the elimination of intercompany accounts.

Consolidating journal entries included the elimination of intercompany sales and cost of goods sold, the elimination of subsidiary

equity, subsidiary income to outsiders, and intercompany receivables, notes, and bonds. Other responsibilities included the

elimination of intercompany profits from inventories, cost of goods sold, and from retained earnings. Responsible for the

maintenance of the company’s accounting books and records. Responsible for maintaining the corporate home office general

ledger. Responsible for general ledger account analysis which included the tracking of monthly cash receipts and disbursements.

GENERAL BUSINESS KNOWLEDGE:

I have recently continued to improve my academic skills and have devoted my time to the study of corporate finance, equity

valuation, investment analysis and portfolio management. I have become fairly expert with the following topics:

Managerial Finance Quantitative Equity Investing

Advanced Corporate Finance Macroeconomics

International Business Finance Microeconomics

Mergers & Acquisitions Econometric Modeling

Finance – Case Studies Competitive Advantage

Fixed Income Analysis Marketing Research

Portfolio Management Multivariate Statistics

Equity Valuation Models SAS Statistical Software

Equity Valuation – Inv. Banks Excel and VBA

EDUCATIONAL BACKGROUND:

ADELPHI UNIVERSITY –September 1973 to June 1977. Graduated in June 1977 with a Bachelor of Business Administration.

Accounting major with 36 credits in accounting. Course work included Principles of Accounting, Intermediate Accounting,

Advanced Accounting, Managerial Finance, Economics, Money and Banking, Operations Management, and Marketing.

HOFSTRA UNIVERSITY –September 1990 to December 1992. Attended Master of Arts Degree program in mathematics.

Accumulated 18 credits with a 3.5 grade point average.

GRUMMAN DATA SYSTEMS INSTITUTE – April 1982 to March 1983. Completed one year of instruction in computer

programming and systems analysis.

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