Reference no: EM131241166

Financial Accounting Information Financial Statement Analysis 1

There are three financial statement analysis assignments due during the semester. You will analyze financial data for two companies. The primary company will be Nike, Inc. and it should be compared to one of its largest competitors, Under Armour, Inc. For all assignments, you are required to provide data from Nike's Form 10-K for fiscal year ended May 31, 2016. For Under Armour, the data should come from Form 10-K for the fiscal year ended December 31, 2015.

There are specific questions for each assignment that are posted to Blackboard. Each analysis should not exceed one page and must be submitted to Blackboard on or before the due date (see Course Schedule of Blackboard for due dates). Below is guidance for locating your company's financial statements.

Here is one way to find your company's (and competitor's) financial information:

1. Go to your company's website.
2. Click on the company information or investor relations link.
3. Look for annual report or financial statements in the investor relations area.

It's important to note that financial statements are sometimes named differently. For example:

• Balance sheets are sometimes named "statement of financial position"
• Income statements are sometimes named "results of operations" or "consolidated income statement"
• Statements of retained earnings are sometimes named "statement of owner's equity" or "stockholder's equity"

You can get more information about your company and competitor at UT's Library through the https://esearch.ut.edu site. Esearch has five really expensive subscriptions to high-end databases: Mergent Online, Morningstar, Business and Company Resource Center, Standard & Poors and Value Line. These premium sites afford the UT student with excellent analysis and financial data which is often far better than free commercial alternatives. In any case, you must get the financial statements from the company to complete your assignments properly. Many times the information at the company's website listed under "investor relations" is the most accurate. Often cnnmoney, quicken and other free websites are inaccurate, dated or both.

FSA 1: Obtain the income statement/statement of operations and balance sheet/statement of financial position from the annual report of the assigned company. Answer the following questions about the company. Concentrate on the most current year in the annual report that, except as directed for particular questions. Your analysis should not exceed one page.

1) How much in cash (which should include cash equivalents) did the company have at the end of the current year? At the end of the preceding year? Did cash increase or decrease during the current year? By how much?

2) What were total assets at the end of the current year? At the end of the preceding year?

3) Write the company's accounting equation at the end of the current year by filling in the dollar amounts:

Assets = Liabilities + Owners' (or Stockholders') Equity.

To complete the above you may need to back into the Liabilities total since many companies only provide subtotals for Total Assets and Total Stockholder's Equity.

4) Identify net sales revenue for the current year. The company may label this as Net Sales, Sales, Net Revenue, or other title. How much was the corresponding revenue amount for the preceding year?

5) How much net income or net loss did the company experience for the current year, the prior year?

6) Go to https://esearch.ut.edu and login using your UT email username and password. Go to one of the following: Business and Company Resource Center, Mergent Online, Standard & Poors or Value Line. Search for your US company then look for analysis of the company's stock. Here you will search for analysis about your company prepared by professional analysts from large brokerage houses or these data companies (the Business and Company Resource Center has the largest variety of reports). Find a recent analysis of your company, these are usually one to seven page write-ups. Next, go to Morningstar (also on esearch) and read the Morningstar analysis on your company. Summarize in your own words your understanding of the outlook for your company in one paragraph. Cite the name of the analyst (if available), firm your analyst works for and date (which must be no less than one year old) of the research report on the stock, include both current and target stock price or, if no target price is stated whether the analyst rates the stock as "outperform", "market perform", "underperform", buy, sell, hold or something else.

7) In one paragraph explain if you think that stock in this company is a good investment for you personally. Assume you have $10,000 to invest, would you choose this company?

FSA 2: Prepare a one-page analysis of your company's merchandising activities. Answer the following questions:

1) How much inventory did your company carry this year and last year?

2) What was cost of goods sold for this year and last year?

3) Determine the gross margin/gross profit percentage (gross margin) for your company and its competitors for the last two years.

4) Does your company use LIFO, FIFO or Average for its financial statements (you will need to explore the company's footnotes)?

5) Where did you look (specific note) to find the answer to #4 above?

6) What was your company's inventory turnover? Make the calculation for its competitor and show your work? How does your company compare to competitor (better/worse/similar)?

7) What does company management have planned for inventory? Will it grow, shrink or will the company change the mix of products/retail outlets available? Are there new concepts on the horizon? Will the company shed operations? Your answer should be a paragraph written in your own words. A great place to look for this is in the Management's Discussion and Analysis (MD&A) section of the 10K Annual Report.

FSA 3: Prepare a one-page analysis of your company and answer the following questions:

1) What is your company's current ratio? How does this compare to its competitor (show the ratio of competitor)? What does the current ratio tell a user?

2) Calculate the quick ratio for your company and competitor.

3) Which ratio (current or quick) do you think provides a better reference for your company's health? Why?

4) What is your company's debt ratio? How does this compare to its competitor (show the ratio of competitor)? What does the debt ratio mean?

5) What is your company's return on assets? How does this compare to its competitor (show the ratio of competitor)? What does the ratio mean?

6) What is your company's profit margin? How does this compare to its competitor (show the ratio of competitor)? What does the profit margin mean?

7) How many shares of common and preferred stock does your company have authorized, issued, and outstanding?

8) What is your company's common and preferred stock par or stated value?

9) What is the company common stock's "book value" per share? What is the company's stock price on the day you prepared your assignment?

10) What is your company's "Market Cap" on the date you prepared your assignment? What is the "Market Cap" for its competitor?