Reference no: EM133393723

Financial Statement Analysis

Goal:
To interpret a company's financial statements by incorporating class terms, concepts, and calculations.

Overview:
The purpose of this project is to explore the information contained in a company's annual report. And then provide your interpretation on the company's financial health. You should incorporate concepts, calculations, and terms from our class this semester in your analysis.

Preparation:
You should have selected a public company during the first week of class, please find your "first step" assignment from week 1. If you can't remember your company, or find your assignment, reach out to your instructor. Any company which is publicly traded is required to make their annual financial statements available to the public. You will need to locate their most recent annual financial statements for this project. In general, the best place to locate this information is on the company's website. Look for a link about Investor Relations, Corporate Information, or other similar labeled areas. Or you can find it on the Securities and Exchange's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) database.

Review Your Work:
Since your grade depends on the quality of your calculated figures as well as your written responses, consider having your figures and written report reviewed. Your instructor or an accounting tutor can assist you with the accuracy of your figures. A peer or tutor can help review your written work. Did you know the college has a Writing Center where you can get assistance with your written reports? They run periodic MLA citation workshops as well. Please visit their website for their schedule and to find information on scheduling one-on-one appointments. Please do not wait until the last minute; otherwise, you may not be able to obtain the assistance you need.

Requirements

Please answer the following questions. Format your paper according to the question you are answering. Your responses should be in complete sentences and be free of spelling or grammatical errors. Responses must be typed.

1. Introduction/ Overview:
a. In three paragraphs, provide an overview of the company and its history. A great place to get this is from the company's website, they will usually have a "company history" or "about us" tab. You can also use other sources just make sure to cite all sources used, MLA (modern language association) citation style should be used.

2. Company Information:
You may find it useful to refer to the letter to the shareholders section of the annual report to answer the following questions.
a. What is the trading symbol for your company? On which exchange is it traded?
b. What is the name of CEO? How long have they acted as the company's CEO? How much is their annual compensation? Remember to cite your sources.
c. Was a dividend paid to shareholders recently? If so, what was the type and amount?

3. Letter to Shareholders:
a. Who wrote the report? What is his/her position in the company? What is the overall attitude of the author? Explain (optimistic, pessimistic, enthusiastic, cautious, etc.)
b. What are some topics that are mentioned in this letter? Why do you think these particular topics are mentioned?

4. Revenue:
a. What is the company's largest source of revenue?
b. How does this compare with what you guessed in your "First Step" homework assignment? Did you correctly guess its largest source of revenue?

5. Expenses:
a. What is the company's largest expense?
b. How does this compare with what you guessed in your "First Step" homework assignment? Did you correctly guess its largest expense?

6. Financial Statements:
a. Are the names for your company's statements the same as you have learned in class? If not, what are the titles for the four statements?

7. Income Statement:
a. Identify and explain at least one positive item and one item that concerns you when you review this statement.

8. Assets & Liabilities:
a. Locate and list these numbers from the financial statements, use the column for the most recent year.
i. Total assets
ii. Total liabilities
b. What is the company's single largest asset? Second largest? Are you surprised by this? Why or why not?
c. What is the company's single largest liability? Second largest? Are you surprised by this? Why or why not?

9. Balance Sheet:
a. Identify and explain at least one positive item and one item that concerns you when you review this statement.

10. Statement of Cash Flows:
a. Identify and explain at least one positive item and one item that concerns you when you review this statement.

11. Notes to the Financial Statements:
a. Select one note, or category of a note, read it and paraphrase the information. What significance would this information have for the company? For the external user? Give reference to the title of the note in your response.

12. Long-Term Liabilities and Stockholders' Equity:
a. Does the company carry any bonds? How do you know this?
b. Has the company issued any preferred stock? Any common stock? If so, how many shares are authorized, issued, and outstanding? What is the par value of the stock? Where did you find this information?
c. Does the company hold any treasury stock? If so, how much? Where did you find this information?

13. Auditor's Report:
The auditor's report deals with the credibility of the financial statements. Of special significance is the opinion section.

a. Who is the auditing firm for the company? What is their opinion on the company? Is it a good opinion or adverse opinion? Why? What does this say about the company's financial statements? Do you notice anything interesting surrounding the auditor's report?

14. Financial Ratio Analysis:
a. Compute the following ratios for the company for two years (the most recent and previous year). UYou must show the ratio formula and your calculations. Round answers to two decimal places.

i. Current Ratio iii. Accounts Receivable Turnover
ii. Debt to Equity Ratio iv. Profit Margin Ratio

b. Explain what each ratio measures -liquidity, solvency, efficiency, or profitability. Why is this ratio important to the company and investors?

c. Compare each ratio to the company's same ratio for the prior year. Has it increased or decreased or experience no change? If there was a change, was it favorable or unfavorable? Explain why the change is favorable or unfavorable and its implications for the company.

15. Current Events
a. Find a recent news release or coverage on the company from a credible source. Provide a summary of it, making sure to cite your source. What does this mean for the company? Do you believe it will impact the company's financial standing favorable or unfavorable? Why?

16. Stock Market
a. Since you selected a public company, it must be available for sale on one of the public stock markets (like the New York Stock Exchange or Nasdaq). Find the company's stock price for a particular date, list the date and the price. A day or week later, check the stock price again. Has the stock price changed? List the new price and date.

17. Conclusion
a. Summarize your findings in one or two paragraphs. Refer back to all your work on this project -its financial statements, financial ratios, and market performance to determine if the company is in good financial health for the short-term? Long-term? And finally, does it represent a good investment?
b. Would you purchase this company's stock? Why or why not?
c. How does your response compare to what you answered in the "First Step" assignment?

18. Reference Page
a. Include a copy of your company's financial statements.
b. Include a list of the references you used in your project, use MLA format.