The Annual Report Project-
Financial Statement Analysis
Part 1
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Goldey-Beacom College
Company Research
Company Selection
1. What company did you choose (give your companys complete name)?
2. What internet sites were used to get your companys information?
3. What is the companys headquarters address?
4. Why did you select this particular company?
5. Where is the company incorporated?
Company Profile
1. What is the nature of the companys business? Are they a manufacturer or merchandiser?
2. What is the companys industry?
3. What is the SIC – Standard Industrial Classification Code for your company? What is the NAICS Code?
4. What are the primary products/ brands of the company?
5. Who are the primary customers of the company?
6. Corporations experience many wide-ranging social, political, economic and technological issues. List and discuss risks and uncertainties that could materially affect the companys business.
7. Who are the Company Chairman and CEO?
8. How many board members does your company have?
9. Who is the companys independent auditor?
10. Does the company discuss any recent accounting pronouncements that they are in compliance with? Briefly list and describe them.
11. Does the company have any foreign operations? If so, what are they?
12. List and briefly discuss any legal proceedings.
Stock Market Information
1. What is the companys stock exchange ticker symbol?
2. On what stock exchange is your company listed?
3. What is the current stock price, 52 week high, low? (Give the date.)
Articles about the Company
1. Find recent articles (3) about your company, attach a copy to this report and provide a written summary of each article. (Indicate the source and date of each article below.)
2. Find recent press releases (3) from your company, attach a copy to this report and provide a short written summary of each press release. (Indicate the source and date of each press release below.)
Annual Report Overview
1. Review the Management Discussion and Analysis. Summarize the major points
made in the analysis.
2. Locate the Managements Report on Internal Control. Answer the following questions:
a. Who is responsible for establishing and maintaining adequate internal control over financial reporting?
b. Does the company maintain a system of internal controls? Why?
c. Who has signed this report?
3. Locate the Report of Independent Registered Public Accounting Firm. Answer the following questions.
a. Who is responsible for preparation and
integrity of the financial statements?
b. According to this report what is an audit?
c. According to the audit report, what is the auditors responsibility?
d. Summarize the auditors opinion.
e. What standards were used to conduct the audit?
4. Locate the Report of Independent Registered Public Accounting Firm. Answer the following questions.
a. Have the auditors conducted an audit of managements assessment on internal controls?
b. What standards were the audit conducted in accordance with?
c. What is the auditors opinion with regards managements assessment on the firms internal controls?
d. Who has signed this report?
5. Does the company have a corporate mission? Summarize and discuss it.
6. Has your company undergone any reorganization in the past 3 years? If so, discuss.
7. Does your company have a corporate governance (code of ethics) section on its website? If so, briefly summarize its contents.
Balance Sheet
1. What years are you using for the balance sheet date?
2. Is this a fiscal year or a calendar year?
3. The accounting equation is Assets = Liabilities + Stockholders Equity. Give the companys accounting equation at the end of the current and prior years.
Assets
Liabilities
Equity
Current Year:
=
+
Prior Year:
=
+
Two Years Ago:
=
+
4. List the total amount of the following subtotals for the past three years.
Current Year:
Prior Year:
Two Years Ago:
Current Assets
Current Liabilities
5. Calculate the companys current ratio for the past three years. (Show your computation.)
Current Year:
Prior Year:
Two Years Ago:
a. Explain what these numbers mean. (Use complete sentences.)
b. Has the current ratio improved or worsened? Explain. (Use complete sentences.)
6. Calculate the companys quick or acid-test ratio for the past three years. (Show your computation.)
Current Year:
Prior Year:
Two Years Ago:
a. Explain what these numbers mean. (Use complete sentences.)
b. Has the quick ratio improved or worsened? Explain. (Use complete sentences.)
7. Calculate the companys working capital for the past three years. (Show your computation.)
Current Year:
Prior Year:
Two Years Ago:
a. Explain what these numbers mean. (Use complete sentences.)
b. Has the working capital improved or worsened? Explain. (Use complete sentences.)
8. Calculate the companys cash ratio for the past three years. (Show your computation.)
Current Year:
Prior Year:
Two Years Ago:
a. Explain what these numbers mean. (Use complete sentences.)
b. Has the cash ratio improved or worsened? Explain. (Use complete sentences.)
9. Calculate the companys sales to working capital ratio for the past three years. (Show your computation.)
Current Year:
Prior Year:
Two Years Ago:
a. Explain what these numbers mean. (Use complete sentences.)
b. Has this ratio improved or worsened? Explain. (Use complete sentences.)
10. Does the company have a deferred tax asset and or liability? If so are they current and/or noncurrent
Deferred Tax
Yes or No
Current Amount
Noncurrent Amount
Asset
Liability
11. Using elements listed on your companys balance sheet, prepare a common size balance sheet using the following format. (Vertical Analysis Chapter 5)
Account
Current Year
%
Prior Year
%
Two Years Ago
%
12. Using elements listed on your companys balance sheet calculate the increase or decrease in dollars and percent between the years using the following format. (Year to Year Change Analysis Chapter 5)
Account
Current Year
Prior Year
+/- $
%
Two Years Ago
+/- $
%
13. Using elements listed on your companys balance sheet calculate the ratios and amounts using two years prior as the base year (100%) using the following format. Your answers should all be in percentages (Horizontal Analysis Chapter 5).
Account
Current Year/Base
Prior Year/Base
Two Years Ago / Base
14. In thoughtful, well-organized paragraphs, comment on changes you see in the balance sheet over the two-year period.
Use a separate sheet of paper and label it Balance Sheet Analysis. Answer in complete sentences. Use a separate paragraph to discuss each item. Label your paragraph according to the letters below. This analysis should be at least one full page in length.
Among the items to consider:
a. In which assets does the company have the most significant investment?
b. Is the company financed primarily with debt or equity?
c. Is the debt primarily short-term or long-term?
d. Comment on any significant changes in assets or liabilities.
e. Comment on any significant changes in the composition of current assets or current liabilities.
f. Evaluate the companys debt-paying ability.
Current Assets
1. List the types and dollar amounts of the current assets for the past three years using the following format. Include the totals.
Account
Current Year
Prior Year
Two Years Ago
2. What is the gross and net amount of accounts receivable for the past three years?
Accounts Receivable
Current Year
Prior Year
Two Years Ago
Gross Amount
Net Amount
3. What is the amount and percentage of bad debt allowance for the past three years?
Bad Debt Allowance
Current Year
Prior Year
Two Years Ago
Amount
Percentage
4. What is the amount of inventory for the past three years?
Inventory Type
Current Year
Prior Year
Two Years Ago