project
Financial Statement Analysis Project The objective of this project is to help students pull together various accounting concepts learned in this course and apply them to a real-world investment decision. The project is individual-based. Students are required to do online research of a company of your choice. You will need to gather background information from the most recent annual report (or similar documents) of the company you select. Based on information you find, develop a critical analysis of the financial health and performance of the selected company. Instructions to Students The project report should be clear, concise, and coherent. In writing the report, you should refer to publicly available information of the company, quoting references from the sources with page numbers where appropriate. Remember to use proper citation. Using references from other sources without clear quotation violates the academic honesty code and is subject to University policy and regulations. The report should be no more than 4 pages (12 pt. Times New Roman font or equivalent) plus any exhibits and reference, if any. There is no correlation between length of the report and points earned. It is important to answer all questions directly and please identify the question number in your report. Instructions on how to find an annual report Annual reports can be found in multiple ways. Financial Statements of U.S. listed companies can be obtained from the website of the Securities and Exchange Commission (www.sec.gov). Under the “Filings” pull down menu, go to “Company Filing Search” where you can search by company name, ticker symbol, or CIK. In most cases, and for non-listed companies, you can usually also find the annual report from the company’s website. They are usually provided under an “About Us”, “Investor Relations,” or similar section. Part A (35%) Download and read the most recent annual report (Form 10-K) for your selected company. Based on information from the annual report and other sources, answer the following questions. Remember to cite any direct quotations along with page number if you choose to take sections from the annual report. Quoting phrases/paragraphs directly from the annual report is appropriate (with proper citation), but you must explain/summarize the text in your own words for full credit. 1. Provide a brief introduction of the company’s history, business structure (including share ownership), and primary businesses (1/2 page or less). 2. Locate the Independent Auditor’s Report. (a) Who is the company’s Auditor? (b) What was the opinion issued by the auditor? How did the auditor come up with that opinion? (c) Briefly explain what “Critical Audit Matters” are and discuss the critical audit matters identified by the auditor regarding this audit 3. Answer the following questions by reading the financial statements and accompanying “Notes to the Consolidated Financial Statements”. If you can’t find pertinent information state that fact in your report. (a) Under what cost convention is the basis of preparation for the financial statements (e.g. historical cost or fair value)? (b) What are the major categories of revenues reported by the company? (c) List the major categories and amounts of liabilities reported by the company. (d) How many classes of shares does the company report? Describe the components of contributed capital versus retained capital for the firm. (e) How much, if any, did the company pay out in dividends? (f) How much was EPS and diluted EPS? What is the main difference between the two, if any? Part B (30%) Compute the following financial ratios for the company you selected using information from the most recent Annual Report and Financial Statements. Show detailed calculations. Use the average of account balances where appropriate. Occasionally you might need to read the notes to financial statements to find relevant information. If you can’t find the necessary data to compute certain ratio(s), or a ratio is not applicable, please state that fact in your report. Ratio/Value Numerator Denominator Answer A Current Ratio B Acid-test ratio C Return on Common Stockholders’ Equity D Payout Ratio E Debt to Assets Ratio F Times-Interest-Earned *If necessary, assume 60% of sales (revenues) are credit sales. Part C (35%) Use a financial website (Yahoo finance, CNBC, etc.) to locate the stock price, P/E, and market capitalization of the company on a recent date. Considering your analysis above and focusing on the liabilities and equity of the company, comment on whether you think the company is a “good” investment choice at its current price. Explain your reasoning.