Financial Analysis Term project

Financial Analysis Term project

WRITTEN TERM PROJECT

Instructions for Financial Analysis Term project

1. Obtain the most recent annual report for your selected Company. The report should contain at least

three years of income statement data and two years of balance sheet data.

2. Analyze at least 3 (three) items on the income statement for your selected company that would be

important to an investor, and discuss whether your company’s performance related to these items

appeared to be improving, deteriorating, or remaining stable. Justify your answer. For ea ch item

selected, address the appropriateness of the accounting treatment and disclosure including the (a)

ASC Codification, (b) the sufficiency of disclosure requirements, and (c) alternative GAAP (or non-

GAAP) accounting treatments and the potential impact of earnings. (24%)

a. Items on the income statement include revenue, cost of revenue, research and

development, interest expense, EPS, etc. Net income is not considered an “item” on the

income statement.

3. Analyze at least 3 (three) items on the balance sheet for your selected company that would be

important to an investor, and discuss whether your company’s performance related to these items

appeared to be improving, deteriorating, or remaining stable. Justify your answer. For each item

selected, address the appropriateness of the accounting treatment and disclosures for each item

identified including the (a) ASC Codification, (b) the sufficiency of disclosure requirements, and (c)

alternative GAAP (or non-GAAP) accounting treatments and the potential impact of earnings. (24%)

a. Items on the balance sheet include cash, accounts receivables, accounts payable, common

stock, etc. Current assets, Total liabilities, and other totals are not considered an “item” on

the balance sheet.

4. Analyze your selected Company’s investing and financing activities for the most recent year as

identified in the statement of cash flows, specifically identifying the two largest investing activities

and the two largest financing activities. Discuss whether you agree or disagree with the investing and

financing strategies that your company appears to be employing. (10%)

5. Identify 2 (two) items not included in (or derived from) the financial statements (Part 7 of the 10-K)

that you think would be important to a potential in your selected Company. Discuss your reasons for

believing that these two items about the company would be important in making an investment

decision. (Hint: you might want to consider items discussed in other business classes.) (10%)

6. Obtain the most recent annual report for a competitor of your selected Company. Compare your

selected Company’s financial statements with those of the competitor’s financial statements. If you

were making a decision to invest in one of the two companies, which company woul d you choose?

Why? (Note: your answer in this section must include some financial issues, but your answer need not

be limited to a discussion of financial issues.) (10%)

7. Calculate certain liquidity, solvency, and profitability financial statement ratios for your selected

Company (as noted below): (20%)

a. Liquidity: Current Ratio, Quick Ratio, operating cash flow to current liabilities, revenues

to cash, days accounts receivable, days inventory held, days accounts payable

b. Solvency: liabilities to assets, liabilities to shareholders’ equity, long term debt to long

term capital, interest coverage ratio, operating cash flow to total liabilities

c. Profitability: Return on Assets, Fixed Asset turnover, return on common equity, price to

earnings, gross profit percentage, profit margin

8. If you had invested $1,000 in this company at the beginning of this semester, what would be the

value of your investment today? (2%)

Additional requirements:

1. You must submit the entire annual report for each company being discussed.

2. Your analysis must include page references to relevant portions of the annual reports, and the

relevant portions of the annual reports must be highlighted. Your report must also contain appropriate

quotation marks for quoted material and appropriate citations for material taken from sources outside

the financial statements.

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