Financial Statement Analysis Project


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Financial Statement Analysis Project

  1. 1. Accounting 4A Financial Statements Project This assignment requires financial ratio analysis on a publicly-traded company of each team’s choosing. The project is due on the date indicated in your course timeline. Each team will be required to examine the chosen company’s annual report and calculate the ratios listed below. Note: the inventory turnover ratio may not apply to your company if you have chosen a service company. If this is the case, chose another ratio to calculate instead. Each team will calculate the ratios for the two most recent years from available annual reports. Once each team has performed an analysis of the financial statements, the team will write up a report summarizing the team’s findings. The report will include a brief introduction, synopsis of the company’s business and current business situation, a summary of the student’s interpretation of team’s analysis, and a conclusion. Written proof of how the ratios were calculated MUST be attached to the report. You must calculate the ratios yourself. Use the attached work page behind to show proof of your calculations of the ratios (show all numbers in the calculations – not just the end result). The paper should be six (6) double-spaced, typed pages (not including the ratios and the ratio calculations). Roughly, the paper should have one page of introduction, four pages of analysis and interpretation, and one page of conclusion. The focus should be on the analysis and your interpretation. The analysis of the financial ratios should include insights into the meanings behind the ratios. The ratios should tell a story about how the company is doing and its prospects for the future. You need to tell that story. Do not copy directly from the annual report. In order to make the ratios more meaningful, a benchmark company or industry average for each ratio should also be included. You must calculate the benchmark company’s ratios as well. I do not need these calculations attached. The conclusion should provide insight into the financial future of the company. An investment recommendation should also be made in the conclusion. Each team will also give a brief presentation to the class summarizing their project and findings. The presentations will occur on the due date indicated in the class timeline. The presentation should include some type of media, preferably a PowerPoint presentation. Each group member is expected to speak during the presentation. The presentation should be about 10 minutes. There will be two progress checks during the semester where I will check the progress your team has made on the project. Each progress check will be worth 5 points. The first progress check requires that your group has calculated the ratios for both companies for two most recent years (that would be a total of 44 ratio calculations). You will need to submit the ratio calculations and a copy of your two companies’ financial statements. The second progress check will be of the rough draft of your written report. I will check the report and give you suggestions for improvements.
  2. 2. The paper will be worth 100 points, the presentation will be worth 40 points, and the two progress checks will be worth 10 points. Required ratios: Liquidity & Efficiency ratios: 1. Current ratio 2. Quick ratio 3. Accounts receivable turnover 4. Inventory turnover 5. Total assets turnover Solvency & Leverage ratios: 1. Times interest earned 2. Debt-to-equity ratio Profitability ratios: 1. Profit margin ratio 2. Gross margin ratio 3. Return on total assets 4. Return on common stockholders’ equity Places to find Annual Reports and financial information: 1. Your chosen company’s website (look under investor relations). 2. The Securities and Exchange Commission. a. Go to: b. Look under “Search for company filings” c. Look under “Companies & other filers” d. Type in your chosen company’s name e. On the left-hand side you will be looking for the Form 10K (that’s the annual report) 3. Yahoo! Finance: 4. 5. CNN Money:
  3. 3. Evidence of Ratio Calculations: Please show your calculations of the financial ratios of your chosen company in the column labeled “Your Company.” You can calculate the ratios by hand or attach a sheet that clearly demonstrates how you calculated the ratio (i.e. X/Y = Z). The ratios you provide for your competitor or industry average do not need to be calculated (you can find these on various finance websites – though you will most likely have to calculate some yourself). Please attach this sheet to the back of your written project. Ratio: Your Company Competitor/Industry Avg. Current Ratio Quick Ratio A/R Turnover Inventory Turnover Total Assets Turnover Times-Interest- Earned Ratio
  4. 4. Debt-to-Equity Ratio Profit Margin Ratio Gross Margin Ratio Return-on-Total Assets Ratio Return-on- Common Stockholders’ Equity Ratio