I. Project 3: Financial Statement Analysis Project
II. Introduction:
This project is designed to assess your ability to research corporate data, analyze and interpret financial statements and make a presentation to your boss and colleagues.
The project provides opportunities for you to further develop the following competencies:
Graduate School Core Competencies:
1. Communication
2. Critical thinking
Accounting Competencies:
3. Measurement, analysis, and interpretation
4. Reporting
5. Research
6. Technology and tools
Business Competencies:
7. Global and industry perspective
Professional Competencies:
8. Professional behavior
Scenario:
You graduated with a MS in accounting from UMGC and have recently been hired by a large accounting firm in Washington, D.C. You report directly to the senior accountant, Kathryn Cowgal, who is originally from Colorado and loves to ski when she’s not riding horses. Fortunately, you and Kathryn hit it off right away and you’re excited to be part of her team.
It’s Monday morning, you’re at your desk with a cup of coffee and a Danish staring at your long list of emails wondering how you’ll ever have time to catch up on last week’s projects. Your boss Kathryn briskly enters your office, sits down, and says, you’re going to love this assignment. I have hand-picked you to prepare a financial analysis for a new client in the retail industry. Kathryn goes on to say your report will be part of a company-wide analysis of the retail business sector in the US. For the analysis, she instructs you to choose from a list of paired public retail companies that are among the Fortune 500 and to be prepared to present your findings to the client. Kathryn hands you the list of paired public retail companies, suggested steps to follow, and a list of deliverables. She strongly encourages you to submit drafts, which she refers to as milestones. The purpose of the milestones is to receive Kathryn’s constructive feedback on your deliverables to give you an opportunity to improve your final versions before her deadline.
Further, Kathryn informs you that she and the CFO will also be attending your presentation to the client. They plan to use your presentation as part of the first quarter review all new employees undergo during the probation period with the company. Realizing this project could make or break your opportunity to stay employed beyond the probation period, you decide to review financial analyses techniques, interpreting SEC 10-K reports, and other resources to prepare the report and make a stellar presentation (Appendix A).
III. Steps to Completion:
Step 1: Select two companies to analyze
Selectany pair of companies found in the Project 3 Fortune 500 Paired Companies List (Excel). Post your selection in the Subject Line of the Week 8 discussion topic. Each paired-company can only be selected by one student. Before making your selection, check the discussion to learn which paired-companies have ...
I. Project 3 Financial Statement Analysis ProjectII. Introduct
1. I. Project 3: Financial Statement Analysis Project
II. Introduction:
This project is designed to assess your ability to research
corporate data, analyze and interpret financial statements and
make a presentation to your boss and colleagues.
The project provides opportunities for you to further develop
the following competencies:
Graduate School Core Competencies:
1. Communication
2. Critical thinking
Accounting Competencies:
3. Measurement, analysis, and interpretation
4. Reporting
5. Research
6. Technology and tools
Business Competencies:
7. Global and industry perspective
Professional Competencies:
8. Professional behavior
Scenario:
You graduated with a MS in accounting from UMGC and have
recently been hired by a large accounting firm in Washington,
D.C. You report directly to the senior accountant, Kathryn
Cowgal, who is originally from Colorado and loves to ski when
she’s not riding horses. Fortunately, you and Kathryn hit it off
right away and you’re excited to be part of her team.
It’s Monday morning, you’re at your desk with a cup of coffee
and a Danish staring at your long list of emails wondering how
2. you’ll ever have time to catch up on last week’s projects. Your
boss Kathryn briskly enters your office, sits down, and
says, you’re going to love this assignment. I have hand-picked
you to prepare a financial analysis for a new client in the retail
industry. Kathryn goes on to say your report will be part of a
company-wide analysis of the retail business sector in the US.
For the analysis, she instructs you to choose from a list of
paired public retail companies that are among the Fortune 500
and to be prepared to present your findings to the
client. Kathryn hands you the list of paired public retail
companies, suggested steps to follow, and a list of deliverables.
She strongly encourages you to submit drafts, which she refers
to as milestones. The purpose of the milestones is to receive
Kathryn’s constructive feedback on your deliverables to give
you an opportunity to improve your final versions before her
deadline.
Further, Kathryn informs you that she and the CFO will also be
attending your presentation to the client. They plan to
use your presentation as part of the first quarter review all new
employees undergo during the probation period with the
company. Realizing this project could make or break your
opportunity to stay employed beyond the probation period, you
decide to review financial analyses techniques, interpreting SEC
10-K reports, and other resources to prepare the report and
make a stellar presentation (Appendix A).
III. Steps to Completion:
Step 1: Select two companies to analyze
Selectany pair of companies found in the Project 3 Fortune 500
Paired Companies List (Excel). Post your selection in the
Subject Line of the Week 8 discussion topic. Each paired-
company can only be selected by one student. Before making
your selection, check the discussion to learn which paired-
companies have already been selected by a colleague, and
therefore no longer an option for you.
3. Step 2: Conduct research
Click Edgar to search for the SEC filings of your chosen retail
paired corporations. Download and review the SEC Forms 10-K
for the most recent year.
If you are unfamiliar with the corporations you selected, learn
more about each company by reading Part I of its SEC Form 10-
K. To learn more about the corporations, the following
resources will be helpful:
· UMUC Library: Research Guide for Business and
Management: Resources
· Browse all databases in this guide to find the most relevant
resources
· Hoovers will be used for the industry averages
· Academic journals
· ABI/Inform is the best starting point
· Click Peer Reviewed
· Federal government Websites
· Big 4 Accounting firm articles published within the last 3
years
Step 3: Using technology and tools to measure, analyze, and
interpret
· In Excel:
1. Perform a horizontal analysis of the Balance Sheet and
Income Statement for the most recent 2 years in Excel using
formulas. Reference different sheets in your formulas when
necessary.
2. Perform a vertical analysis of the Balance Sheet and Income
Statement for the most recent 2 years in Excel using formulas.
Reference different sheets in your formulas when necessary.
3. Perform ratio analyses using 20 ratios for each corporation
using formulas in each cell that contains an answer. Reference
different sheets in your formulas when necessary.
4. Compare the horizontal analysis, vertical analysis, financial
ratio analysis of both corporations and the industry averages,
4. which can be found in Hoovers, to detect trends and outliers, if
any.
5. Summarize your findings on the last sheet.
Step 4: Reporting
Create an Excel file.
· Start by pasting the original SEC 10-K reports for each
corporation into Tabs 1 and 2.
· Highlight figures on the Form 10-K’s you will use in your
analyses
· Note: all computations must be computed via an Excel formula
that references other sheets when necessary. The Excel file
must be prepared by you.
· Add sheets to your Excel file as follows:
Sheet #
Label
Contents
Notes
1
Corp A
BS & IS of Corp A
Copy & paste from Edgars
Cite all sources
2
Corp B
BS & IS of Corp B
Copy & paste from Edgars
Cite all sources
3
Ind Avgs
Industry averages
Copy & paste from Hoovers
Cite all sources
4
Horizontal
Side-by-side horizontal analyses
5. Both Corp A & B, must use formulas
5
Vertical
Side-by-side vertical analyses
Both Corp A & B, must use formulas
6
Ratios
20 relevant financial ratios
Select the same ratios for both Corp A & B. Must use formulas
7
Comparison
Compare the same 20 financial ratios of both companies to the
industry averages. Look for anomalies, outliers, trends,
similarities, differences
Compare Corp A to Corp B & to the Industry averages
(in Hoovers). Cite all sources. Must use formulas.
8
Summary
Present a side-by-side comparison & note your findings
Corp A & B and
Industry Averages
Cite all sources
Step 5: Critical thinking and communication
Create a Word document summarizing your analyses and
recommendations for both Corporation A and B.
· Approximately a 3-4-page report not including the cover sheet
and reference list
· Must be in APA format.
· Include accurate citations and a reference list.
· Please use spell check before submitting your final copy.
Step 6: Presentation with Oral Communication
Prepare a PowerPoint presentation that includes the following:
· Graphs, tables, and other data visualization tools to explain
your findings
6. · Speaker’s notes must be placed under each slide.
· All slide content and speaker’s notes must be in your own
words.
· The audio enhancement should be embedded and run without
requiring your professor to click the “Play” button on each
slide.
· Note, the sample PowerPoint presentation located in Projects
& Rubrics is one way to add audio; there are other methods.
· Note, when you click “Play from Start” on slide 1, the slides
advance automatically, the closed captioning is shown below
each slide, there are no background distractions, and the
presenter speaks clearly at a reasonable pace. Keep in mind that
the main objective of that project was different from the main
objective of this project.
· Read the speaker’s notes you created to create the audio file.
· One slide should include a summary side-by-side comparison
of the two corporations and the industry averages you computed
on Tab 8 of the Excel file. Note your findings on the slide face
or in the speaker’s notes.
· Important – state your recommendations to improve
profitability in Company A and B.
IV. Deliverables:
This project has three deliverables in the following formats:
Excel, Word, and PowerPoint
1. Excel workbook with 8 tabs (Sheets).
2. Word report as described above and written in your own
words. Use spell check.
3. PowerPoint presentation as described above. Use spell check.
V. Hints and Tips:
· As your professor, please note that I have very little interest in
reading what others in the field have written. It is fine to quote
sources to illustrate or support your own thoughts, however,
every graded assessment in graduate accounting courses will be
based on the content you have thought about and you have
7. written in your own words. To properly guide you, I need to
read your thoughts and interpretations and observe you making
presentations which demonstrate your comprehension of the
learning goals and ability to perform the competencies.
· Read the grading rubric before beginning the project to fully
understand the requirements; ask questions about the
requirements if needed.
· Use spell check!
· Review and refresh your memory of APA style formatting 3-4
weeks before the assignment is due.
· Writing a Research Paper:
https://owl.english.purdue.edu/owl/resource/658/01/
· APA: https://owl.english.purdue.edu/owl/section/2/10/
· Developing your graduate level writing skills:
https://owl.english.purdue.edu/owl/section/1/2/
· What Constitutes Graduate Level Writing; source unknown. In
LEO, Content, Week 9.
· Seek feedback for submitting your final version for a grade.
· Ask a classmate, friend or family member to read your report,
watch your presentation, and share constructive feedback to
help improve your final version.
· Submit your draft Word document to the Graduate Writing
Center at least 1 week before the project due date. This FREE
resource can be accessed in your LEO classroom. Make edits to
your report after reviewing feedback from the writing center
tutors.
· Submit all required files on or before the due date. Late
assignment policies can be found in the syllabus. No
assignments are accepted after the last day of class.
· Ask questions as needed in the weekly Ask the Professor
forums. Students may discuss questions about the project in
LEO.
VI. Rubric:
You will find the rubric in LEO under Contents>Course
Resources>Projects & Rubrics. It is highly recommended that
8. you read the entire project and review the rubric before you
start the Steps to Completion. Your deliverables will be graded
according to the rubric.
1
A Comparative Analysis of
Home Depot & Lowe's
By:
NYSE: LOW
NYSE: HD
Background
Home Depot is the world's largest home improvement retailer.
Lowe's Companies, Inc. And subsidiaries are the world's second
largest home improvement retailer.
Both stores retail include: home improvement,
building, hardware, do-it-yourself (DIY), do it for me
(DIFM), and décor products
Home Depot is 23rd & Lowe's is 40th on the Fortune 500
Financial Statements
9. Tenebruso, J. (2018). Better buy: the Home Depot, Inc. vs.
Lowe’s. Retrieved April 16, 2019
from, https://www.fool.com/investing/2018/10/17/better-buy-
the-home-depot-inc-vs-lowes.aspx
Home Depot revenue is nearly 50% larger than Lowe's.
Home Depot has a higher operating margin 14.5% compared to
8.9%.
Home Depot generated more than twice as much cash from
operations and free cash flow.
3
Growth
Tenebruso, J. (2018). Better buy: the Home Depot, Inc. vs.
Lowe’s. Retrieved April 16, 2019
from, https://www.fool.com/investing/2018/10/17/better-buy-
the-home-depot-inc-vs-lowes.aspx
Lowe's revenue growth has slightly outpaced Home Depot but,
Home Depot has provided higher profit growth.
Lowe's grow from cost reduction initiatives and Home Depot e-
commerce.
4
Valuation
10. Tenebruso, J. (2018). Better buy: the Home Depot, Inc. vs.
Lowe’s. Retrieved April 16, 2019
from, https://www.fool.com/investing/2018/10/17/better-buy-
the-home-depot-inc-vs-lowes.aspx
P/FCF - Price to free cash flow
P/E - Price to Earnings
PEG – Price to earnings to growth
Home depot stock is more expensive.
5
Horizontal Analysis
Home Depot stronger balance sheet
Cash flow more Robust
And higher dividends
6
Vertical Analysis
11. Home depot higher net earnings,
bigger sales,
larger operating income
7
Financial Ratios
Market Performance Ratios
EPS
Home Depot 6.25 Lowes 4.15
Profitability Ratios
Gross Profit Margin
Home Depot 0.34 Lowes 0.34
Asset Utilization/ Turnover Ratios
Inventory Turnover
Home Depot 5.57 Lowes 3.97
EPS – Home Depot is a better value than Lowes
Gross – Profit Margin is equal. They both have about the same
amount left over from sales once cost of goods sold is taken
into account.
Inventory – Home Depot is able to turn it's inventory over more
times than Lowes.
8
Financial Ratios cont.
Liquidity Ratios
Current Ratio
Home Depot 1.03 Lowe’s 1.20
Debt Ratios
12. Cash Coverage
Home Depot 17.86 Lowe’s 12.69
Current Ratio – Lowe's is however surpassing Home Depot in
meeting it's financial obligations. This is due to Lowe's carrying
lower debt than Home Depot
Cash Coverage – Home Depot is more liquid than Lowe's due to
the availablity of more revenue and retained earnings
9
Conclusion
Neither company is a bad investment.
Lowe's stock has room to grow.
Home Depot is more robust and thus the better investment now.
Home Depot is paying higher dividends.
Home Depot has more cash available.
Home Depot has more operating capital.
Lowe's is up and coming but, not on the same level as Home
Depot.
10
SIC NAICS
Aerospace United Technologies Corp Honeywell International
Inc 3724 336412
Airlines American Airlines Group Inc Delta Air Lines Inc 4512
13. 481111
Apparel Nike Inc VF Corp 3021 424340
Apparel The Gap Inc Ross Stores Inc 5651 448140
Autos Manufacturing Fox Factory Holding Corp Harley-
Davidson 3751 336991
Auto Parts Icahn Enterprises LP O'Reilly Automotive Inc 5531
441310
Beverage Constellation Brands Inc Brown-Forman Corp 2084
312130
Bottled Beverages The Coca-Cola Co PepsiCo Inc 2086 312111
Building Materials,
Glass Builders FirstSource Inc. Boise Cascade Co 5211 423310
Commerial Banks Wells Fargo & Co. Citigroup Inc 6021
522110
Computer Software International Business Machines Corp
Hewlett Packard Enterprise Co 7379 541519
Contruction and Farm
Equipment Deere & Co AGCO Corp 3523 333111
Defense Northrop Grumman Corp Raytheon Co 3812 334511
Education Laureate Education K12 Inc. 8299 611710
Electronics, Electrical
Equip. Hubbell Inc. Methode Electronics Inc 3679 334417
Energy Vistra Energy Corp Entergy Corp 4911 221122
Entertainment Comcast Corp The Walt Disney Co. 4841 515210
Financial Data Services PayPal Holdings Inc Mastercard Inc
7389 561499
Food Production General Mills Inc Kellogg Co 2043 311230
Food and Drug Stores Sprouts Farmers Market Inc Chefs'
Warehouse Inc 5411 445299
General Merchandisers Macy's Inc Kohl's Corp 5311
448150/44
8120
Healthcare: Medical
14. Facilities Genesis Healthcare Inc. Ensign Group Inc 8051
623110Healthcare: Pharmacy
and Other Quest Diagnostics Inc Laboratory Corporation of
America Holdings 8071 621511
Home Equipment and
Furnishings Mohawk Industries Inc Interface Inc 2273 314110
Home Builders Lennar Corp Century Communities Inc 1521
236115
Hotels, Casinos,
Resorts Hilton Worldwide Holdings inc Hyatt Hotels Corp 7011
721110
Household and
Personal Products Colgate-Palmolive Co. Estee Lauder
Companies Inc 2844 325620
Industry Machinery Illinois Tool Works, Inc. Zebra
Technologies Corp 3569 333999
Mail Packing and
Freight Air Transport Services Group Inc FedEx Corp 4513
492110
Packagin, Containers Ball Corp Crown Holdings Inc. 3411
332431
Pharmaceuticals AmerisourceBergen Corp. Cardinal Health Inc.
5122 424210
Plastics Berry Global Group Inc Tupperware Brands Corp 3089
326199
Railroads CSX Corp Norfolk Southern Corp 4011 482111
Retail - Good &
Beverage United Natural Foods Inc SpartanNash Co. 5141
424410
Securities Franklin Resources Inc Ameriprise Financial Inc
6282 523930
Shipping Kirby Corp. Matson, Inc 4449
483211/48
3113
15. Temporary Help Robert Half International Inc Kelly Services
Inc 7363 561320
Transportation and Roadrunner Transportation Systems Inc.
C.H. Robinson Worldwide Inc. 4731 488510
Trucking, Truck
Leasing J.B. Hunt Transport Services Inc Knight-Swift
Transportation Holdings Inc 4213 484121
Waste Management Advanced Disposal Services Inc US
Ecology Inc 4953 562211
Guidelines: Only 1 student per paired companies - no
exceptions
You may NOT change your selection - no exceptions
Industry / Service or
Products Sold
Company 1 is Paired with Company 2
Last updated 4/3/20 Sharon L. Levin Page 1 of 3
Business Research:
Finding Financial Ratios for Companies and
Industries
Financial ratios show the mathematical relationship between
two numbers related to a
company's or an industry's performance. Once a ratio has been
calculated according to the
relevant formula, the ratio can be used to help determine how
well a particular company or
industry is doing in comparison to its competitors and/or in
comparison to its own past
16. performance.
Here's how to find company and industry ratios in various
UMGC Library databases.
Business Insights: Essentials
Company ratios
• Click on the Companies link from the menu bar toward the top
of the database's home
page and then on the link for Financial Reports.
• Browse or search for a U.S. company's name.
• Click on the Ratios tab on the resulting Fundamentals
Analysis page.
Industry ratios
• Click on the Industries link from the menu bar toward the top
of the database's home
page and then on the link for Plunkett Reports.
• Use the search box on the left-hand side of the page to search
for an industry by
keyword or NAICS code. The resulting report will include ratios
and analysis for the
industry.
D&B Hoovers
Company ratios
• Enter a company's name in the search box on the database's
home page and click on its
name from the results list.
17. • On the company information page, below the "Financials"
heading on the left-hand side
of the page, click on the Annual Ratios link and/or the Ratio
Comparisons link.
Industry ratios
• Enter an industry's name, SIC code, or NAICS code in the
search box on the database's
home page and use the drop-down menu next to the search box
to select Industries.
• Click on the industry link on the search results page.
• On the industry information page, below the "Market
Research" heading on the left-
hand side of the page, click on the All Market Research Reports
link and scroll through
the list of available reports to select relevant report(s), such as
RMA Industry Norms
reports.
https://sites.umuc.edu/library/libhow/businessresearch-
financialratios.cfm
https://sites.umuc.edu/library/libhow/businessresearch-
financialratios.cfm
https://sites.umuc.edu/library/libhow/businessresearch-
financialratios.cfm
http://ezproxy.umuc.edu/login?url=http://infotrac.galegroup.co
m/itweb/umd_umuc?db=BIE
http://ezproxy.umuc.edu/login?url=https://www.mergentonline.c
om/Hoovers
Last updated 4/3/20 Sharon L. Levin Page 2 of 3
18. Factiva
Company ratios
• Click on the Companies/Markets link from the menu bar
toward the top of the
database's home page and then on Company.
• Search for a company and click on its name from the search
results.
• On the company snapshot page, click on Financial Results
from the left-hand side of the
page and use the drop-down menu next to "Statement Type" to
select Key Ratios.
Industry ratios
• Click on the Companies/Markets link from the menu bar
toward the top of the
database's home page and then on Industry.
• Click on the link for an industry.
• On the industry snapshot page, scroll down to the "Industry
Averages and Ratios"
section.
Mergent Online
Company ratios
• Enter a company's name in the search box on the database's
home page and click on the
company's name from the search results.
• On the company information page, click on the Company
19. Financials tab and then on
the Ratios sub-tab.
Industry ratios
• Click on the Industry Analysis tab on the database's home
page and then select from
the among the available industries and/or regions.
• Industry reports contain data that demonstrate industry
performance.
Nexis Uni
Company ratios
• Click on the Menu link in the upper left-hand corner of the
database's home page and
then on Company Dossier.
• Enter a company's name in the "Company name" search box
and click on its name on
the results page.
• On the company snapshot page, click on Financial Overview
from the menu on the left-
hand side of the page and then click on the link for Ratio
Analysis.
Industry ratios
• Click on the Menu link in the upper left-hand corner of the
database's home page and
then on Company Dossier.
• Click on the Industry tab at the top of the resulting page and
enter an industry's name
20. or SIC code into one of the search boxes.
• Click on the link for an industry from the results page.
• On the industry overview page, click on the link for Ratio
Components.
(Source:
https://sites.UMGC.edu/library/libhow/businessresearch-
financialratios.cfm)
http://ezproxy.umuc.edu/login?url=https://global.factiva.com/en
/sess/login.asp?xsid=S003Wvf1WFo5DEs5DEmM9YuNTAvOD
FyMHmnRsIuMcNG1pRRQUFBQUFBQUFBQUFBQUFB
http://ezproxy.umuc.edu/login?url=http://www.mergentonline.co
m/compsearch.asp
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https://sites.umuc.edu/library/libhow/businessresearch-
financialratios.cfm
Last updated 4/3/20 Sharon L. Levin Page 3 of 3
S&P NetAdvantage
Company ratios
• Enter a company's name in the search box on the database's
home page and click on its
name from the results list.
• On the company profile page, below the
"Financials/Valuation" heading on the left-hand
side of the page, click on the Ratios link.
21. Industry ratios
• Click on the Industry Survey link on the database's home page.
• Use the drop-down menu in the "Industry Surveys" section of
the resulting page to
select an industry.
• Click on the PDF icon next to the name of a report of interest.
• Scroll through the report to the relevant section (e.g., "Key
industry ratios and
statistics," "Financial metrics," etc.).
Additional Resources
The UMGC Library contains many resources that can be used to
find more information about
what financial ratios are, how they're calculated, what they can
be used for, etc. A sampling of
these resources is given below:
• Financial ratios - provides information about five categories
of ratios: profitability,
activity, liquidity, leverage, and market value
• Financial ratios - provides information about four categories
of ratios:
profitability/return on investment, liquidity, leverage, and
efficiency
• Financial ratios - provides information about many types of
financial ratios: profitability,
asset utilization, leverage, liquidity, market value, and common
size, as well as
cautionary information about the use and interpretation of
financial ratios
22. • Business ratios and formulas: A comprehensive guide (2nd
edition) - per the preface
for this e-book, "There are nearly 200 measurements itemized in
this book. Each one is
accompanied by a complete description, an explanation of the
calculation, an example,
and cautions regarding its use."
• Financial ratios: How to use financial ratios to maximize value
and success for your
business - per the foreword for this e-book, the book looks at
financial ratios from the
perspectives of customers, employees, suppliers, the
community, and shareholders
• Intermediate accounting for dummies - this e-book presents 10
ratios for financial
statement analysis, in addition to numerous other accounting-
related topics
• Analysis of financial statements (3rd edition) - per the
description for this e-book, the
book's "authors demonstrate the nuts and bolts of financial
analysis by applying the
techniques to actual companies"
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ARUC
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14&site=eds-live&scope=site
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http://link.galegroup.com/apps/doc/CX3273100106/GVRL?u=u