Perform an expanded analysis on the financial statements of a

 

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This Project has two parts: calculations and a 4-to 6-page essay. While the calculation requirements of this assignment are important, equally important are your discussion and analysis of the quantitative results.

 

Choose a publicly traded company and perform an expanded analysis on the financial statements. Please use the most current 10K statements available on www.sec.gov http://www.sec.gov or annual statements in finance.yahoo.com http://finance.yahoo.com.

 

You will submit two files:

 

1) A spreadsheet containing your horizontal and vertical analysis (and perhaps your ratios) and

  2) A word document containing your essay 12 Point Times New Roman Double Spaced. 3 references APA format.

 

 Part 1:

  Please complete the following for your chosen firm in an Excel spreadsheet:

 

  1.  Horizontal and vertical analysis of the Income Statements for the past three years (all yearly balances set as a percentage of total revenues for that year).
  2. Horizontal and vertical analysis of the Balance Sheets for the past three years (all yearly balances set as a percentage of total assets for that year).
  3. Ratio analysis (eight ratios of your choosing) for the past three years PLUS a measurement for the creditworthiness of your firm as measured by Altman’s Z-score.

 

 Part 2:

 The Paper: 5 pages in length. Include a proper introduction and conclusion. Include a reference page.

Your paper should provide your reader with an overall understanding of the financial health of your chosen firm including the following:

 

  1.  Discussion of the ratio analysis results, including rationale for the ratios chosen.
  2. Discussion of all horizontal and vertical analysis.
  3. 12 Point Times New Roman Double Spaced. 3 references APA format.

  ·       Discussion of four items from the management discussion of the firm that support the conclusion formed in your discussion of the financial results.

 

Much of this course has concentrated on learning the financial statements, primarily because there was not an accounting prerequisite. Because of this concentration, you may find this assignment challenging. However, if you understand the financial statements, then the horizontal and vertical analysis should (hopefully) be rather intuitive. For example, if you see sales rise by 20%, then shouldn’t you also see net income rise by 20% or more if the managers are effective at controlling costs? If you see sales rise by 20% and assets rise by 40%, we have to ask why this is happening. It would appear that assets have risen too far given the sales that are generated from those assets — why did this occur? You may have to research that type of question and discuss it in your analysis. You’ve had some experience with financial ratios through Discussion Board. I’d suggest that you start your ratio analysis with the four ratios found in the DuPont equation. If you discover a weakness in one component of the DuPont ratios, then it would make sense to look at ratios that are closely related to the troublesome ratio. For example, if you discover that the asset turnover is declining over time, and then takes a look at some related ratios such as the inventory turnover rate or the average collection period. If you discover that the equity multiplier is increasing (indicating greater reliance on debt), then look at some related ratios such as the debt ratio or Times Interest Earned.

 

 

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