"Financial Accounting (ACTG 4A)"
Financial Accounting (ACTG 4A) Financial Statement Analysis Project This assignment requires financial ratio analysis on a public company of each team’s choosing. 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 written section interpreting of the financial ratios you have calculated, 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 hand-calculate the ratios. The paper should be five (5) double-spaced, typed pages (not including the ratios and the ratio calculations). Roughly, the paper should have one page of introduction, three pages of analysis and interpretation, and one page of conclusion. The main 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 should 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 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. The paper will be worth 60 points, and the presentation will be worth 20 points. Required ratios: Liquidity & Efficiency ratios: 1. Current ratio 2. Acid-test ratio 3. Accounts receivable turnover 4. Inventory turnover Solvency & Leverage ratios: 1. Times interest earned 2. Debt-to-equity ratio Profitability ratios: 1. Profit margin ratio 2. Gross profit ratio 3. Return on assets ratio 4. Return on common stockholders’ equity ratio 5. Earnings per share 6. Price/Earnings ratio 7. Dividend yield ratio 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: http://www.sec.gov/edgar.shtml 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: http://finance.yahoo.com/ 4. Morningstar.com: http://www.morningstar.com/ 8. CNN Money: http://money.cnn.com/ Date due: Group presentations will take place on Monday May 11th. Immediately after the group presentation, written reports should be submitted. 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 Acid-Test Ratio Accounts Receivable Turnover Inventory Turnover Times-Interest- Earned Ratio Debt-to-Equity Ratio Profit Margin Ratio Gross Profit Ratio Return-on- Assets Ratio Return-on- Common Stockholders’ Equity Ratio Earnings Per Share Price/Earnings Ratio Dividend Yield Ratio