In prior weeks, you learned about the financial statements and financial statement ratios. This week, you will use that information and tips from the course textbook Using Financial Accounting, and tips from the Warren Buffett Accounting Book: Reading Financial Statements for Value Investing to take an in-depth look at one company.
Part 1:
Assume the role of a senior financial analyst who has been assigned to complete a thorough and detailed review for a company of your choice from the following list. Access the company’s quarterly financial statements (10-Q) for the past two quarters on EDGAR, which is available on the webpage, EDGAR Company FilingsLinks to an external site..
Select one of the following companies.
Company Name Abbreviation
Home Depot HD
Bloomin Brands BLMN
Apple AAPL
Starbucks SBUX
Gap GPS
Verizon VZ
Target TGT
Cisco CSCO
Ulta ULTA
Dollar Tree DLTR
In your thorough and detailed review, analyze the company’s quarterly financial statements (10-Q) for the past two most current quarters and perform the following:
Prepare a comparative balance sheet and comparative income statement for the last two quarters and conduct a horizontal analysis of at least two items from the income statement and two items from the balance sheet. What conclusions or insights can you draw about the company’s performance from your analysis?
Prepare a common-size balance sheet and common-size income statement for the last two quarters and conduct a vertical analysis of at least two items from the income statement and two items from the balance sheet. What conclusions or insights can you draw about the company’s performance from your analysis?
Prepare a liquidity analysis by computing and using the appropriate ratios to assess liquidity.
Compute a minimum of three ratios and show your supporting calculations.
Analyze the ratios computed and discuss any insights or conclusions that can be drawn from your analysis.
Prepare a solvency analysis by computing and using the appropriate ratios to assess solvency.
Compute a minimum of three ratios and show your supporting calculations.
Analyze the ratios computed and discuss any insights or conclusions that can be drawn from your analysis.
Prepare a profitability analysis by computing and using the appropriate ratios to assess profitability.
Compute a minimum of three ratios and show your supporting calculations.
Analyze the ratios computed and discuss any insights or conclusions that can be drawn from your analysis.
In addition, use the methods and tips provided in the textbook, Warren Buffet Accounting, to address the following questions:
What is your company’s primary revenue, secondary revenue, and gains?
What is your company’s primary expenses, secondary expenses, financial activity generated expenses, and losses?
What is the revenue trend? Does the 10-K or 10-Q discuss primary revenues and other revenue types?
What do the accounting policies say in the annual report (footnotes) regarding the cost of revenue? What are the drivers to the cost of revenue and the trends?
Are there any trends in sales and marketing expenses or research and development? Are these amounts reasonable for the type of business?
Compare general and administrative expenses to similar companies. Are they reasonable?
What is the ratio of net interest income (expense) to income from operations? Is this a safe ratio for the company? Why or why not?
What is the income taxes trend? Is the effective tax rate reasonable over time?
Formulate your analysis on the preceding requirements to discuss the financial health, performance, strengths, and weaknesses of the company, as well as any identified positive or negative trends.
This written portion must be five to seven double-spaced pages in length (not including title and references) and provide supporting calculation of the horizontal analysis, vertical analysis or ratio calculations and be formatted according to APA Style as outlined in the Writing Center’s APA StyleLinks to an external site..
Part 2:
In addition to your written financial statement analysis, you will also need to communicate a high-level summary of your analysis to your selected company’s executive team using PowerPoint. The summary should be documented with three to five PowerPoint slides, including speaker notes. In addition, include the company’s
financial health,
performance strengths and weaknesses, and
identified positive or negative trends.
Directions
Consider the following requirements to complete the final project:
Final Paper Requirements
PowerPoint Presentation Requirements
Waypoint Submission
The Real-World Financial Statement Analysis final paper
must be five to seven double-spaced pages in length (not including title and references). You must provide supporting calculations for the horizontal analysis, vertical analysis, and the ratio calculations and be formatted according to APA style as outlined in the Writing Center’s APA StyleLinks to an external site. resource.
must include a separate title page with the following:
title of paper
For further assistance with the formatting and the title page, refer to APA Formatting for Microsoft WordLinks to an external site..
student’s name
course name and number
instructor’s name
date submitted
must utilize academic voice.
See the Academic VoiceLinks to an external site. resource for additional guidance.
must include an introduction and conclusion paragraph.
Your introduction paragraph needs to end with a clear thesis statement that indicates the purpose of your paper.
For assistance on writing Introductions & ConclusionsLinks to an external site. and Writing a Thesis StatementLinks to an external site., refer to the Writing Center resources.
must document any information used from sources in APA Style as outlined in the Writing Center’s APA: Citing Within Your PaperLinks to an external site.
must include a separate references page that is formatted according to APA Style as outlined in the Writing Center.
See the APA: Formatting Your References ListLinks to an external site. resource in the Writing Center for specifications.
Directions
The Real-World Financial Statement Analysis PowerPoint presentation
must be three to five slides in length (not including title and references slides) with Speakers Notes and formatted according to APA Style as outlined in the Writing Center’s How to Make a PowerPoint PresentationLinks to an external site. resource.
must include a separate title slide with the following:
title of paper
student’s name
course name and number
instructor’s name
date submitted
must document any information used from sources in APA Style as outlined in the Writing Center’s APA: Citing Within Your PaperLinks to an external site. guide.
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