Questions:
OBJECTIVE: The objective of this assignment is to expose you to the type of information contained in an annual report as well as learn where to locate specific financial data within the report. You will use the annual report from your assigned company to complete the three parts of this assignment. Please reference (and print) the pages from the annual report used to gather information for this case study. Each of the three parts of this assignment will be evaluated on the criteria outlined below.
Company Profile -
GOAL: For this section of the assignment you will have to locate pertinent company information contained in the annual report or on financial websites (example is finance.yahoo.com). Bullet pointing this information is appropriate for your report.
You will have to identify the following items that are specific to your company:
*Ticker symbol
*Mission Statement as it is printed in the Annual Report
*Corporate headquarters location
*Date of Incorporation
*Public Auditor
*Name of CEO
*Name of CFO
*Stock classifications (common, preferred, both?)
*Exchange (e.g.: NYSE, Nasdaq)
*Dividends (have they been issued, when were they last issued, and for how much)
Industry Profile -
GOAL: For this section of the assignment you will have to locate pertinent company information contained on financial websites (ONE example is finance.yahoo.com).
• Identify the market sector to which your company belongs. Describe what makes a company part of this market sector.
• Define the industry to which your company belongs. Describe what makes a company part of this industry. Identify 3 industry leaders and 3 industry laggards.
• Locate (using Yahoo Finance) and attach your company's stock performance in comparison to your company's two largest competitors' stock performance over the past two years. Note on the graph three events. These can be company, industry or market specific events. In detail, describe the events and their effect on your company's stock performance. This can be done either in Excel or using web based applications as the data set is large in this example.
• Explain what is meant by Market Capitalization. Graph, using a pie chart in Excel, your company versus other companies (at least 3) in the industry with market capitalization data. Make observations and describe your observations. Make sure your graph is labeled properly including a legend, a title, and appropriate data labels as well.
Financial Statement Research -
GOAL: For this section you should locate data in both the Income Statement and Balance Sheet. You will have to find the data from the two most current consecutive years available for each of the items listed below. You will then have to create an Excel spreadsheet to represent the data and then calculate the percentage change for those two consecutive years and indicate that change. On the spreadsheet you should put information from the two previous years as well as the percent change between those years and your observations of what it all means. You must include a copy of the Income Statement and the Balance Sheet from the annual report for this section of the assignment and highlight data used, as well as upload your Excel spreadsheet with the aforementioned data analysis and formula derivation. Based on the data you gathered, what overall observations can you make about the company (that does not mean just stating assets went up or down, but rather strategies, trends or impacts)? You can include questions you would ask or other information you would want to research.
*Sales *Cash
*Cost of Sales (COGS) *Total Current Assets
*Gross Profit *Total Debt
*Net Income (loss) *Total Equity
*Inventory *Total Current Liabilities
Financial Statement Analysis -
GOAL: For this section you will use financial ratios to evaluate the relationship between Balance Sheet and Income Statement data from the two most current consecutive years in making determinations about company performance. You are to compare this data to the averages for your company's industry. Use at least three companies to calculate the industry average (your company plus 2 others). You must indicate which to firms were used to compile this industry average data. For each ratio you should show the formula used, enter your company's numbers into that formula, compute the ratio, and assign the proper label to the answer ($, %, etc.). You will complete this for each of the two years' data. Once again, an excel spreadsheet is required to complete this section. Two properly labeled graphs (including x and y axis as well as titles) are to be created to show relationships between your company and the industry. One example of this could be showing return on investment for your company versus the industry as a whole. Based on the data gathered, what overall observations can you make about the company (that does not mean just stating a ratio went up or down, but rather why, given strategies, trends or impacts or particular input data)? You can include questions you would ask or other information you would want to research.
*Current Ratio/Liquidity *Inventory Turnover (sales/inventory)
*Debt to Equity Ratio *Profit Margin
*Return on Investment *One additional ratio of your choice
Interpretive Analysis -
GOAL: Each of the ratios in Section 2 provide relevant information to help answer specific questions about the financial health of the company. You will have to interpret that information by responding to each of the multi-part following questions. The discussion should be thorough and incorporate data and analysis from above.
1. What is meant by liquidity? Did the company experience and increase or a decrease in liquidity over the two-year period evaluated? What effect do the liquidity figures have on the company's long term and/or short term performance?
2. What is meant by Profit Margin? Did the company experience an increase or decrease in profit margin over the two year period evaluated? What effect do the Profit Margin figures have on the company's long term and/or short term performance?
3. What is measured in a Debt to Equity ratio? Did the company experience a change in its leverage over the two year period evaluated? What impact do these Debt to Equity figures have on the company's overall long term and short term performance?
4. How does inventory and inventory turnover affect liquidity? Did the company experience and increase or decrease in inventory turnover?