Real-World Financial Statement Analysis
In prior weeks, you learned about the financial statements and financial statement ratios. This week, you will utilize that information, along with Chapter 13 from the course textbook, Using Financial Accounting Information: The Alternative to Debits and Credits, and tips from the textbook, Warren Buffet Accounting, to take a deep dive into one company.
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 list below. Access the company quarterly financial statements (10-Q) for the past two quarters on EDGAR, which is available on the web page, EDGAR Company Filings (Links to an external site.).
Select one of the following companies:
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 balance sheet and income statement horizontal analysis for the last two quarters.
Prepare a balance sheet and income statement vertical analysis for the last two quarters.
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.
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.
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 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, as well as 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 above requirements to discuss the financial health, performance, strengths, and weaknesses of the company, as well as any identified positive or negative trends.
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 Screencast-O-Matic (Links to an external site.). If needed, review the Screencast-O-Matic Quick-Start Guide (Links to an external site.). 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
Click each tab to review the instructions to complete and submit your project.
Final Paper Requirements Oral Presentation Requirements Folio Submission 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, supporting calculation of the horizontal analysis, vertical analysis or ratio calculations) and formatted according to APA Style as outlined in the Writing Center’s APA Style (Links to an external site.) resource.
Must include a separate title page with the following:
Title of paper
Student’s name
Course name and number
Instructor’s name
Date submitted
For further assistance with the formatting and the title page, refer to APA Formatting for Microsoft Word (Links to an external site.).
Must utilize academic voice. See the Academic Voice (Links 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 & Conclusions (Links to an external site.) as well as Writing a Thesis Statement (Links 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 Paper (Links to an external site.) guide.
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 List (Links to an external site.) resource in the Writing Center for specifications.
The Real-World Financial Statement Analysis oral presentation
Must be three to five slides in length (not including title and references slides) and formatted according to APA Style as outlined in the Writing Center’s How to Make a PowerPoint Presentation (Links to an external site.).
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 Paper (Links to an external site.) guide.
