ACCT 350 – Intermediate Acct. 1
Financial Statement Analysis Assignment
Fall 2010
Company Selection
Select a Publicly-held company which is a manufacturer, wholesaler or retailer, software developer is OK.
You will need to acquire the most recent annual report and 5 years of income statement and balance sheet data and perform the following:
Financial Statement Analysis
Part 1 - Ratio Analysis
Calculate, graph and discuss the following financial statement ratios for the last 5 years.
Current Ratio
A/R Turnover
Quick Ratio
Days Sales in Receivables
Invtl Turnover
Operational Cycle
Debt/Equity
Asset Turnover
Days Cost of Sales in Inventory
Working Capital
Times Interest Earned
Net Income/Sales
Part 2 - FSA Questionnaire
You will be provided with a questionnaire, which you will complete for your selected company
Point Values and Due Date
The project is worth 75 points and is due on Monday, October 25
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Central Washington University
Department of Accounting
Accounting 350 – Fall 2010
FSA Questionnaire
NAME
The purpose of this project is to allow you to examine the effects of various accounting practices and reporting procedures first hand. You will select an annual report of a major corporation for a fiscal period beginning in 2008 or 2009. This report will be turned in accompanied by the annual report no later than
October 25, 2010
Company Name
Date of Annual Report
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Annual Report SECTION I - Financial Statements
A. General Information:
1. Describe the principal business activity(ies) of the firm.
2. Where is the corporate headquarters located?
3. Over what stock exchange is the firm's stock traded?
4. Complete the following table:
*Date
Closing Market
Dividends Price of
E.P.S. Per Share Common Stock
Price/
Earnings
Ratio
12/31/07
12/31/08
12/31/09
*Adjust dates if company's fiscal year is not the calendar year.
5. The Auditor's Report a) Audit firm ____________________________ b) Audit opinion
______ Unqualified
______ Qualifed
______ Adverse
______ Disclaimer c) If the opinion is not unqualified, describe reason
for opinion given. d) Was a change in auditors evident? Was reason for change
disclosed?.
B. Income Statement
1. Title used _________________________________
2. Report format (multiple step, single step, other )
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C. Balance Sheet
1.Title used ___________________________________
2. Report format (report, account, other)
D. Retained Earnings
How was the change in Retained Earnings presented?
__________ Separate statement
__________ Part of Income Statement
__________ Other (please describe)
E. Statement of Cash Flows
1. What was the net change in cash during the year?
$ ________________________
2. What was the net change in working capital during the year?
$ ________________________
3. What approach (direct or indirect) was used to compute cash from operations?
Cash from/used by:
Operations $ ________________________
Investing $ ________________________
Financing$ ________________________
4. Identify the three largest sources of cash and compute the following:
Source Amount % of Total Sources
5. Identify the three largest uses of cash and complete the following:
Use or
Application Amount % of Total Application
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F. Notes to the Financial Statement
List, in order presented in the annual report, the title used to describe each footnote
1.
2.
3.
4.
5.
6.
15.
16.
17.
18.
19.
20.
11.
12.
13.
14.
7.
8.
9.
10.
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Section II. - Specific Accounting Issues
A. Accounts and Notes Receivable:
1. Current accounts receivable.
2. Estimated uncollectible accounts.
Prior
Year
____________
____________
Current
Year
___________
___________
3. Net current accounts receivable.
4. Net sales.
____________
____________
___________
___________
5. # of days' sales in receivables. ____________ ___________
6. Receivable Turnover . ____________ ___________
7. Describe (summarize) the accounting principles used by the firm to account for receivables.
B. Inventory
1. Summarize the valuation method(s) used by the firm to account for
inventory.
2. Complete the following table:
Beginning Inventory
Ending Inventory
Net Sales
Cost of Goods Sold
Inventory turnover
Prior Year
Amount
Current Year
Amount
_______________ _______________
_______________ _______________
_______________ _______________
_______________ _______________
_______________ _______________
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C. Investments
1. Summarize the accounting principles used by the firm to account for
marketable securities.
2. Complete the following table: Marketable Securities
Prior Year Current Year
Cost ______________ ______________
Market value ______________ ______________
Book value ______________ ______________
4. Complete the following table:
Prior Year
Book value of long-term investments in MS ____________
Book value of equity investments ____________
Market value of equity investments
(use year-end stock prices)
____________
Income reported for equity investments. ____________
Current Year
____________
____________
____________
____________
D. Property, Plant and Equipment:
1. Summarize the accounting principles used by the firm to account for
property, plant and equipment.
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2. Complete the following table:
Depreciable fixed assets
Non-depreciable fixed assets
Depreciation expense
Total assets to total assets
Percent of total fixed assets
Prior Year
_____________
_____________
_____________
_____________
Current Year
_____________
_____________
_____________
_____________
_____________ _____________
E. Intangible Assets:
1. Does the annual report balance sheet indicate an amount assignable to
intangible assets or assets that you know to be intangible in nature?
If yes, complete the following items.
2. Complete the following table. Break out the intangibles by type. Be sure to
provide totals.
Intangible Method of Prior Year Additions/ Current Year
Item Amortization Dollar Amount Reductions Dollar Amount
3. What is the percentage of intangible assets to
total assets?
If yes, complete the following items.
________________
F. Long-Term Liabilities
1.Does the annual report balance sheet indicate that the firm has long-term
obligations?
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2. Complete the following table for the five largest long- term obligations.
Description of Is the Debt Identify Interest --- Amount ---
Obligation Secured Collateral Rate Beg/Yr End/Yr
G. Income Taxes
1. What was the effective average tax rate, given the reported tax expense, on corporate earnings:
For the current year? ___________
For the prior year? ___________
If the difference between last year and this year's effective average tax rate was > 5 percentage points(say 50% to 45%), provide an explanation of the difference.
2. What was the effective average tax rate, given taxes paid, on corporate
earnings
For the current year?
For the last year?
__________
__________
3. In comparing the taxes paid with tax expense for both last year and this
year, a difference would suggest that taxable income was not equal to
financial statement income. Report the following:
LastYear
Current taxes (per income statement) __________
Deferred taxes (per income statement) __________
Estimate the amount of tax actually paid __________
This Year
__________
__________
__________
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If deferred taxes were zero for both years, ignore the remaining items. a. To what specific event(s) can you attribute the
deferred tax items for both years? b. The balance sheet account(s) related to deferred
taxes were:
Deferred Tax Assets
Deferred Tax Liabilities
Prior Year
____________
____________
Current
Year
____________
____________
Explain what caused the increase or decrease.
H. Leases (lessee only)
1. Capital Leases: a. What is the total capital lease debt? b. What is the % of total capital lease debt
to total debt? c. Complete the following for assets under capital leases.
(1)Land
(2) Buildings
$ Gross Accumulated Net
Value Amortization Book Value
__________ __________ __________
__________ __________ __________
(3) Machinery &
Equipment
(4) Other
(specify)
__________ __________ __________
__________ __________ __________
Increase
(Decrease)
____________
____________
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2. Operating Leases: a. What is the total commitment (minimum annual fixed rental
payments) under non-cancelable operating leases? b. What is the % of operating lease rental payments to
total revenues? c. What is the present value (use a 12% rate) of the commitments under
non-cancelable operating leases for the next five years? d. What is the percentage of (c) above to total assets.
I. Pensions
1. Does the firm offer a pension plan? YES NO
If yes, identify the type of plan:
Defined benefit plan _____ Defined contribution plan _____
Other (describe) _____
2. Identify the actuarial cost method used. ___________
3. a. What is the accumulated benefit obligation? _______________
b. What is the projected benefitobligation? _______________
c. What are the plans' net assets available for benefits? _______________
d. What is the accrued pension expense liability or prepayment
reflected in the balance sheet? _______________
J. Stockholders Equity
1. Complete the following table:
Shares Total Paid Shares
Outstanding In Capitals Stock Class Authorized
Beg. of Yr
End of Yr
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J. Stockholders Equity (continued) b. What method does the company use to account for treasury
stock?
________ Cost
________ Par
________ Other (describe)
4. Summarize the EPS statistics as follows: a. Basic
Earnings before extraordinary items
Extraordinary items, net of tax
Effect of accounting change,
net of tax
Prior Year Current Year
Net earnings b. Diluted
Net earnings
6. Did the company report cumulative comprehensive income? If so, what
types of items contributed to the difference between net income and
comprehensive income. Also, how was the change in comprehensive
income for the year presented.
K. Segment Reporting
Does the company report segment information?
List the operating segments disclosed and list the information disclosed for each segment.
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L. Interim Reporting
1. Are quarterly results of operations reported in the annual
report? YES NO
If yes, complete the following:
Operating Revenues
Operating income
Net income (loss) lst Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
_________ _________ ________ ________
_________ _________ ________ ________
_________ _________ ________ ________
M. Accounting Changes
1. Did the company report a change in accounting principle for either of the years? YES NO
If yes, complete the following:
2. Briefly describe the nature of the accounting change.
3. The company used the
_______ a. current approach.
_______ b. retroactive approach to record the effects of the accounting change.
4. The effect on current year net income was a. in dollars? Net income before $ __________
Net income after $ _____________ b. in percentage of effect to net income _________
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