WRITING ASSIGNMENT The primary purpose of this assignment is to help students gain a better understanding of corporate annual reports. This is a group assignment. You should have four to five students to a group. In the event you have not found a group to work with, you may do the project as a group of one. Each question (A to P and 1 to 18) must be answered individually. Do not combine the answers in an essay format. Type the question first, followed by your response. Please review “Guide to Understanding Basic Financials” before starting to respond to the questions A to H. This guide can be accessed at http://www.ibm.com/annualreport/2004/annual/guide_whatis.shtml#chair .Once at this site read the explanation on the annual report to respond to the following questions: A. What is an annual report? B. Name the federal government agency that requires a publicly held corporation to keep shareholders informed of its state of business. C. What is the purpose of auditing financial statements? D. What is the name of rules and regulations used to prepare financial statements? E. Name two other primary financial information sources. F. What type of information is provided in the statement of earnings (also called income statement or profit and loss statement)? Please be as brief as possible. G. What type of information is provided in the statement of financial position (also called balance sheet)? Please be as brief as possible. H. What type of information is provided in the statement of cash flows? Please be as brief as possible. Next, please visit http://www.sarbanes-oxley-101.com/sarbanes-oxley-TOC.htm to respond to questions I to L I. Briefly explain the purpose of Public Company Accounting Oversight Board (PCAOB). J. Under the new rules of the Sarbanes-Oxley Act of 2002, to whom does an auditor report? K. What caused the new rule to be created? L. Under the new rules of the Sarbanes-Oxley Act of 2002, name eight types of services that are "unlawful" if provided to a publicly held company by its auditor. You may then go to the Securities and Exchange Commission (SEC) site at www.sec.gov to answer questions M to P. M. N. O. P. What is the mission of SEC? How many commissioners does SEC have and who appoints them? How many divisions and offices does SEC have? Briefly explain the difference between the Securities Act of 1933 and the Securities Exchange Act of 1934. Select a 2007 annual report of a publicly held corporation. You may download an annual report from www.annualreports.com or by visiting the company’s home page. The company’s annual reports and 10-K form will be necessary to answer the questions listed below. Please note that 10-K form does not replace the use of the annual report; it merely supplements it. Review your company’s annual report to answer questions listed below. Internet access is necessary to respond to questions 1 to 9. 1. What is the address of the company’s website? 2. When was the 2007 annual shareholders’ meeting? 3. Where was the 2007 annual shareholders’ meeting? 4. Who is the corporation transfer agent? 5. Where is the agent located? 6. What is the company’s stock ticker symbol (Sym)? 7. Go to http://finance.yahoo.com, type in the company’s ticker symbol to obtain, print, and state the closing price of the common stock. You may choose any day you wish in this academic quarter to report the closing price. 8. Click on the company link in the “Symbol” box to obtain, print, and state the 52-week range. 9. State the stock market on which the company’s stock is traded. Go back to the 2007 annual report to respond to the questions below. 10. When does the company’s fiscal year end? 11. What is the name of the Certified Public Accountant that audited the annual report? 12. What goals, objectives, and predictions are expressed in the “Letter to the Stockholders?” Chapter 17, “Financial Statement Analysis”, must be reviewed in order to answer the ratio questions. 13. 14. 15. 16. What is the company's Current Ratio? What does it express? What is the company's Working Capital? What does it express? What is the company’s Acid-test (Quick)? What does it express? What is the company's Accounts Receivable Turnover?--use “Total Revenue” (instead of net sales on account) as the numerator. What does it express? 17. Prepare a horizontal analysis, similar to illustrations on pages 849 to 852 of your textbook for the following items in the balance sheet: Current Year Increase (Decrease) Amount Percent Previous Year Total Current Assets Property and Equipment (net) Total Assets Total Current Liabilities Total Liabilities Total Stockholders’ Equity 18. Prepare a vertical analysis in relation to sales, similar to illustrations on page 852 to 854 of your textbook (total revenue as the denominator) for the following items in the income statement. Previous Year Current Year Amount Total Revenue (Also called Total Net sales) Total Cost of Sales (also called Cost of Goods Sold) Percent 100% Amount Percent 100% Gross Profit (also called Gross Margin) Research and Development Selling, general, and Admin. Expenses Interest and other income (loss), net Income Tax Expense* Net Income (Loss) *Please note: Income Tax Expense is the same as Provision for Income Taxes. Recommended steps to follow in order to complete the assignment: 1. 2. 3. 4. 5. 6. Meet with your group, with everyone there, at least 2-3 times in the quarter. Set deadlines for these meetings and goals for what will be accomplished by the time you leave the library. Use library periodicals to find articles on your company. Divide the questions up among the group. Meet with your group to read chapter 17 and answer questions on ratios and financial analysis. Five brains work better than one, so take advantage of all of that brainpower! Type a rough draft of the assignment using a word processing software and have everyone in the group read it over. Then have someone else read it. Check for spelling and grammatical errors. Set a deadline for this to be completed. Edit the report and again proofread this copy, as it should be error free and presented as professionally as possible. NOTE: If there is a member of your group who does not seem to be contributing his/her fair share of the workload (examples: never shows up to meetings, has never really contributed his/her agreed share of research), inform the person of your observations. Make it clear to him/her that his/her contribution is necessary and s/he needs to reliably participate if s/he wishes to stay in the group. If the person simply fails to contribute after that, document your communications with him/her and drop him/her from your group. Do not allow shortcomings of another individual to affect your grade. Support responses to these questions by writing next to each answer the annual report page number where you obtained the answer. If you have used a downloaded copy of the annual report, make sure it is manually numbered so you can write the page number next to each answer. Each group must turn in a packet that includes three items: 1) answers to each individual question (do not combine answers), 2) select pages of company's 2007 annual report which include the financial statements which provided the basis for your analysis(DO NOT PRINT THE WHOLE ANNUAL REPORT!), 3) a printout of stock/bond prices (questions 7 and 8).