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:
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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).