Course Project for GB 112
Exploring Financial Statements
Spring 2014
The purpose of this project is for you to explore the 10-K of a company, and to become familiar with its
industry. This will enable you to learn about the financial health of your company.
The due date is listed in your syllabus.
TRAINING REQUIRED:
1. Trading Room
Some tasks will require you to use the Trading Room to gather data. To assure that every
student has a working knowledge of the Trading Room resources, each student is required to
attend the FactSet mini class specifically for GB 112. Remember: if you do sign in for the
Trading Room Session, you will not get credit for this part of your grade (please see the
syllabus for further details).
The mini classes are taught by Trading Room assistants. For a list of upcoming classes,
please visit the Hughey Center web site (http://www.bentley.edu/trading-room/). Separate
instructions for signing up for these sessions will be provided on the Allsections Blackboard
site. Please note: many students wait until the last minute to sign up for the mini classes.
Make sure that you check the cutoff date for signing up for a session. The Trading Room has
a limited capacity – it’s in your best interest to sign up for and attend the mini classes early
in the semester to insure there is a seat available for the session you wish to attend! Bring a
copy of this assignment and financial statements of your company to the Trading Room
session. You should also bring your laptop with the complete 10-K file for your company. If
possible, try to attend the session with the other members of your team.
2. Library
You are required to complete three online tutorials (about 10-15 minutes each) covering
library research as it specifically pertains to your course project. Your participation in these
tutorials will be tracked, and you will be required to complete a quiz upon the completion of
each tutorial. Please see the “Library” tab on the GB 112 Allsections Blackboard site for
more detailed information regarding due dates and the grading of this assignment.
Remember: if you do not complete these in accordance with the guidelines, you will not
get credit for this part of your grade (please see the syllabus for further details).
ASSIGNING TEAMS: For this project you will work in a team of three students, which your
instructor will assign. The team is required to submit a Team Contract and Work Plan to their
professor. These are due in class 13. Remember: if you do complete these, you will not get
credit for this part of your grade (please see the syllabus for further details).
Each member of the team will also need to fill out a "peer evaluation" form at the midterm and
the end of the project. The result of these evaluations will be incorporated into the grade for the
course project. We encourage you to use the strategies covered in class regarding teamwork to
help develop a strong team, with balanced participation.
REQUIRED RESEARCH: Your instructor will determine the company that your class will
study. As part of this project, you and your team should follow current events that relate to your
1
company and its industry. Use current issues from the financial press, such as The Wall Street
Journal, Business Week, Fortune, and Forbes, to monitor relevant developments. The project
provides a place for you to cite an article that you found about your company.
ACADEMIC HONESTY: See the Academic Honesty Policy for GB 112 on the Allsections
Blackboard site for guidelines on appropriate conduct. You may not work with anyone other
than your team members on this project. All team members are responsible for work that is
submitted by their team. The Trading Room resources and Trading Room assistants are available
to help you find the information you need to complete this assignment, not to help you answer
specific assignment questions. If you have any questions, contact your instructor.
Plagiarism is not just copying and pasting (though copying and pasting IS plagiarism). You need
to summarize your article and industry information in your own words; try to connect ideas from
different parts of the sources you are reading. By citing your sources in APA format (please refer
to the Citing Source guide in the library tutorials or http://libguides.bentley.edu/citingsources)
you let your reader know where you got that information so that they can go check out the
original source themselves. By doing your own original work on this assignment, and not
copying others’, you will learn more and do better in your classes.
ASSIGNMENT FORMAT: We expect you to use a word processing program to complete all
your assignments and to use a writing reference book. Since you have been provided an
electronic version of this assignment on the GB 112 AllSections Blackboard site, please modify
the “Header” on the document and insert your names and your section number in the space
provided. Then, insert your answers in this document immediately after each question and print
out the completed assignment. Please remember that the presentation of your work (appearance,
grammar, syntax, typographical errors, etc.) reflect your ability to communicate as a business
professional and will be taken into consideration when your grade is determined. When you use
outside sources such as library databases and articles, you must cite those sources both within the
project, and in a list of “Works Cited” at the end of the project. Use APA format to cite your
sources.
This entire assignment will comprise 15% of your total course grade. A penalty of ten points per
calendar day will be assessed for assignments turned in late. The assignment is considered late if
it is not handed in during your class time. Electronic submissions will only be accepted if this
type of submission is pre-approved by your respective professor. Each team member should
keep a copy of the submitted assignment.
2
Students’ Names:__________________________________________________
Section: _______________
GB 112 Course Project
To obtain the most recent and complete 10-K for your assigned company, go to the
company website and click on the investor relations tab; next click on SEC filings tab.
Find the most recent 10-K. The 10-K is the Annual Report (AR). Be sure to check with
your instructor to make sure you have the 10-K for the correct year end. If you do not
find the complete 10-K on the company website, you should check the library database
Morningstar. Check with your instructor if you have any question as to whether or not
you have the correct report for the correct year. Be careful that you are not getting
summary data or generalized data compiled by organizations such as Compustat. Unless
otherwise specified, all answers must come from the 10-K.
1. What is the exact name of your company? What is the ticker symbol for your company,
on what stock exchange(s) does it trade, and when is the company’s fiscal year end? How
many shares does your company have outstanding at the end of the company’s most
recent fiscal year end as shown on the Balance Sheet and/or Statement of Retained
earnings and/or Notes to the Financial Statements? What is the company’s market
capitalization at the end of the fiscal year? (Note: Compute the company’s market
capitalization by finding the shares outstanding at year end in the AR and the price per
share at year end from a Trading Room source).
2. What industry is your company in? What is its primary NAICS code? What is its primary SIC
code? What products does it sell that leads you to believe that it belongs in this industry? Using
FactSet, generate a list of six competitors that compete most directly with your firm and list
them. If fewer than six are listed, use all companies listed. Choose and label the major competitor from this list of six. Explain why you chose this company as the major competitor.
3. Find an article relating to your company, from the financial press:
The article must:
have been published within the last 12 months.
have a listed author.
be over 300 words.
This article should provide meaningful information to a potential investor in your
company, and not simply, for example, a list of stock performances on a single day. Use
one of two library databases: Business Source Premier or ABI/Inform. Your article should
be published in a publication categorized by that database as a Magazine, Newspaper,
Trade Publication, or Trade Journal. Do not use business wires, press releases, blogs,
announcements, or short pieces. This is an important step to identify the major issues
facing your company now and in the future. Refer to the library tutorials for additional
guidance.
3
List the article as a citation in APA format. Write a paragraph on why you chose this
article and how it would help a potential investor make a decision. Attach a copy of the
article. Refer to the library tutorials for additional guidance.
4. Use the library’s resources on industry information to answer the following questions. Suggested
databases to start with are: Standard & Poor’s NetAdvantage, IBISWorld, and Business Source
Premier (click on “Industry Profiles” in the right hand column). You will find more databases
under the “Companies & Industries” section of the library’s databases. Look up your industry by
name or NAICS/SIC code.
Using bullet points:
 Identify and explain two trends that are currently developing in your company’s industry.
 What types of regulations affect this industry?
 List several characteristics of this industry’s most frequent customers.
5. Using the 10-K, show that the fundamental accounting equation, Assets = Liabilities +
Stockholders’ Equity, is true for your company at the end of the most recent year-end.
Assets
Liabilities
Stockholders’ Equity
__________
__________
__________
6. In the 10-K, you will find footnotes to the financial statements. Thoroughly read the first
(or second) footnote, which is usually called “Summary of Significant Accounting
Policies.” Summarize any portions of that footnote that describe the company’s policies
about recording revenues, uncollectible accounts, inventory and depreciation. Focus on
when and/or how revenues are recorded, and the methods of accounting for uncollectible
accounts, inventory and depreciation.
7. Find and read the “Report of Management Responsibilities” or “Certification of Chief
Executive Officer/Chief Financial Officer” (or similarly titled report) found in the
company’s 10-K. These reports are required by the Sarbanes-Oxley Act. Who signed the
report? Summarize the responsibilities management assumed regarding financial
statements and internal controls based on this report. Do not copy what is written in the
certification letter.
8. Find and read the “Report of Independent Registered Public Accounting Firm” (or
similarly titled report) in the 10-K. Who are the auditors of your company and what type
of opinion did they issue? (unqualified, unqualified with modified wording, qualified,
adverse or disclaimer). What is the interpretation and significance of this type of opinion?
Summarize the responsibilities the auditors assumed regarding the financial statements
and internal controls based on their report. Do not copy what is written in the report.
4
9. As part of the GB 112 course, you attended a demonstration of the Sage System.
Although it is unlikely that a system this small would be used in a publically traded
company, assume that your team includes the CEO and CFO of a company that uses the
Sage System to produce their financial statements and that your company has to comply
with the Sarbanes-Oxley Act. You are in the process of reviewing the system in order to
render an opinion on the internal controls over the financial reporting system (refer to
question 7 for an example of this type of opinion).
Choose two different specific internal controls strengths and two different internal control
weaknesses that you observed during the Sage Demonstration and complete the following
tables regarding them:
Example (you cannot use the Control Strength in this example)
Description of Control Strength
The Sage System allows you to set up a list of
authorized users, and you can restrict their access to
the system. For example, you could segregate duties
by giving an employee who handles cash only read
access to the system, but no ability to change a
transaction.
Objective Achieved
Ensure accurate, reliable accounting
records.
Description of Control Strength
1.
Objective Achieved (see list below)
2.
Description of Control Weakness
Objective that will not be achieved
as a result of this weakness (see list
below)
1.
2.
5
The objectives of the system of internal controls are to:
i. Safeguard assets
ii. Encourage employees to follow company policy
iii. Promote operational efficiency
iv. Ensure accurate, reliable accounting records
v. Comply with legal requirements
10. 10-Ks generally include a summary of financial data for the last 5- or 10-year period. Use
Excel (or a similar spreadsheet program) to prepare three separate graphs of the following
data that can be found directly in the financial summary or can be calculated from data
that are provided in the summary. Use a line graph to illustrate the trends in these items.
In a separate area, or on the graphs, clearly indicate the numerical values used in each
graph. If the data for all the years needed are not in the current 10-K, you may have to
access prior year 10-Ks.
a) Net Income for the past 5 years
b) Sales for the past 5 years
c) Stock Price per share for the last 3-5 years on a daily basis (use FactSet rather
than the 10-K for this information.)
11. Use “FactSet Estimates” to find the annual Earnings Estimates for your company and the
mean consensus recommendation.
 Is the predicted earnings trend increasing or decreasing?
 Have the analysts recently revised their predictions upward or downward; do they
expect a large earnings growth or very small?
 What is the consensus recommendation and what does it mean? (Note: Describe
how the consensus recommendation is calculated, the scale used and the definition
of each number in the scale.) For your company give the actual number in the
scale and explain what the number means. Please provide the source of your
consensus recommendation.
12. Look at the Statement of Cash Flows from the 10-K. What is the cash flow generated (or
used) from Operating Activities? __________________
What does this indicate about the financial health of the company?
13. Based on all the information you gathered throughout this project and what you have
learned in GB 112, would you buy this company’s stock today? Why or why not? Your
response should be approximately one page, double-spaced and in your comments,
specifically reference:
a) information obtained from the article listed in question 3.
b) information on the industry obtained in question 4.
c) the graphs prepared in question 10.
d) information obtained from questions 11 and 12.
6