ACCT321 – Financial Accounting, Financial Statement Analysis Project
SUMMARY - The purpose of this Financial Statement Analysis Project is to use the information that you’ve studied
this quarter to perform financial statement analysis of real companies. Students will be divided into teams (see end
of this document). Teams will research several similar public companies of their choice and perform a financial
analysis comparison. Each team member will submit a written report (worth 40 points) about her/his chosen
company following the instructions below. The written reports are due no later than midnight on Wednesday, Dec.
9. In addition, each team will give a short presentation to the rest of the class (worth 30 points) that will
compare/contrast the companies selected. Presentations are scheduled for Monday, Dec. 7. Teams will present in
the order listed at the end of this document.
SELECTING YOUR COMPANIES - Each team will choose an industry that it thinks will be interesting to study (e.g.
retail, pharmaceutical, airlines, auto, consumer products, services, etc.). Because of the peculiar and complicated
nature of financial service firms, do not pick any banks, insurance or investment companies. In addition, avoid utility
companies since they also have weird financial statements. Each member of the team will select a large public U.S.
company (one whose stock is traded on the NYSE or Nasdaq markets) that is in the same industry as the companies
selected by the other team members. The companies selected need to be similar enough that they would be
considered competitors. For example, if a team selected the airline industry, one team member might pick Alaska
Airlines, another Southwest, another United, and still another maybe American Airlines. Or, suppose a team selects
the clothing retail industry; one team member may pick GAP, another American Eagle Outfitters, another
Abercrombie & Fitch, and still another Lands End. (FYI: at http://finance.yahoo.com, once you’ve entered the ticker
for one company, you can click on Competitors to get a list of similar companies. Or you can use the Sector
Summary at http://finance.google.com/finance). One last word of advice: avoid selecting non-U.S. companies, such
as Toyota, Nissan, Volkswagen, etc. because you will not be able to find all the information needed.
WHERE TO FIND YOUR INFORMATION – Once you have selected your company, you should be able to find all the
information you need about the company on the internet. Start with http://finance.yahoo.com or
http://finance.google.com/finance or www.forbes.com or www.businessweek.com or http://money.cnn.com/ or
http://moneycentral.msn.com/home.asp. Eventually, you will want to access the company’s annual report from the
company website (usually under About Us or Investor Relations, etc.). The annual report can either by the colorful
report issued by some companies or the black/white report (Form 10-K) submitted to the SEC every year. Form 10-K
can be accessed either from the company’s website or from the SEC EDGAR database (follow the SEC Filing link from
a web-portal such as Yahoo or Google finance).
Written Assignment
The written part of this assignment, which is worth 40 points, must be done on a word-processor, such as Word. It
is due no later than Wednesday, Dec. 9 at mid-night. Short bullet-point answers are encouraged. You can use Excel
to prepare tables and charts and then paste them into Word. Each team member must submit (via email) a separate
written report about her/his own particular company.
1. Identification Information. (A) Company name, (B) Company ticker symbol, (C) Exchange or market where
stock is traded (NYSE or Nasdaq), (D) Brief summary of company’s products/services (see
http://finance.yahoo.com under Profile), (E) Date of latest fiscal year end, (F) Number of members on the
board of directors (see annual report) (G) The largest stockholder (person or institution who directly owns
the most stock -- see http://finance.yahoo.com under Major Holders). (H) The percent of stock owned by all
insiders/5% owners and by institutional/mutual fund owners? (see http://finance.yahoo.com under Major
Holders). (I) The total number of full-time employees (see http://finance.yahoo.com under Profile). (J) The
city/state where the company has its headquarters (see http://finance.yahoo.com under Profile.)
2. Market Information. Information for this section can be found at http://finance.yahoo.com, using the
Charts and Key Statistics links. (A) Find and record the approximate all time high and low stock prices in the
last decade; (B) Paste a line graph here that shows the stock price over the maximum period available (if you
have a PC, you can use the Windows Snipping Tool); (C) paste in another similar line graph but this time
comparing the stock with the S&P500 index; (D) record current annual dividend amount and yield (if any);
(E) # of common shares authorized, issued and outstanding (note: you may need to get the actually annual
report for this information – not Yahoo’s version); (F) date and description of any stock splits in the last five
years (see Interactive Chart at http://finance.yahoo.com ); (G) par value of common & preferred stock, if any
(note: you may need to get the actual annual report for this information from the company’s website – not
Yahoo’s version).
3. Report of Independent Auditors. Information for this section can be found by accessing the company’s
latest annual report from its website (just Google “XYZ annual report”) or by finding the SEC Form 10-K (see
http://finance.yahoo.com under SEC Filings). Look for the Report of Independent Registered Accounting
Firm. (A) Who are the auditors? (name of auditing firm) (B) Did the auditors give an unqualified or
unmodified (clean) opinion? (C) How long after fiscal year end did it take for the company to finish their
financial statements and the auditors to complete their audit (see audit report date)?
4. Ratio Analysis: For the latest fiscal year, calculate all the ratios listed in Illustration 5A-1 (p. 246) of your
text. It would be best if you did this in an Excel table. Note the following observations:
(1) Not all 17 ratios might necessarily apply to your company (e.g. dividend payout ratio wouldn’t apply if no
dividends were paid, etc.).
(2) Some terminology may differ from your text. For example, sales or net sales would be the same as total
revenue. You can assume that all these sales are credit sales. Cost of goods sold is the same as cost of
revenue. Net cash provided by operating activities is the same as total cash flow from operating activities.
(3) You can find the total number of shares outstanding by going to http://finance.yahoo.com, under Key
Statistics look for Share Statistics section.
(4) You should not calculate the price-earnings and earnings-per-share ratios but rather look them up at
http://finance.yahoo.com (see Key Statistics, Trailing P/E, and Diluted EPS).
5. Statement of Cash Flows: For each of the three latest years, prepare a table showing total cash flow from
operating activities, investing activities, financing activities and net change in cash. For each year, comment
on whether you think the cash flows are normal and healthy and discuss whether the three-year trend in
cash flows is positive.
Example:
Statement of Cash Flows:
Net cash flows from operating activities
Net cash flows from investing activities
New cash flows from financing activities
Net change in cash balance during year
20X5
20X4
20X3
6. Evaluation: Based on the data gathered above, intelligently assess in words your company’s:
(A) liquidity (ability to pay current bills and manage working capital)
(B) activity (ability to manage assets such as receivables and inventory)
(C) profitability (return to investors)
(D) coverage (long-term solvency base on ability to pay principal and interest on debt)
(E) market value (ability to create value for stockholders). To assess market value, use the stock graphs and
the following three figures: total market cap, price/earnings, and market-to-book (or price/book) ratios. Do
not calculate these figures because they are constantly changing -- rather look them up at
http://finance.yahoo.com. See Key Statistics, Market Cap, Trailing P/E, and Price/Book.
Presentation
Each team should plan to give a maximum 10-minute presentation to the rest of the class on Monday, Dec. 7. The
presentations are worth 30 points. You might lose points if your presentation goes for more than 10 minutes. Each
team member should participate in the presentation. Team #1 will start . . . and so forth. You must use PowerPoint
or some other presentation software. Divide your presentation into three sections:
1. First, very briefly introduce the companies that are included in your group by completing a table similar to the
one below, which describes what the companies do and compares their size in terms of total sales/revenue, total
assets, total employees, and total market cap. You may considering using pictures/videos of the products/services,
logos, etc. to make your company descriptions interesting.
EXAMPLE:
Main Product/Service
Total Sales/Revenue
Total Assets
Total Employees
Total Market Cap
Company #1
Clothing/Shoes
$5.3 billion
$30.6 billion
10,000
$40 billion
Company #2
Clothing/Shoes
$4.1 billion
$20.2 billion
7500
$30 billion
Company #3
Clothing/Shoes
$1.2 billion
$6.8 billion
3000
$15 billion
2. Next, prepare a table similar to the one below which compares/contrasts your conclusions for each company in
the five areas listed (see Step 6 A-E above). Assign each company a grade of A or B or C etc. in each of the five areas
of liquidity, activity, profitability, coverage, and market values. Letter grades would reflect the same meaning as
letter grades given to students. Calculate the company’s GPA (A=4, A-=3.7, B+=3.3, B=3, B-=2.7, C+=2.3, C=2,C-=1.7,
D+=1.3, D=1, D-=.7, and F=0).
EXAMPLE
Liquidity
Activity
Profitability
Coverage
Market Value
Overall GPA
Company #1
B+
B
CB
D+
2.4
Company #2
AA
AB
B3.4
Company #3
B
CDC
F
1.5
3. Finally, your team should come to a consensus about which of the companies analyzed by your team would be
the best long-term investment (e.g. which company would perform the best over the next decade in terms of profit
and stock price). Example: We believe Company #2 is in the best position for superior performance over the next
decade because . . . . Your rationale should be informed, intelligent, and persuasive.
Make the presentation creative and interesting. I suggest that you save your material on a USB stick or thumb drive
so you can load your presentation quickly. You could also login to your email address in order to retrieve your file
but this may waste some time. Each team will be evaluated by the instructor using the following criteria:
creativity/originality, organization/coherence, knowledge/familiarity about subject, and presentation skills.
Team 1
Team 2
Team 3
Team 4
Team 5
Kaelin
Cassie
Brad
Justice
Ryan
Spencer
Kari
Olivia
Jake
Isaac
Haley
Erick
Matthew
Timothy
Adam
Tyler M.
Aaron
Austin
Michael P.
Team 6
Michael R.
Tyler S.
Chad
Team 76
Emmalee
Alex
Kiefer