ACCT 2300 Internet Project, Spring 2010
14 points (minimum 2 people, maximum 4 people per group)
Note: this grade is a separate component of your homework grade, and cannot be dropped.
Due on the last day of class, May 4.
Section 1. Your group should choose a pair of companies from the same industry. If you have no particular interest, I
have suggested some companies below. You will be asked to perform calculations for your selected pair of companies
for the most recent fiscal year. Use the ratios as displayed and illustrated in the Walmart example posted to my
web page. (You may need to use the prior year’s information for certain ratios requiring “averaged” numbers).
Additional information for the selected ratios indicated on the next two pages may be found in the electronic version of
the Porter/Norton text, Chapter 13, pages 667 – 677 (found in the STUDY TOOLS tab/ebook section of your
CengageNOW account).
Suggested pairs of companies:
You may use one of these pairs below, or pick your own pair, as long as the two are in the same industry.
FedEx (FDX)
UPS (UPS)
Barnes and Noble (BKS)
Borders (BGP)
Home Depot (HD)
Lowe's (LOW)
H. J. Heinz (HNZ)
General Mills (GIS)
Apple (AAPL)
Microsoft (MSFT)
Southwest Airlines (LUV)
Jet Blue Airways (JBLU)
Note that the capital letters indicated to the right of each name are called the "SYMBOL" (used by Yahoo Finance)
and can be used to find the companies in the data base discussed in the next section.
Section 2. Locate the financial statements. Once you have found your pair of companies, you may locate the
financial statements by going to http://finance.yahoo.com (this web page can also help you select your companies);
you may use another financial resource if you prefer. Yahoo Finance is just one source of financial information, but
very user friendly, especially for beginners. All of the detailed instructions below are given for Yahoo Finance.
At the top of the Yahoo Finance web page, it has a box to the left of “Get Quotes”. You can use the capital letters in
parentheses next to each name to find each of your firms, or just type in the company name.
The calculations for Wal-Mart (WMT) for 2009 (prior year) are illustrated in a separate file; you should use this
example to calculate your ratios for the most recent year for each of your 2 selected companies.
At the top left of the Yahoo Finance page, enter WMT where it says “Get Quotes”, then click "Get Quotes".
On the Wal-Mart page, go to the column of information on the left side of the page (down to the bottom), and click on
"Income Statement" in the "Financials" section. This should give you the annual income statements for the past 3
years (make sure it shows 3 years – NOT 4 quarters). Just print that page (click on the printer icon at the top of the
page, or go to "File", "Print").
Now you need to switch to the balance sheet by clicking on "Balance Sheet" in the left column of information (just
below the "Income Statement" link). After the annual data comes up, print the annual balance sheets, then do the same
to get the annual statements of cash flow.
Section 3. Once you have the annual balance sheets, income statements and statement of cash flow for your 2
companies, you are ready to calculate the ratios indicated on the next 3 pages, and answer the indicated questions.
(Attach the next 6 pages to the front of the printed financials for the two companies you analyzed.)
Names (maximum of 4 per group)
_______________________________________
___________________________________________________
_______________________________________
___________________________________________________
The first three pages are your answer sheet, and should contain the results of the ratio calculations on the last 3 pages. Include all
the pages and show all your calculations on the attached sheets.
Company A
Company B
Name:__________________
Name:___________________
Liquidity Ratios:
Current Ratio
_________________
__________________
Acid Test Ratio
_________________
__________________
Cash Flow from Operations to
Current Liabilities Ratio
_________________
__________________
Accounts Receivable Turnover
_________________
__________________
Inventory Turnover
_________________
__________________
Based on your analyses above, which of the firms has better liquidity and efficiency ratios?
Firm A?___
Firm B?____
No clear indication_____
In a few short sentences (using correct grammar), explain your analysis below, including a discussion of which ratios were better
for Firm A, and which ratios were better for Firm B. (Which ratios led you to your conclusion?)
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
Show your calculations for all of the ratios on pages 4 - 6.
Helpful Hints (PLEASE READ):
Remember that, whenever you need to calculate an AVERAGE value, you should go to the balance sheet and get the value for the
end of the current year and the end of the previous year, add them together, then divide by 2. For example, to calculate Average
Accounts Receivable:
(A/R at the end of the current year + A/R at the end of last year) / 2
For the Inventory Turnover ratio: If no inventory, just note N/A (not applicable)
In Yahoo Finance, COGS is the same as "Cost of Revenue".
For the Receivables Turnover ratio: use "Total Revenue" since net sales is not available.
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Solvency Ratios:
Debt to Equity Ratio
_________________
__________________
Times Interest Earned Ratio
_________________
__________________
Cash Flow From Operations to
Capital Expenditures Ratio
_________________
__________________
Based on your analyses above, which of the firms has better solvency ratios?
Firm A?___
Firm B?____
No clear indication___
In a few short sentences, explain your analysis below, including a discussion of which ratios were better for Firm A, and which
ratios were better for Firm B. (Which ratios led you to your conclusion?)
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
Show your calculations for all of the ratios on pages 4 - 6.
Helpful Hints (PLEASE READ):
For Times Interest Earned Ratio, all information is available on the current income statement.
For Cash Flow from Operations to Capital Expenditures Ratio, all information is available on the current cash flow statement.
- Cash flow from operating activities in the Operating section (if negative, carry the negative amount to the ratio).
- Capital expenditures in the Investing section (should be a deduction – just carry the absolute value to the ratio).
- Dividends; IF there are any cash dividends, the easiest place to find them is in the Financing section (they will show up
as a deduction in the financing section; just carry the absolute value to the ratio).
2
Profitability Ratios:
Return on Sales
_________________
__________________
Return on Assets
_________________
__________________
Return on Common Stockholders’ Equity
_________________
__________________
Based on your analyses above, which of the firms has better profitability ratios?
Firm A?___
Firm B?____
No clear indication___
In a few short sentences, explain your analysis below, including a discussion of which ratios were better for Firm A, and which
ratios were better for Firm B. (Which ratios led you to your conclusion?)
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
____________________________________________________________________________________________________
Show your calculations for all of the ratios on pages 4 - 6.
Helpful Hints (PLEASE READ):
Ignore any tax effects in your ratios (like return on assets and return on sales).
For the Return on Assets ratio: Ignore interest and taxes. Calculate average total assets like you calculated average receivables
(using the last year’s total assets combined with the current year’s total assets to get an average).
For the Return on Sales ratio: use "Total Revenue" since net sales is not available. Ignore interest and taxes.
For the Return on Common Stockholders’ Equity ratio (you may want to wait until after Chapter 11 to attempt this ratio):
If Preferred Stock is not listed (with a value) in the stockholders’ equity section of the balance sheet (the majority of companies
have not issued preferred stock), your ratio collapses to the following:
Net Income
Average Stockholders’ Equity (where the average is calculated in the same fashion as other averages)
If Preferred Stock IS listed with a value in the stockholders’ equity section of the balance sheet, you will need to deduct the total
par value of preferred stock from total stockholders’ equity (for each year), before calculating the average common stockholders’
equity.
If preferred stock is listed, you may assume that preferred dividends are zero, unless specific information is given about these
dividends (Yahoo Finance has limited disclosure on this component).
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Calculation Sheets
(pages 4 through 6)
Liquidity Ratios:
Current Ratio
Firm A:
Firm B:
Acid Test Ratio
Firm A:
Firm B:
Cash Flow From Operations to
Current Liability Ratio
Firm A:
Firm B:
Accounts Receivable Turnover
Firm A:
Firm B:
Inventory Turnover
Firm A:
Firm B:
4
Solvency Ratios:
Debt to Equity Ratio
Firm A:
Firm B:
Times Interest Earned Ratio
Firm A:
Firm B:
Cash Flow From Operations to
Capital Expenditures Ratio
Firm A:
Firm B:
5
Profitability Ratios:
Return on Sales
Firm A:
Firm B:
Return on Assets
Firm A:
Firm B:
Return on Common Stockholders’ Equity
Firm A:
Firm B:
NOW ATTACH BALANCE SHEET, INCOME STATEMENT AND STATEMENT OF CASH FLOW FOR EACH OF
YOUR FIRMS TO THE BACK OF THESE PAGES.
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