The objective of the financial statement project is to allow students to apply the knowledge acquired in the classroom to the analysis of a real-world company and communicate that analysis effectively. Specifically, upon completion of the project, students will be able to,
• Retrieve company’s annual report (10-K) from the SEC website.
• Analyze and evaluate accounting information obtained from company’s annual report.
• Produce a written report to effectively communicate your findings.
• Develop problem solving and critical writing skills.
• Perform spreadsheet analysis.
At the beginning of the semester, each student will be assigned one NASDAQ or NYSE public company that has readily available financial statements. The students must obtain copies of the companies’ annual reports (10-K) for the most recent fiscal year from the Securities & Exchange Commission (SEC) website (free access).
In the report, please answer the following questions:
(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?
(2) What industry and primary SIC code is your company in? What types of products does your company sell? Identify a major competitor of your company. You may find the information from finance.yahoo.com or www.google.com/finance.
(3) For how many years does the 10-K present complete Balance Sheet? Income Statements? Statement of Cash Flow?
(4) Are your company’s financial statements audited by an independent public accounting firm? Find and read the “Report of Independent Registered Public Accounting Firm” (or similarly titled report) in the 10-K. What is the name of your company’s audit firm and what type of opinion did it issue? (unqualified, unqualified with modified wording, qualified, adverse or disclaimer). Summarize the responsibilities the auditor assumed regarding the financial statements and internal controls based on their report.
(5) Find and read the “Report of Management Responsibilities” or “Certification of Chief Executive Officer/Chief Financial Officer” (or similar titled report) found in the company’s 10-K. These reports are required by the Sarbanes-Oxley Act. Who signed it? Summarize the responsibilities the management assumed regarding the financial statements and internal controls based on their report.
(6) Income Statement:
a. Read the footnotes to the financial statements. What is your company’s revenue recognition policy?
b. What subtotals does your company report on its income statement?
c. What amount of revenue was earned for the most recent year?
d. What is the amount of the largest expense on the income statement for the most recent year? Please briefly describe the transaction represented by the expense.
e. What is the amount of net income for the most recent year?
f. What is your company’s earnings per share (basic only) for the three years reported?
(7) Balance Sheet:
a. 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.
A _________________= L ____________________+ S.E. ___________________
b. What was your company’s largest asset (net) at the end of the most recent year?
c. List the types of assets and liabilities your company has.
d. Describe in general terms what prepaid expenses are. Did your company report any prepaid expenses and other current assets account at the end of the most recent year? Where did you find this information?
e. Read the notes to financial statements. What method does your company use to determine the cost of its inventory?
f. Read the notes to financial statements. What method of deprecation does your company use?
g. What was the original cost of the property, plant and equipment held by your company at the end of the most recent year? What was the accumulated depreciation and amortization at the end of the most recent reporting year? (If the assigned company does not report the original cost of PP&E, use the net value of the property, plan, and equiptment).
h. What is the amount of long-term liabilities at the end of the most recent reporting year?
i. List the accounts and amounts of your company’s stockholders’ equity.
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