Task:
Financial Analysis: The Big Picture
Question 1. "Income statement provides investors with past financial data and information and therefore cannot be relied on to make future investing decisions." Do you agree? Explain.
Question 2. What is pro forma income statement and in your opinion has this practice put too much "spin" on operating results of a company? Explain.
Question 3. Perform a research (using internet etc) on a company that makes a restatement of improper revenue recognition. State the reason of such revenue restatement and the impact of such on its stock price shortly before and after such announce of restatement/restatement.
Question 4. Wall Street financial analysts have put a substantial amount of weight on a company's stock price performance as whether it meets or does not meet its income or earnings per share estimates. Have you experience that impact of failure to make the Wall Street expectation in your company or know of someone who did? Explain.
Question 5. Why is it essential to apply more than one financial statement analysis ratio when analyzing a company? You can use the four types of financial ratios as a basis for your discussion.
Question 6. What are examples of irregular items? How does a change in accounting principles affect the financial statements? Who in the organization is responsible for the application of a change in an accounting principle? Why?
Question 7. What is horizontal analysis? What is the value in using horizontal analysis? Why would a company use this analysis? What does this analysis tell you?
Question 8. What are the three most common types of ratios? Why are they important? Which ratios would you use to determine the long-term viability of an organization? Why?