CASE STUDY - FINANCIAL STATEMENT ANALYSIS RESEARCH PAPER
Find an annual report of a publicly traded corporation on the Internet. The selection of the company is up to your preferences, but the annual report must be available on-line and you must use the most recent one.
Referring to the Annual Report and supplemented by your research, respond to the instructions and questions below. Fully explain your answers by detailed explanation or calculations where necessary and appropriate. All questions and instructions refer to the most recent year reported, unless otherwise stated:
1. Provide an overview of the company, the type of business it engages in, and any significant recent events affecting the company's operations or financial position.
2. How many shares of common stock did the company have outstanding?
3. Does the company have any preferred stock outstanding?
4. What is the nominal value, book value, market value per share of common stock?
5. What is the company's total paid-in capital?
6. Compute net working capital and comment on the result.
7. Compare net income and cash flow and comment on your findings.
8. Prepare common-size income statement and balance sheet and comment on the structure of assets, liabilities and stockholder equity.
9. Compute all profitability, asset management, liquidity and financial leverage ratios. Evaluate and comment on your findings. Make sure you compare company's results with either industry average or its main competitor.
10. Estimate the internal and the sustainable growth rates and explain the results.
11. Based on all your analysis, what weaknesses, if any, do you see in the financial status, operating performance, or cash position of the company, and what steps would you recommend for improvement?
Support your discussion, opinions, and conclusions fully. Remember that evaluation requires some comment and analysis, not just a computation of the ratios. At a minimum, you are expected to use the ratios presented in your text. Be sure to show all computations. You should also use the same formulas for the ratios used by the author of the text, unless you explain why you are using a different version of the ratio.
One of the objectives of this assignment is to give you some exposure to actual financial statements, such as those that you might encounter in a business setting. In many cases, actual financial statements may contain terminology, or non-typical items that are not covered in the textbook. You are encouraged to research other sources and do some additional reading to learn about any unusual items you may see.