Assignment
Locate the Form 10Kusing the EDGAR database at the SEC Web site.
Answer the following questions using the most recently filed Form 10-K for the company's yearend:
1. Primary Line of Business: What is the company's primary line of business (industry)? Must provide a meaningful discussion and analysis which should be a minimum of one page.
2. Auditors Opinion: What public accounting firm conducted the audit and what was the opinion stated in the audit report? Must provide a meaningful discussion of the opinion and identify one key area (if any) addressed by the auditors beyond the standard opinion given.
3. List the following information from the financial statements (but you must provide the basic formula, the data (or numbers) used in the calculation by the student with a reference to the Form 10K information obtained. You must also have a meaningful discussion of what each of the resulting computations means and any secondary verifications used (a minimum of one page for each of the six items below):
A. Assets = Liabilities +Stockholders' Equity (Balance Sheet Discussion and identifying any key areas or concerns).
B. Net sales or net revenues (Sales Discussion by Product Line or Geographic Area)
C. Net income or loss (Net Income Discussion)
D. Cash increase or decrease (Cash Flow Discussion - from operations, investment, financing & other).
E. Retained earnings balance (Discussion of items impacting & payout ratios).
F. Total Owner's equity (Discussion of major components, leverage and ratios)
4. Using the Management Discussion and Analysis of Financial Condition and the Results of Operations (MD&A) of the annual report (Form 10-K), complete or answer the following for each of the three following areas:
A. Evaluate the overall quality of the information presented in the MD&A and are all the items that should be addressed in the MD&A included? (requires a minimum of one page)
B. Based on the MD&A section, what is your assessment of the prospects for the company? (Do you have any concerns regarding the company's profitability, solvency, or liquidity?) (requires a minimum of one page)
C. How does the company's key financial ratios compare to the average ratios in its industry (or the paired company)? (requires a minimum of five pages).
a. Profitability Ratios: (Must select & discuss a minimum of 6 ratios below)
i. Net Profit Margin
ii. Total Asset Turnover
iii. Return on Assets
iv. Operating Income Margin
v. Operating Asset Turnover
vi. Return on Operating Assets
vii. DuPont Return on Operating Assets
viii. Sales to Fixed Assets
ix. Return on Investments
x. Return on Total Equity
xi. Return on Common Equity
xii. Gross Profit Margin
b. Liquidity Ratios: (Must select & discuss a minimum of 6 ratios below).
i. Days' Sales in Receivables
ii. Accounts Receivable Turnover
iii. Accounts Receivable Turnover in Days
iv. Days' Sales in Inventory
v. Inventory Turnover
vi. Inventory Turnover in Days
vii. Operating Cycle
viii. Working Capital
ix. Current Ratio
x. Acid-Test Ratio
xi. Cash Ratio
xii. Sales to Working Capital
c. Long-Term Debt-Paying Ability: (Must select & discuss a minimum of 3 ratios below).
i. Times Interest Earned
ii. Fixed Charge Coverage
iii. Debt Ratio
iv. Debt/Equity Ratio
v. Debt to Tangible Net Worth Ratio
vi. Operating Cash Flow/Total Debt
5. Use common-size financial statements, profitability ratios, and any other financial analysis tools you consider relevant to analyze the changes and differences in profitability between the companies you selected for your research. Provide any comments you consider necessary to support your analysis. (You must use the standard presentation in your text book for doing the analysis of your primary company and the "paired" competitor). Minimum of five pages for discussion.