Homework: Financial Statement Analysis Paper
One basic method that an accountant can use to analyze the financial situation of a business is ratio analysis. This can be a useful tool no matter the type of legal structure of the business and regardless of whether ownership is public or private. To help assure the availability of the necessary data, though, this homework will be focused solely on a publicly traded company.
As an overview, you will choose a publicly traded company from a list provided at the end of this homework. Locate the company's website, retrieve the latest company's annual report from that site, calculate specific ratios for the latest two fiscal years, and respond to a limited number of analysis questions.
Note that this entails far more than finding precalculated ratios from a website such as Yahoo! Finance or Google Finance. If you desire, you can use such a site for a reasonableness check on the results of your calculations, but any such comparisons should not be part of your resulting paper. Also, you might not match exactly to their figures anyway because those may include quarterly updates.
The paper should be three to four double-spaced pages (not counting the cover page and bibliography).
For the section showing the ratio calculations, provide appropriate details regarding the formula used, the source of the data, and the resulting calculations. Although you are certainly welcome and encouraged to use Excel to complete these tasks, copying and pasting from Excel into the Word document is discouraged unless it can be done in a manner that is cosmetically appropriate.
The requirements for the ratio analysis section are as follows.
I. Compute the following for each of the two most recent years.
1) Profit margin
2) Return on shareholders' equity
3) Current ratio
4) Interest coverage ratio
II. Document your work by properly citing items such as the following.
1) The website for the company
2) The web page link for the annual report
3) The page number of the annual report
4) Appropriate details of the calculations
The questions that should be addressed in the second section of the paper are as follows.
1) If you were an accountant for a potential vendor for this company, explain which of these ratios would be of the most interest to you. Would there also be a second ratio of interest to you?
2) If you were an accountant for a potential investor in this company, explain which of these ratios would be of the most interest to you. In your opinion, what other ratio or ratios beyond the ones listed above should also be considered in an investment context?
3) What is your overall opinion of this company based on the limited analysis completed via the four ratios? Feel free to mention any questions that you feel should still be considered in view of the ratios or the changes from one year to the next.
List of companies (choose one):
1) Barnes & Noble, Inc.
2) Intuit Inc.
3) The Kroger Co.
4) Macy's Inc.
5) Dell Inc.
6) Family Dollar Stores Inc.
7) Kodiak Oil & Gas Corp.
8) Tractor Supply Company
9) Verizon Communications Inc.
Format your homework according to the following formatting requirements:
(1) The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
(2) The response also includes a cover page containing the title of the homework, the student's name, the course title, and the date. The cover page is not included in the required page length.
(3) Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.