Financial Statement Analysis Project

14 Jun Financial Statement Analysis Project

Santa Monica College

Financial Statement Analysis Project Requirements

Accounting 2

Due Date = April 23, 2019

Points = 60 Points

Overview

You have completed chapter 1 through 17 of the Corporate Financial Accounting section of the

textbook. It’s now time to show off your knowledge and understanding of the materials learned thus far.

This project will allow you to exercise your quantitative, qualitative, and written communication skills.

This project is also a good opportunity to demonstrate your teamwork and leadership skills including

project management and conflict resolution. You are asked to form a team of 4 members maximum. In

your teams, you will perform a complete review of two Fortune 500 companies’ financial statements

using comparative analysis, common-size analysis and ratio analysis.

Getting Started

Select two Fortune 500 companies. Download their 10K annual reports from their company websites for

the most recent 2 years. Below are the core requirements for the project. The order of the information

can be different. Charts and graphs are highly recommended when applicable.

Section 1

Introduction Slide – Introduce all members of the team

Slide 1 – Brief introduction of each company

Slide 2 – Recent stock market prices in the last 3 months, last year or 3 years for Company A

Slide 3 – Recent stock market prices in the last 3 months, last year or 3 years for Company B

Section 2

Slide 4 – Comparative Balance Sheet Analysis – Company A (intracompany analysis)

Slide 5 – Comparative Balance Sheet Analysis – Company B (intracompany analysis)

Slide 6 – Compare Company A vs. Company B (intercompany analysis) & Conclusions

2

Section 3

Slide 7 – Comparative Income Statement Analysis – Company A (intracompany analysis)

Slide 8 – Comparative Income Statement Analysis – Company B (intracompany analysis)

Slide 9 – Compare Company A vs. Company B (intercompany analysis) & Conclusions

Section 4

Slide 10 – Common-size Balance Sheet Analysis – Company A (intracompany analysis)

Slide 11 – Common-size Balance Sheet Analysis – Company B (intracompany analysis)

Slide 12 – Compare Company A vs. Company B (intercompany analysis) & Conclusions

Section 5

Slide 13 – Common-size Income Statement Analysis – Company A (intracompany analysis)

Slide 14 – Common-size Income Statement Analysis – Company B (intracompany analysis)

Slide 15 – Compare Company A vs. Company B (intercompany analysis) & Conclusions

Section 6

Slide 16 – Ratio Analysis – Company A (intracompany analysis)

Slide 17 – Ratio Analysis – Company B (intracompany analysis)

Slide 18 – Compare Company A vs. Company B (intercompany analysis) & Conclusions

Slide 19 – Overall Conclusion and Recommendation

Slide 20 – Optional – International Strategy for each company

Hints

Balance Sheet Analysis

In your comparative balance sheet analysis, some of the things you want to look at are:

1. How are the assets financed? How much by debt and how much by equity?

2. What are the major % increases on the balance sheet and why?

3. If there is a major change in cash, take a look at the statement of cash flows to explain the

movement.

Income Statement Analysis

1. Why is net income up or down? Is it related to lower or higher cost of sales/revenues and/or

higher or lower operating expenses?

2. What is the % of net income for both companies? Which company has a higher % of net income

and why?

3

Ratio Analysis

In your ratio analysis, you must calculate and explain for both companies: current ratio, working capital,

debt ratio, equity ratio, gross margin, profit margin and PE ratio. If the company has account receivables

and inventory, then you must also include AR turnover and Inventory turnover.

Paper deliverable – Check the schedule for the due date

1. A print out of your Project

2. Typed work for all ratio calculations

3. Print out of the original 10K Consolidated financial statements for both companies