Examining Financial Statements
Assignment #1–
75 Points
Students will select a Fortune 500 company to examine (http://fortune.com/fortune500/). Prepare a Word document using information from their Annual Report. (Use the most recent year available.)
The Word document must cover ALL of the following:
Overview
- Describe the content and purpose of the three main financial statements.
Balance Sheet
- What are the balances at year-end for assets, liabilities, and stockholder’s equity?
- Prepare a common-size Balance Sheet. Be sure to properly label and form this financial statement.
- Review the Notes to the financial statement:
- What Inventory Method does the company use?
- What other pertinent information does the company disclose about their inventory
- What does the company disclose regarding fixed assets and depreciation?
Income Statement
- What is revenue, gross profit, and net income for the year?
- Prepare a common-size Income Statement. Be sure to properly label and form this financial statement.
- Are there any special items on the Income Statement (e.g. Discontinued Operations, Extraordinary items)? If so, describe the event that caused the item and why is this event classified as a special item.
- Review the Notes to the financial statement:
- Describe the company’s policy on revenue recognition.
Statement of Cash Flows
- What are the cash flow totals for operating, investing, and financing activities?
- What are some of the main investing and financing activities that occurred? If there are negative cash flow totals, describe whether this cash outflow has a positive or negative impact on the company’s sustainability. Why?
Management’s Discussion and Analysis (MD&A)
- Highlight 3 interesting topics discussed in the MD&A section of the annual report.
- How does the information presented impact the financial statements and relevant ratios?
Additional Instructions
- Make sure to choose a Fortune 500 company that has inventory
- Annual Reports (10-k) can be found:
- Company website – Usually at the bottom of the main page under a link titled ‘Investor Relations’, ‘Corporate’, (or something similar).
- SEC website (https://www.sec.gov/). Click ‘Filings’ tab to search for the company (Make sure to use the 10-k report).
- The document should include the same headings listed above (Overview, etc.).
- The document should be APA formatted (including title page, APA formatted references, etc.)
- You can complete the common size financial statements in Excel then copy and paste into your main Word document.
- MUST: Include the direct link to the Annual Report
- You must upload your file to Blackboard under Week 3 Assignments. Go to the Assignment, scroll down to “Attach Local File” and click Browse to select YOUR file, then hit SUBMIT.
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