Financial Statement Analysis and Decision Making Activity

Purpose of Assignment

The activity requires students to perform research and analysis on competing companies and the potential implications of international standards. This real-world analysis is key to understanding how a company’s profitability, liquidity, and solvency can be useful for all users. Students also learn to analyze financial statements and use managerial tools to make decisions from an investor’s and creditor’s standpoint.

Assignment Steps

Resources: U.S. Securities and Exchange Commission (SEC), websites such as Annual Reports (AnnualReports.com)

Select two competing companies, one of which must be an international company, and locate annual reports for these two companies on the Internet.

Research the two companies on the Internet and download the Income Statement, Statement of Shareholders’ Equity, Balance Sheet, and Statement of Cash Flows.

Develop No more than 500 words examination of the financial statements and include the following:

• Make a 5-year trend analysis for each company, using 2011 as the base year, of:
  • Net sales.
  • Net income. Discuss the significance of the trend results.
• Compute for 2015 and 2014 the:
  • Debt to assets ratio.
  • Times interest earned. How would you evaluate each company’s solvency?
• Compute for 2015 and 2014 the:
  • Profit margin.
  • Asset turnover.
  • Return on assets.
  • Return on common stockholders’ equity. How would you evaluate each company’s profitability?
• Evaluate the financial opportunity presented by the companies. If you were a creditor, which company would you be more likely to lend money to? Defend your decision.
• Which company would you recommend as an investment? Discuss the items that were considered in your decision.
• Research global implications for the international company selected. How might changing environmental factors affect organizational choices?
• Consider the ethical climate (internal or external) of your chosen companies. Describe the ethical issues and impact on the stakeholders. What has been/is being done to resolve these issues? Do you agree with these methods for resolution? If not, what might you do differently?

Show your work in Excel^®.

Complete calculations/computations using Excel^®.

Include the four financial statements along with your assignment.

NOTE: read the attached file first please!!!

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