Balance Sheet Analysis
The discussion questions for Weeks 2 – 4 are designed to help teach you to derive meaning from financial statements. Each week you will select a line item and use Variance Trend Analysis to make some initial assessments about how the company is performing. Collectively, as a class we will seek to find the “story behind the numbers.” Let’s start applying what you have learned to a real-life Balance Sheet.
Note: We want to encourage a rich exchange of information and ideas in this discussion. Please select a Balance Sheet line item based on the first letter of your last name as indicated below. Locate and post a screenshot of a Balance Sheet from the investor relations section of the website from the latest fiscal year for one of the following companies:
Locate and post a screenshot of a Balance Sheet from the investor relations section of the website from the latest fiscal year for one of the following companies:
FedEx
Walmart
Pick a Balance Sheet line item from the following list:
Accounts Receivable [Last Name: A-B]
Inventory [Last Name: C-E]
Property, Plant, and Equipment (PP&E) [Last Name: F-H]
Accounts Payable [Last Name: I-L]
Long-Term Debt [Last Name: M-P] This is the one!
Total Equity [Last Name: Q-S]
Retained Earnings [Last Name: T-Z]
What does this line item measure and why is it important item for Management to understand this number?
From the Balance Sheet, identify the Current Year and the Previous Year closing amounts for your line item. Share these with the class using a data table similar to the below:
Mary’s Perfume Shop
(in thousands)
2021 2022
Inventory $336.0 $304.5
Answer the following questions:
Has the amount for the line item increased or decreased, and by how much (dollar and/or percentage)?
Is this a “good” thing or a “bad” thing for this company?
What might this mean for the organization?
What might management do to improve this line item?
