Chevron Corp
NYSE: CVX
Pick a publicly traded company you might be interested in learning more about (Chevron Corp).
Go to the company’s website and find a copy of their most recent Form 10-K. This annual filing with the SEC contains their financials and a lot of other information. For most companies, you can find the Form 10-K by going to the “investors” page, then “financials”, then “SEC filings”, then choosing the “annual items” option. I would suggest saving the pdf of the 10-K for future reference.
You will use the same 10-K for parts 1 and 2 of this analysis. You can also find the 10-K using Mergent Online through Business Library.
Write a maximum of 11-14 pages, double-spaced, analysis of the company based on your learnings on the topics addressed in their 10-K. Refer to the rubric and the topics below regarding what is expected in your analysis. There is a page limit because people in the business world want concise and to-the-point messaging written with proper grammar and easy-to-understand language that a person without much financial knowledge can understand. How you organize your report to cover the below is up to you, but I would use graphs, charts, visuals, and words. It must be easy to follow and written as an analysis and commentary rather than just stating the facts. I am not looking for quantity but quality of analysis. As a reader, I want to get the most analysis in as few words as possible.
Organizational Context:
What key features of the organization (e.g., major products or services, customers, location, etc.) help set the boundaries for business decisions? In other words, what key goods or services does your organization provide, for whom, where, and why?
How is the company organized and managed (e.g., by product groups, geographic region, function, etc.)? How does that affect accounting and financial information and subsequent business decisions?
Risks & Growth Opportunities: (You might want to read the management discussion & analysis to help you analyze this section)
What are some risk factors facing the company? How are they working on reducing the adverse effects of these risks? For example, is the company vulnerable to technological changes or cyber-attacks? Loss of high-talent personnel? Production disruptions?
What is a decision that your company is facing or might face? What information would be required (or at least help) with making that decision? If you were charged with implementing the gathering/analysis of the information, what sources would you try to use? Can you think of any obstacles related to the data? One overriding issue with data usage is keeping in mind motivations. If you ask me for information (data), my motivations may shape what I give you. Could this be an issue for this decision?
How might the organization better capitalize on non-financial factors such as market share, reputation, human resources, physical facilities, or patents? Support your response with relevant research and analysis. You can use Mergent Online to help with your research.
Past Financial Performance:
Analyze your company’s balance sheet, statement of income, statement of stockholders’ equity, and statement of cash flows. I am not just looking for net income, which went up by this, but I am looking for in-depth analysis. Below are some areas you can consider looking at that we have discussed in chapters 1-11:
Analyze the company’s performance year over year. For example, what do the amounts and year-to-year changes in revenue, operating income, net profit or loss, and Earnings Before Interest, Taxes, Depreciation, and Amortization tell you? Do any items stand out?
Describe your company’s earnings quality. Any room for growth and improvement?
Any discontinued operations? If so, why were those segments closed?
How often do they pay dividends? How are retained earnings doing?
Complete a profitability analysis for your company and explain year-over-year changes in profitability ratios and what they mean for the company.
Revenue recognition criteria? Is revenue increasing/decreasing, and why?
What is happening to income from continuing operations year over year?
What are the sources and uses of cash? Any non-cash transactions?
What are some of the company’s significant accounting policies?
Are there any ongoing concerns or issues? Any related party transactions? Any subsequent events, and how are they disclosed?
AR methods used?
Inventory methods used?
Write down the inventory.
Interest capitalization?
Financial Health:
How is the overall financial health of the company? Can use liquidity and solvency ratios and/or graphs and charts to help the reader understand. For example, does the organization have enough cash for payroll and other bills? Does it have the right mix of debt versus equity (stock)? How do you know?
Give your conclusion on whether you would invest in this company and why.
Footnotes:
Focus on two footnotes from your class. The analysis can be related to any of the below topics. Do not select footnote topics not discussed in class.
-Critical estimates/judgment
-Revenue recognition
-Subsequent events
-Cash & cash equivalents
-Accounts receivable
-Inventory
-Property, Plant & Equipment
-Intangibles
-Impairments
Every company does footnotes a bit differently. So each topic may be a separate footnote or organized differently.
Be sure to compare the footnotes to those of another similar company. Do not give me screenshots of the footnotes in the paper. Take what you have learned in class, analyze what the footnote tells you about the company, and compare the company to another in the industry. You can compare using trends, ratios, and simple observations.
Attach a copy of the footnotes from your company and its competitor as an exhibit item. This is not part of the page limit. Don’t attach the entire 10-K, just the relevant footnote, so it’s easy for me to grade.
Rubric:
Guidelines for Submission: Your financial analysis report should be approximately 11-14 pages (excluding the title page). It should be double-spaced, with 12-point Times New Roman font, one-inch margins, and proper page number citations from the 10-K.
