Pick a publicly traded company you might be interested in learning more about throughout the semester. It could be a company you have seen on the news, a member of an industry you want to work in, or just a random choice.
Go to the company’s website and find a copy of their most recent Form 10-K. This is the annual filing with the SEC that contains their financials and a whole 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.
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: (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 you company’s balance sheet, statement of income, statement of stockholders’ equity and statement of cash flows. I am not just looking for net income is this and it went up by this, but looking for in depth analysis. Below are some areas you can consider looking at that we have discussed in chapters 1-11:
Analyze 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 is retained earnings doing?
Complete profitability analysis for your company and explain year over year change in profitability ratios and what that means 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?
Any going concern issues? Any related party transactions? Any subsequent events and how are they disclosed?
AR methods use?
Inventory methods use?
Write down of inventory?
Interest capitalization?
Financial Health:
How is the overall financial health of the company? Can use liquidity and solvency ratios and/or graphs and chart to help 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 the your class. The analysis can be related to any of the below topics. Do not select footnote topics not discussed in class.
-Critical estimates / judgement
-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 either be a separate footnote or organized a bit differently.
Be sure to compare each of the footnotes to another similar company. Do not give me screenshots of the footnotes in the paper, take what you have learned in class and analyze what the footnote is telling 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 title page). It should be double-spaced, with 12-point Times New Roman font and one-inch margins, and proper page number citations from the 10-K. Please also include your name, course name, submission date and year of your 10K on the title page.
