Financial Statement Analysis Case Requirements
For this project, you will be analyzing the financial statements (contained in Form 10-K) of two companies in the same industry. You will draw conclusions about the overall health of each company. Your project will culminate in a written paper that details your analysis.
Instructions for finding a Form 10-K
You will need to locate a company’s Form 10-K, which is the annual report that publicly-held companies file with the Securities & Exchange Commission (SEC). The Form 10-K is usually quite long, exceeding 100 pages in most cases.
The first thing you need to do is find a recent 10-K for a publicly-held company in which you are interested. This company must meet the criteria described earlier.
To find a Form 10-K, go to http://www.sec.gov/edgar.shtml#.VOhw6vnF9mX. If you know what company you are interested in, you might also be able to go to that company’s Investor Relations website and locate its Form 10-K there.
Company Criteria
Obtain the 2021 10-K for Walmart and Amazon.
General Writing Instructions
Your source documents for the information you will be using for this project will primarily be your companies’ Form 10-Ks. To follow is a list of questions and other requirements. You are to use the Form 10-Ks for your companies to answer the questions.
Write your answers in paragraph form (do not use bullet points). Use headings to separate each section. You may want to use tables for numbers (i.e., ratio presentations). Please use proper English, grammar, and spelling.
Written paper rubric
The following grading rubric will be used to evaluate your written paper.
Outstanding
Above average
Average
Needs work
Below expectations
Structure
The Paper is well organized and flows well. Written in complete paragraphs. Appropriate use of headings. Seamless integration of company information.
The Paper is fairly well organized with mostly complete paragraphs. Can follow the organization flow of the paper. Company information is integrated, although some information is not aligned.
Paper is average in terms of organization. Appears to simply be responses to questions, transitions are lacking a bit. Some differences in analyses are visible.
Questions are answered, mostly in bullet format. The paper appears to be a list of answers. Few headings for organization; somewhat difficult to follow. Coverage of companies differs.
The Paper is not organized and lacks headings. Hard to follow structure. Analyses of companies vary widely throughout the paper.
Concepts
The Paper indicates a thorough understanding and analysis of the requirements.
The Paper indicates a good understanding and analysis of the requirements.
Understanding and analysis of the required concepts appear to be average.
Analysis needs more depth; understanding of the required concepts is not clear.
The Paper does not indicate an understanding of the required concepts.
Evaluation
Industry description identifies key opportunities and risks; evaluation of ratios is in-depth and shows a rich understanding of underlying concepts.
Industry description identifies most key opportunities and risks; evaluation of ratios is mostly in-depth and shows an understanding of underlying concepts.
Industry description identifies some key opportunities and risks; evaluation of ratios is at a basic level and shows some understanding of underlying concepts.
Industry description identifies a few opportunities and risks; evaluation of ratios is at a basic level. Some ratios are missing or interpreted incorrectly.
Industry description is missing or is superficial; evaluation of ratios is lacking. Many ratios are missing or interpreted incorrectly.
Spelling, grammar, tone
No spelling, grammar, or punctuation errors. The tone of the writing is professional and appropriate for business.
A few typos, grammatical, or spelling errors are found, but less than five in total. The tone is mostly professional.
Less than five typos, grammatical, or spelling errors in total but the tone is too casual.
5 – 10 spelling or grammar errors; the tone is not appropriate in a few places.
Several spelling, grammatical, or punctuation errors throughout the paper and/or tone is entirely inappropriate.
Basics
All requirements and deadlines were met. All questions were answered in their entirety. The paper is within the page limit. Group members worked well together, producing a cohesive result.
All requirements, deadlines, questions, and page limits were met except for one minor miss. Group members worked fairly well together, producing a cohesive result.
All requirements, deadlines, questions, and page limits were met except for two minor misses. One or two group issues were experienced, but a mostly cohesive product resulted.
Missed a deadline, did not answer one or two questions, or paper exceeds page limit count. The resulting product showed evidence of group issues due to its lack of cohesiveness.
The Paper was late; several questions were skipped, or the paper either exceeds or does not make paper page limits. Group members were not able to work together cohesively.
Industry and company overview
Write a 200 – 400 word paragraph including general facts about the industry in which your companies operate. Also, summarize each company (in your own words) from reading Form 10-K. Do not copy and paste information; put the information in your own words.
Statement of cash flows
1. Now locate the statement of cash flows. List the page number from the most recent Form 10-K where you found it.
2. Which method (direct or indirect) does the company use to report cash flows from operations? How do you know?
3. Did the company buy or sell more plant assets in the most recent year as compared to the prior two years?
4. Did the company buy back any of its own stock? Did it pay any dividends?
5. What type of activity (operating, financing, or investing) in total generated the most cash flows for the company in the most recent year? What conclusions can you draw?
Ratio analysis
Calculate and interpret the following ratios and measures. You should complete the following in Excel and embed the worksheet in the word document you will be submitting.
Liquidity Measures – working capital, current ratio, acid-test ratio
Activity Measures – Total Asset Turnover, Inventory Turnover, Numbers of Days in A/R
Profitability Measures- ROI, DuPont Model. Return on Equity
Financial Leverage Measures – Debt Ratio, Debt/Equity Ratio
Horizontal Analysis (most recent year only -income statement and balance sheet )
Common Sized Statements (Vertical Analysis) (most recent year only -income statement and balance sheet )
Overall analysis
This section is the overall analysis of your two companies. Which company do you believe is healthier? Why? Which company would you be more likely to invest in? Why? Be specific in your reasoning.
Be sure to fully support your conclusion of which company is healthier. Be sure to include a variety of measures, not just one measure of financial health.
Submission instructions
You will be condensing all of the project parts into one cohesive document that is no more than ten double-spaced pages (11 point font, Calibri or Candara, 1-inch margins, Word format.) Use headings to make your document via Turn it In on Moodle.
