ACCT 350 – Intermediate Acct.

1
Financial Statement Analysis Assignment
Fall 2010

Company Selection

Select a Publicly-held company which is a manufacturer, wholesaler or retailer,

software developer is OK.
You will need to acquire the most recent annual report and 5 years of income
statement and balance sheet data and perform the following:

Financial Statement Analysis

Part 1 - Ratio Analysis

Calculate, graph and discuss the following financial statement
ratios for the last 5 years.
Current Ratio Quick Ratio
A/R Turnover Days Sales in Receivables
Invtl Turnover Days Cost of Sales in Inventory
Operational Cycle Working Capital
Debt/Equity Times Interest Earned
Asset Turnover Net Income/Sales

Part 2 - FSA Questionnaire

You will be provided with a questionnaire, which you will complete for your selected
company

Point Values and Due Date

The project is worth 75 points and is due on Monday, October 25

1
Central Washington University
Department of Accounting
Accounting 350 – Fall 2010
FSA Questionnaire

NAME

The purpose of this project is to allow you to examine the effects of various
accounting practices and reporting procedures first hand. You will select an annual
report of a major corporation for a fiscal period beginning in 2008 or 2009. This
report will be turned in accompanied by the annual report no later than October 25,
2010

Company Name

Date of Annual Report

2
Annual Report SECTION I - Financial Statements

A. General Information:

1. Describe the principal business activity(ies) of the firm.

2. Where is the corporate headquarters located?

3. Over what stock exchange is the firm's stock traded?

4. Complete the following table:

Closing Market Price/

Dividends Price of Earnings
*Date E.P.S. Per Share Common Stock Ratio

12/31/07

12/31/08

12/31/09

*Adjust dates if company's fiscal year is not the calendar year.

5. The Auditor's Report

a) Audit firm ____________________________

b) Audit opinion
______ Unqualified
______ Qualifed
______ Adverse
______ Disclaimer

c) If the opinion is not unqualified, describe reason

for opinion given.

d) Was a change in auditors evident? Was reason for change

disclosed?.

B. Income Statement

1. Title used _________________________________

2. Report format (multiple step, single step, other )

3
 C. Balance Sheet

1.Title used ___________________________________

2. Report format (report, account, other)

D. Retained Earnings
How was the change in Retained Earnings presented?
__________ Separate statement
__________ Part of Income Statement
__________ Other (please describe)

E. Statement of Cash Flows

1. What was the net change in cash during the year?

$ ________________________

2. What was the net change in working capital during the year?

$ ________________________

3. What approach (direct or indirect)

was used to compute cash from operations?

Cash from/used by:

Operations $ ________________________

Investing $ ________________________

Financing$ ________________________

4. Identify the three largest sources of cash and

compute the following:

Source Amount % of Total Sources

5. Identify the three largest uses of cash and complete the following:

Use or
Application Amount % of Total Application

4
 F. Notes to the Financial Statement

List, in order presented in the annual report, the title used to describe each footnote

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.
18.

19.

20.

5
Section II. - Specific Accounting Issues

A. Accounts and Notes Receivable:

Prior Current

Year Year

1. Current accounts receivable. ____________ ___________

2. Estimated uncollectible accounts. ____________ ___________

3. Net current accounts receivable. ____________ ___________

4. Net sales. ____________ ___________

5. # of days' sales in receivables. ____________ ___________

6. Receivable Turnover . ____________ ___________

7. Describe (summarize) the accounting principles used by the firm to account for
receivables.

B. Inventory

1. Summarize the valuation method(s) used by the firm to account

for
inventory.

2. Complete the following table:

Prior Year Current Year

Amount Amount

Beginning Inventory _______________ _______________

Ending Inventory _______________ _______________

Net Sales _______________ _______________

Cost of Goods Sold _______________ _______________

Inventory turnover _______________ _______________

6
C. Investments

1. Summarize the accounting principles used by the firm to account for

marketable securities.

2. Complete the following table: Marketable Securities

Prior Year Current Year

Cost ______________ ______________

Market value ______________ ______________

Book value ______________ ______________

4. Complete the following table:

Prior Year Current Year

Book value of long-term
investments in MS ____________ ____________

Book value of
equity investments ____________ ____________

Market value of
equity investments ____________ ____________
(use year-end stock prices)

Income reported for

equity investments. ____________ ____________

D. Property, Plant and Equipment:

1. Summarize the accounting principles used by the firm to account for
property, plant and equipment.

7
 2. Complete the following table:

Prior Year Current Year

Depreciable fixed assets _____________ _____________

Non-depreciable fixed assets _____________ _____________

Depreciation expense _____________ _____________

Total assets _____________ _____________

Percent of total fixed assets

to total assets _____________ _____________

E. Intangible Assets:

1. Does the annual report balance sheet indicate an amount assignable

to
intangible assets or assets that you know to be intangible in nature?

If yes, complete the following items.

2. Complete the following table. Break out the intangibles by type. Be

sure to
provide totals.

Intangible Method of Prior Year Additions/ Current Year

Item Amortization Dollar Amount Reductions Dollar Amount

3. What is the percentage of intangible assets to

total assets?
________________

F. Long-Term Liabilities

1.Does the annual report balance sheet indicate that the firm has long-
term
obligations?

If yes, complete the following items.

8
 2. Complete the following table for the five largest long- term obligations.

Description of Is the Debt Identify Interest --- Amount ---

Obligation Secured Collateral Rate Beg/Yr End/Yr

G. Income Taxes

1. What was the effective average tax rate, given the

reported tax expense, on corporate earnings:

For the current year? ___________

For the prior year? ___________

If the difference between last year and this year's effective average
tax
rate was > 5 percentage points(say 50% to 45%), provide an
explanation
of the difference.

2. What was the effective average tax rate, given taxes paid, on
corporate
earnings

For the current year? __________

For the last year? __________

3. In comparing the taxes paid with tax expense for both last year and
this
year, a difference would suggest that taxable income was not equal to
financial statement income. Report the following:

LastYear This Year

Current taxes (per income statement) __________ __________

Deferred taxes (per income statement) __________ __________

Estimate the amount of tax actually paid __________ __________

9
If deferred taxes were zero for both years, ignore the remaining items.

a. To what specific event(s) can you attribute the

deferred tax items for both years?
b. The balance sheet account(s) related to deferred
taxes were:

Current Increase
Prior Year Year (Decrease)

Deferred Tax Assets ____________ ____________ ____________

Deferred Tax Liabilities ____________ ____________ ____________

Explain what caused the increase or decrease.

H. Leases (lessee only)

1. Capital Leases:

a. What is the total capital lease debt?

b. What is the % of total capital lease debt

to total debt?

c. Complete the following for assets under capital leases.

$ Gross Accumulated Net

Value Amortization Book Value

(1)Land __________ __________ __________

(2) Buildings __________ __________ __________

(3) Machinery &

Equipment __________ __________ __________

(4) Other
(specify) __________ __________ __________

10
 2. Operating Leases:

a. What is the total commitment (minimum annual fixed rental

payments) under non-cancelable operating leases?

b. What is the % of operating lease rental payments to

total revenues?

c. What is the present value (use a 12% rate) of the commitments

under
non-cancelable operating leases for the next five years?

d. What is the percentage of (c) above to total assets.

I. Pensions

1. Does the firm offer a pension plan? YES NO

If yes, identify the type of plan:

Defined benefit plan _____ Defined contribution plan _____
Other (describe) _____

2. Identify the actuarial cost method used. ___________

3. a. What is the accumulated benefit obligation? _______________

b. What is the projected benefitobligation? _______________

c. What are the plans' net assets available for benefits? _______________

d. What is the accrued pension expense liability or prepayment

reflected in the balance sheet? _______________

J. Stockholders Equity

1. Complete the following table:

Shares Total Paid Shares

Outstanding In Capitals Stock Class Authorized

Beg. of Yr

End of Yr

11
 J. Stockholders Equity (continued)

b. What method does the company use to account for treasury

stock?

________ Cost

________ Par

________ Other (describe)

4. Summarize the EPS statistics as follows:

a. Basic

Prior Year Current Year

Earnings before extraordinary items

Extraordinary items, net of tax
Effect of accounting change,
net of tax

Net earnings

b. Diluted

Net earnings

6. Did the company report cumulative comprehensive income? If so,

what
types of items contributed to the difference between net income
and
comprehensive income. Also, how was the change in
comprehensive
income for the year presented.

K. Segment Reporting

Does the company report segment information?

List the operating segments disclosed and list the information disclosed

for each segment.

12
 L. Interim Reporting

1. Are quarterly results of operations reported in the annual

report? YES NO

If yes, complete the following:

lst Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.

Operating Revenues _________ _________ ________ ________

Operating income _________ _________ ________ ________

Net income (loss) _________ _________ ________ ________

M. Accounting Changes

1. Did the company report a change in accounting

principle for either of the years? YES NO

If yes, complete the following:

2. Briefly describe the nature of the accounting change.

3. The company used the

_______ a. current approach.

_______ b. retroactive approach to record the effects of the accounting

change.

4. The effect on current year net income was

a. in dollars? Net income before $ __________

Net income after $ _____________

b. in percentage of effect to net income _________

13