Examining Financial Statements

Assignment #1– Examining Financial Statements
Due Sunday Week 3
75 Points

Students will select a Fortune 500 company to examine (http://fortune.com/fortune500/). Prepare a Word documentusing information from their Annual Report. (Use the most recent year available.)

The Word document must cover ALL of the following:

Overview
● Describe the content and purpose of the three main financial statements.

Balance Sheet
● What are the balances at year-end for assets, liabilities, and stockholder’s equity?
● Prepare a common-size Balance Sheet. Be sure to properly label and form this financial statement.
● Review the Notes to the financial statement:
o What Inventory Method does the company use?
o What other pertinent information does the company disclose about their inventory
o What does the company disclose regarding fixed assets and depreciation?

Income Statement
● What is revenue, gross profit, and net income for the year?
● Prepare a common-size Income Statement. Be sure to properly label and form this financial statement.
● Are there any special items on the Income Statement (e.g. Discontinued Operations, Extraordinary items)? If so, describe the event that caused the item and why is this event classified as a special item.
● Review the Notes to the financial statement:
o Describe the company’s policy on revenue recognition.

Statement of Cash Flows
● What are the cash flow totals for operating, investing, and financing activities?
● What are some of the main investing and financing activities that occurred? If there are negative cash flow totals, describe whether this cash outflow has a positive or negative impact on the company’s sustainability. Why?

Management’s Discussion and Analysis (MD&A)

➢ Highlight 3 interesting topics discussed in the MD&A section of the annual report.
o How does the information presented impact the financial statements and relevant ratios?
Additional Instructions
➢ Make sure to choose a Fortune 500 company that has inventory
➢ Annual Reports (10-k) can be found:
o Company website – Usually at the bottom of the main page under a link titled ‘Investor Relations’, ‘Corporate’, (or something similar).
o SEC website (https://www.sec.gov/). Click ‘Filings’ tab to search for the company (Make sure to use the 10-k report).
➢ The document should include the same headings listed above (Overview, etc.).
➢ The document should be APA formatted (including title page, APA formatted references, etc.)
➢ You can complete the common size financial statements in Excel then copy and paste into your main Word document.
➢ MUST: Include the direct link to the Annual Report
➢ You must upload your file to Blackboard under Week 3 Assignments. Go to the Assignment, scroll down to “Attach Local File” and click Browse to select YOUR file, then hit SUBMIT.

Evaluation Criteria for: Assignment 1
Assignment 1 points
WD
68 -75 Points
Dev
56 to 67 Points
NSW
55 points or lower

Overview (10%)

7.5 points
Provides a complete overview of the three main financial statements. Clearly states the content and purpose of each.
Provides a somewhat complete overview of the three main financial statements. Clearly states the content and purpose of each.
Provides no clear overview of the three main financial statements. Does not clearly or fully state the content and purpose of each.

Balance Sheet (20%)

15 points
Reported balances agree to the linked Annual Report. Common-size balance sheet is computed correctly. Clearly and correctly describes the required information from the Notes to the Financial Statement
Reported balances agree to the linked Annual Report. Common-size balance sheet contains some inaccuracies. Somewhat clearly and correctly describes the required information from the Notes to the Financial Statement
Reported balances do not agree to the linked Annual Report. Major inaccuracies with the Common-size balance sheet. Description of the required information from the Notes is inaccurate or incomplete.

Income Statement (20%)

15 points
Reported amounts agree to the linked Annual Report. Common-size income statement is computed correctly. Clearly and correctly describes the required information from the Notes to the Financial Statement
Reported amounts agree to the linked Annual Report. Common-size income statement contains some inaccuracies. Somewhat clearly and correctly describes the required information from the Notes to the Financial Statement
Reported amounts do not agree to the linked Annual Report. Major inaccuracies with the Common-size income statement. Description of the required information from the Notes is inaccurate or incomplete.

Statement of Cash Flows (20%)

15 points
Reported amounts agree to the linked Annual Report. Correctly identifies sources of major investing and financing activities
Reported amounts agree to the linked Annual Report. Somewhat correctly identifies sources of major investing and financing activities
Reported amounts do not agree to the linked Annual Report. Incorrectly identifies sources of major investing and financing activities

MD& A (20%)

15 points
Highlights 3 topics discussed in the MD&A. Provides a reasonable and logical analysis of how the information may impact the financial statements and ratios.
Highlights at least 2 topics discussed in the MD& A. Provides a somewhat reasonable and logical analysis of how the information may impact the financial statements and ratios.
Highlights 1 or less topics discussed in the MD& A. Does not provide a reasonable and logical analysis of how the information may impact the financial statements and ratios.

Grammar, Speech Patterns, Punctuation and APA (10%)

7.5 points
Clearly uses proper grammar, APA for in text citations and for all references. Formatting is clean and reader friendly.
Has more than three errors in APA, grammar and or punctuation. Formatting is somewhat clean and reader friendly.
Has more than four errors in APA, grammar and or punctuation. Formatting is not clean nor reader friendly.

N S W = Needs Significant Work D = Developing WD = Well Developed