Choose two publicly held companies within the same industry and obtain both of their annual reports. Most annual reports can be found at the…

Choose two publicly held companies within the same industry and obtain both of their annual reports. Most annual reports can be found at the company’s website.

Find the following statements and notes and save as a file. Include the company’s website address and all sources. ● Income Statement ● Balance Sheet ● Statement of Cash Flows ● Footnotes (if too extensive, just copy the first four pages).

Below are items that should to be included in your analysis, but add additional analysis as needed.

A. Balance Sheet Analysis

  1. What is the asset mix? What stands out as common to the industry?
  2. Does your company outline how it has borrowed money? (Check the notes) What form of borrowing is the largest portion of the total?
  3. Has debt changed from one year to the next? If so, how?
  4. List capital stock and number of shares outstanding. Has there been activity in the current year? Have dividends been paid?
  5. Is the operating leverage high, low or somewhere in between? Do the companies have a similar operating leverage?
  6. Perform a common size analysis for the two most current years and compare the 8 two companies. What do you conclude?

B. Income Statement Analysis

  1. What is net income? Compare this to the prior year and find and report on the reasons for change.
  2. How do the companies generate most of its revenues? Profits?
  3. What, if any, are the “below-the-line” items?
  4. Perform a common size analysis for each company for the two most current years. Compare by company and year. Analyze your findings.

C. Statement of Cash Flows

  1. What is the largest inflow of cash in each company? What section is it in?
  2. What is the largest outflow of cash in each company?
  3. Are there any plant and equipment purchases? Was there any new debt added?
  4. Summarize what you found.

D. Notes to Financial Statements

  1. Check the notes to the statements and summarize in one paragraph the most important notes.
  2. What is the single most interesting piece of information you found?

E. Financial Ratios

Calculate the following ratios for two years for both companies and describe findings.

● Liquidity Ratios

o Current Ratio

o Accounts Receivable Turnover Ratio

o Inventory Turnover Ratio

● Leverage Ratios

o Debt Ratio

o Debt to Equity Ratio

● Profitability Ratios

o Return on Total Assets

o Return on Stockholder’s Equity

o Earnings per Share

o Rate of Return on Sales

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