Choose your company and locate its 2022 annual report (or 2021 if 2022 not available).
Please avoid financial services companies, i.e. banks, insurance companies, and real estate
companies (SIC codes 6000). (You should have this readily available from the Kickstart
project.)
Part 2:
1. What product does your company sell? Which industry is that? Who are the
competitors of the company?
2. Compare the company’s daily stock returns with one of its competitors and those
of Dow Jones Industrial Average in the past five years and explain the trends you
observe. You are required to use a graph to support your comments.
3. Obtain one recent analyst report and summarize it. You should address the analyst’s
current assessment of your company, and you should summarize the analyst’s
prognosis for your company.
Part 3:
Find three articles in the financial press describing events that have occurred in the
company and potentially affected its stock performance. Each article should be at least 500
words, and they should be published within the last three years. At least one article must
come from The Wall Street Journal and one article must come from The Financial Times.
Print out the articles and provide a summary of more than 100 words for each of them.
Part 4:
1. Who is the company’s auditor? What is the responsibility of the auditor? What is
the auditor’s opinion?
2. Who is responsible for the preparation of the company’s financial statements?
3. Find out and state the responsibility of the audit committee.
Part 5:
1. Who is the company’s CEO? Who is the company’s CFO? How long have they
been in the company? What do they have to do regarding financial reporting after
the Sarbanes Oxley act of 2002?
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2. How much did the CEO of the company make in total compensation? How was
he/she paid: salary, bonus, stock, stock options? Repeat the two questions for the
CFO.
3. What is the management’s view on the financial performance of the company?
(Summarize three key items in the management discussion and analysis section.)
Part 6:
1. Prepare a 5-year trend analysis, using the earliest year as the base year of (1) net
sales, (2) net income, (3) total assets, (4) total liabilities, (5) total stockholders’
equity, and (6) operating cash flows. Comment on the significance of the results.
2. Prepare a vertical analysis for 2022 (or 2021) of net sales based on the income
statement data: cost of goods sold, operating expenses, interest expenses, income
tax expense, other income/expenses, and net income. Comment on the
significance of the results.
3. Prepare a vertical analysis for 2022 (or 2021) of total assets based on the balance
sheet data: current assets, plant assets (net), intangible assets, other assets, current
liabilities, long-term liabilities, other liabilities, preferred stock, common stock,
additional paid in capital, retained earnings, treasury stock, and other equity.
Comment on the significance of the results.
4. Identify a competitor of your company and calculate the following ratios for your
company and its competitor for 2022 (or 2021), and comment on significant
differences of the two companies in terms of the ratios:
a. Liquidity ratios: current ratio, quick ratio, receivables turnover, and
inventory turnover.
b. Profitability ratios: asset turnover, profit margin, return on assets, and
return on common stockholders’ equity, earnings per share, price-earnings
ratio, and payout ratio.
c. Solvency ratios: debt to total assets and times interest earned
5. Did the company report any discontinued operations on the income statement?
6. Did the company report any extraordinary items on the income statement?
7. Did the company report any comprehensive income? Where?
8. Calculate the company’s free cash flow for 2022 (or 2021).
Part 7:
Evaluate the company’s short-term (1-year) and long term (5-year) financial
performance. Comment on the company’s profitability, liquidity, and solvency. Do you
recommend the company to potential investors?
Part 8:
Present your evaluation in Part 7. Base your argument on information you have gathered
in Parts 6 and 7