Competency 6: Post-Test: Financial Statements Briefing and Analysis
The purpose of this assignment is exposure to a ‘real’ financial statement annual report for a stock-market based popular company
C1: Identify accounting, accounting standards, and objectives of financial and managerial accounting.
C2: Identify and differentiate between the four basic financial statements, purposes and elements.
C3: Describe an effective accounting information system and management’s role.
C4: Analyze cost behaviors using various financial analysis.
C5: Identify, construct, and appraise budgets for effective management.
C6: Analyze financial statements to evaluate operations and performance.
Open Textbook: Accounting Principles: A Business Perspective
Pages 8, 18 -19, 23, 25 – 26, 32 (Competency 1)
Article: The Sarbanes-Oxley Solution by George D. Royster (Best’s Reviews-September 2003,: Copyright EBSCO Publishing)
Article: Sarbanes-Oxley: What It Means to the Marketplace by Coustan, Leinicke, Rexroad, and Ostrosky (Journal of Accountancy, February 2004, Copyright American Institute of Certified Public Accountants)
Pages 32 – 46, 65 – 73, 116 – 121, 202 – 204 (Competency 2)
Pages 164 – 169, 332 – 342 (Competency 3)
Chapter 23, pages 881 – 903 (Competency 5)
Chapter 17, starting from page 675 (Competency 6)
Open Textbook: Financial Accounting
Chapters 3 and 19 (Competency 2)
Chapter 6 (competency 3)
Open Textbook: Managerial Accounting
Chapters 5 and 6 (Competency 4)
Chapter 9 (Competency 5)
Open Textbook: Management Accounting Concepts and Techniques
Chapters 3, 4 and 5 (Competency 4)
Chapter 20 (Competency 5)
Instructions:
1. Review company’s financial information and process financial statement briefing and analysis.
You will need to conduct research to locate the company’s financial statements and/or annual reports.
General Electric: https://www.ge.com/investor-relations/annual-report
2. Read in detail, at least 3 financial documents provided relating to selected company. The required readings and research are as follows: latest annual report or 10-K filing, annual letter to shareholders and management’s discussion and analysis. Students may research more documents than mentioned; however, the student must research the noted document listed above, at minimum. You will find other documents very helpful such as financial highlights. While you are not required to research this document, it will be very helpful in summarizing financial outcomes.
4. Write a comprehensive report containing with the following elements: (If report is partially completed, the report will not be accepted. You must have all parts completed before I will grade your report. Remember this is a comprehensive report and must be summited as a whole.
Declared Company – Write 1-1.5 pages about the company and its direction from a financial standpoint (This is based on combination of narrative and quantitative measurements in the annual report.) (Measures C6)
It is suggested to write this section after researching items b-i below.
Identify the main financial statements in the annual report and describe the basic financial statement elements. Discuss if the financial statements follow GAAP and how can a user identify if it is compliance with GAAP. The suggested length be 1 to 1 ½ page. (Measures C2). I suggest using balance sheets e.g. Account receivables (Cash). This is maybe in management’s Discussion and analysis report, or Auditors report in internal controls.
The annual report information should discuss budget outcomes (Management’s discussion analysis and annual report should say something about Budget Outcome). Discuss budget results and management’s reflection and//or action of budget outcomes. How it was discus and how they dealt with it. E.g. discussing the budget report, how the managed to address any issues that came up with not meeting the budget or exceeding the budget. The management need to address this. The suggested length be ½ – 1 page. (Measures C4-C5)
Create a vertical analysis for the most recent year for one major financial statement (consolidated) Strongly recommend using Balance Sheet.
Measuring percentage of each item or element in the financial statement to the total asset, total liability, and owner’s equity. Go line by line and measure what is the ratio of the cash to the total asset, the account receivables to the Assets, account payables to the liabilities. Inventory by total assets. Talk about the one with the highest percentages, Total assets is 100%. For example, if your cash is $75 and your total asset is $100 that means your cash is 75% of your total asset. It is the higher ratio of 75% and so pick the one with the highest ratio and talk about it. E.G. Discuss why it is the way it is (Management’s discussion and analysis Report)
Do a vertical analysis of their financial statement and analyzing accounting element and dividing the numbers of that accounting elements by total assets (Suggest using balance sheets) Go line by line to divide by assets, liabilities, and owners’ equity. (Measures C6)
Create a horizontal analysis for the most recent year and immediate prior year for one major financial statement (consolidated). Use year 2021 and 2020. Going over increase and decrease from one year to the next. Go the lined item on financial statement to compare them. The most recent change. For example, Transportation expenses became high due to cost of fuel (Management’s discussion and analysis. Which line has the highest in one or two sentences says why it is high (measures C4 & C6)
There are various categories of financial ratios discussed in this course. Discuss each category Profitability, Solvency, Efficiencies, and Liquidity ratios. For each category pick 2 ratios to calculate based on the information on the financial statements contained in the annual report.
You must show your work on ratio calculation and result.
Show formula for the ratio (2 Ratio per category)
Show work for formula, numbers that goes into the formula to create each ratio.
Discuss the ratio results and its meaning if it meets the industry turnout. The student may integrate information in the report that explains ratio analysis and outcome. For example, if the current ratio is 2:1, it means that they are very well funded to cover any liability should they decide to close the operation. They have enough cash to meet all current liabilities and some future expenses
5. The report must be in one document. Final report should be submitted here. Piecemeal reports will not be accepted and will automatically receive a 0. Citations and citation page are required, if applicable.
Report deliverables specifications:
– Times New Roman font
– Size 12
– Doubled space
– Moderate margin.
– Citation page is required.