Guide to Analyzing Financial Statements

1. You will need the most recent twoannual SEC 10-K filings for your company. Some places to look for the data include the company website or the SEC website (EDGAR database)-SEC website (Edgar database)My recommendation is to use the SEC website option, so that you can have the information downloaded as an Excel file. Using the website above, find your company, click on the red numbers under the “CIK” column, then find the most recent two 10-Ks.  After locating the 10-Ks select the “Interactive Data” button beside the 10-K. This will then open a new page named “View Filing Data” from here you will want to select “View Excel Document” which will be in red letters underneath your company’s name. Refer to the Project Instructions Video for help.

To find the financial statements, go to the company's webpage and look for a link called Investor Relations or Corporate Information or something along those lines. This may be found at the bottom of the company's main webpage. You should see information on Annual Report, SEC Filings, Stock Charts, etc. Using the SEC filings (either through the EDGAR link above or the company website), you will need annual filings and you will need the most recent 2 years’ 10-Ks. That is the SEC version of the annual report. Look for the financial statements in the 10-K (it will be item 8). The SEC 10-K information may be downloaded in Excel which may save you some time.

Do not use the financial statements on Yahoo or Google Finance or MSN Money because they have summary or condensed formats and do not give you the detail account information. You will need the most recent financial statements and you must use the annual financial statements, not quarterly. Feel free to e-mail me if you have questions about the information you need.  Please check out the "video" explanation of the project and the FAQs found in the project folder on WTClass. 

2. Using an Excel spreadsheet* and your company's financial statements, compute the following for the most recent two years(chapters with information on each ratio are in parenthesis next to the ratio, refer to the tables in Section 13.3 Ratio Analysis on WileyPlus or pages 661-662, Appendix 13A provides a great example of ratio analysis):    

-Current ratio (2,13)

-Working capital (not really a ratio) (2, 13)

-Inventory turnover ratio (6, 13)

-Accounts Receivable turnover ratio (8, 13)

-Debt to total assets ratio (2, 13)

-Return on assets (9,13)

-Asset turnover ratio (9, 13) 

-Return on equity (11, 13)

-Gross profit ratio (5, 13)  

-Profit margin ratio (5, 13).

3. Also using the spreadsheet, prepare the following for the most recent two years:

-Comparative Income Statement - VerticalAnalysis (Illustration 13-12 in Section 13.2 Comparative Analysis on WileyPlus or see page 658 for example)

-Comparative Balance Sheet - HorizontalAnalysis (Illustration 13-9 in Section 13.2 Comparative Analysis on WileyPlus or see page 656 for example)

4. Find industry comparative numbers on the MSN Money for the following items calculated in # 2 above:

-Current Ratio

-Inventory Turnover

-Return on Assets

-Asset Turnover

-Return on Equity

-Profit Margin (Net Profit Margin)

Refer to the Project Instructions Video for help. The industry comparative numbers should be the most recent available. You should refer to Appendix 13A.    

5. Using the information gathered and calculated above, write up an analysis of your company. Begin with a brief history of the company to help the reader understand the company. Next include a discussion of the company's financial performance as seen through ratios and other calculations, whether favorable or unfavorable. The analysis should also give a conclusion on how the company has performed in the past and what its future looks like.  

The analysis is to be written by you, not copied from a professional analyst's work.  When writing up the analysis, refer back to the ratios and other calculations above to support your conclusions. The data should be analyzed from two different perspectives: across time and across companies (industry data). Be sure to explain what the calculations mean. The analysis should be done in a professional manner (typed, double-spaced, 1” margins, 10-12 font, proper grammar, appendices, cover page, graphs, references, etc.).  The written portion of the paper should be about 2-5 pages.

6. Report, with analysis and supporting data (cutting and pasting between Excel and Word might save you some time). Submit your finished project with a cover sheet that incudes your name and class section in the Financial Statement Analysis Dropbox (attach your Word and/or Excel files or pdf).  Please make sure it is ready for me to print.