Overview
In this assignment you’ll have an opportunity to apply the accounting concepts you learned in class to a real-world public company by analyzing its financial statements and footnotes, interpreting key performance indicators, and evaluating its financial strategy and risks.
Instructions:
Select one company from the list below: (Note: Do that as early as possible & start familiarizing yourself with their financial statements and the different accounting method they have used. Use the beginning of each class time to ask any questions you may have).
No. | Name of Company | Symbol |
1. | Nvidia | NVDA |
2. | Alphabet | GOOG |
3. | Mcdonal’s | MCD |
4. | United Health | UNH |
5. | Sherwin Williams | SHW |
6. | Delta Airlines | DAL |
7. | Schlumberger | SLB |
8 | PepsiCo | PEP |
9. | Johnson & Johnson | JNJ |
10 | Netflix | NFLX |
Download the latest audited annual report (including the full set of financial statements and notes). Answer the following questions based on the company’s official disclosures—no external analyst summaries or media reports. Show all calculations clearly. Where you make estimates, state and justify your assumptions.
Q1. Construct the extended accounting equation for each of the last two years. Identify and discuss the main changes in Assets from the prior year. Explain how these changes were financed. Support with numbers.
Q2. From the notes to the financial statements along with the numbers reported in the financial statements determine the gross receivables, the provision or allowance for doubtful accounts, and the net realizable value for each year. State and discuss the accounting convention/principle, used/followed in preparing the allowance?
Q3. From the notes to the financial statements determine the inventory valuation method(s) used? Given the general price level changes over the last year explain the impact of the method(s) used on the related figures reported in the financial statements.
Q4. List the major categories of Long-term (Non-current assets). From the notes to the financial statements determine the depreciation/ depletion/ amortization methods used. Explain the meaning of goodwill and how it is accounted for.
Q5. Determine the number of shares authorized, issued, and outstanding for each of the last two year. Explain the impact on earnings per share (EPS) if the number of shares has changed.
Q6. List the different categories of revenues. Describe the revenues recognition principle(s) used.
Q7. Determine EBIT & EBITDA for each year. Explain the meaning of each & explain what EBITDA reveals to the users of the financial statements that EBIT doesn’t.
Q8. Explain how you would assess the quality of earnings reported. Comment on the company’s quality of earnings over the study period. Support you statement with numbers.
Q9. Determine the Free Cash Flow (FCF) for each year. Explain why FCF is important to investor.
Q10. Calculate the degree of operating leverage (DOL) using percentage changes in EBIT and sales revenue for the latest two years. Interpret what this means for the company’s risk profile. Show your calculations. Use the operating leverage you just estimated and prepare a contribution margin format income statement.
Q11. Accounting Analysis – Based on your answers above, evaluate the management choices of the different accounting methods and determine whether management has been liberal or conservative in these choices. Support your statement.
Q12. Calculate or determine the company’s Return on Equity (ROE) for each year. Determine the relative contribution of operational & financing activities.
Q13. Diversity, Equity, & Inclusion (DEI): What does the company think of its role in society? Is management committed to DEI? Support your answer with figures form the company's annual report.
ESG: Does the company implement an ESG framework? How much was their ESG score over the last 3 years? What does it mean to you as an investor? How does the company compare to competitors.
Deliverables:
Create a professional report with clearly labelled sections corresponding to each question. Remember to introduce your company before you start your answer.
Referencing and Citation:
As part of your academic responsibilities, all submitted work must adhere to the APA 7th edition guidelines for proper referencing. Please refer to this resource Links to an external site.to verify citation and formatting rules before submitting your assignments.