Financial Statement Analysis Project

Select two similar publicly traded companies (for example, Ford &
GM, or McDonalds & Wendys). You must get approval from your
professor for your company selections. Once a pair of companies is
selected by and approved for a team, those companies are not
available for others. See the accompanying list of potential pairings.
3.

After the professor has approved of your pair of companies,

download and save as a computer file each of the companies
10-K report for the fiscal year end of December 31, 2014 (or a
month end in 2014 or early 2015). You will be accessing various
parts of the 10-K during the rest of the semester to answer various
questions.
You can retrieve reports in two main ways. You can go to the
companys website and search for Investor Relations. You will be
looking for the companys 10-K Report. The financial statements,
auditors report, and notes to the financial statement are usually in
Section 8 of the 10-K report. The income statement may be shown as
Consolidated Income Statement or Consolidated Statements of
Operations, and the balance sheet may be shown as Consolidated
Statement of Financial Position. The reports should be comparative
with the year ended in 2014 (or early 2015) and 2013 on the same
report.
NOTE: In our textbook, check out the auditors report , balance
sheet , income statement.
Another way to access this information is to get each companys 10-K
report on Edgar on the SEC website
(www.sec.gov/edgar/searchedgar/webusers.htm or
www.sec.gov/edgar.shtml.
Follow the way I described in the class to retrieve the financial
statements.
Print or make TWO copies of each companys Income
Statement, Balance Sheet, and Auditors Report or download
them in excel. One set will be handed in to me for my reference.
The other set of copies should be included as attachments to your
final report.

SECTION I -- Set-up of Companies on Excel

1.
Enter the Income Statement for each company (side-by-side). You
may need to do
some( calculations to determine steps like Gross Profit, if that figure is
not provided by your company.
2.
Enter the Balance Sheet for each company (side-by-side). You may
need to do
some calculations to determine Current Assets or Current
Liabilities. List the
current assets individually, but show the total as well.

SECTION 2 -- Vertical Analysis

1. Insert percentage (%) analysis next to each dollar ($) amount for both
Income Statements and both Balance sheets. This is called vertical
analysis. The percentages should be done with formulas in the cell
rather than just typing the percentage amount.
For the income statements divide every number by total revenue and
find the percentage
For the balance sheet divide every number by total assets and find the
percentage
SECTION 3 Financial Analysis
1.
2.

3.

2.

Compare the two companies using the ratios discussed in each

chapter in your textbook.
Give your opinion if you are the investor, creditor and in the
management team. Remember some ratios concern investors, others
creditors and the rest do interest the management (efficiency ratios).
You need to compare and comment in which company has a better
performance in each ratio.
Evaluate each companys Auditors Report from 2014.
(NOTE: You will have to look at the 10-K for this information. It is
called the Report of Independent Registered Public Accounting
Firm. Make sure it is not the report on internal control.)
1.

Who is the auditor for the company?

2.
Was each company issued a clean audit report? And if not,
why not?

SECTION 4 Critical Analysis

If you could invest $10,000, which company would you invest in and why?
Support your decision by your answers to the following questions:
1.

Which company has the strongest position in terms of being a going

concern? What can the weaker company do to improve their position
in terms of being a going concern?

2.

Which company has the strongest position in terms of profitability?

What can the weaker company do to improve their profitability?

3.

Which company has the strongest position in terms of solvency? What

can the weaker company do to improve their solvency?

4.

Which company has the strongest position in terms of operating

efficiency? What can the weaker company do to improve their
operating efficiency?

5.

Which company has the strongest position in terms of rewarding its

owners? What can the weaker company do to improve their position
in terms of rewarding its owners?

Your answers to the previous 5 questions include your analysis of the

horizontal, vertical, and ratio analyses done in Sections 2 and 3. See the
sample analyses in Chapter 12 for these questions for Tucker Enterprises,
Inc. I expect your analyses to provide the same level of discussion and
support for your evaluations.
SECTION 5 In class Presentation
1.

Select the 4-5 most important ratios (you decide) and convert them
into graphs. For groups of 3 members, do 4 ratios; for groups of 4
students, do 5 ratios.
2. Create a PowerPoint slide show for your presentation. Start with an
introduction to your two companies, including some basic data on one
slide such as total sales, gross profit, net income, total assets, total
liabilities, and total equity. Follow the introduction and company
overviews with your graph slides. Have each team member explain a
graph. At the end, indicate which company you would invest in and
why, as well as what the weaker company could do to improve its
position.