The purpose of this project is to give students exposure to the 10-K annual report and filings publicly traded companies are required to make with the SEC.
Students will examine the 10-K annual report in alignment with our coverage in Chapters 3, 4, & 5.
When completing the assignment, the student is taking the perspective of the accountant presenting information to the board of directors/stockholder meeting. Students are not evaluating the company or developing a conclusion on the results of the company but presenting the facts about the company. In the ratios, students should indicate what would be expected for the given company and industry and then the results from your chosen company.
- Choose a publicly traded company and access the most recent annual report, 10-K, from the company website or the SEC EDGAR database. Downloading the financial statements in Excel format is good for the ratio computations, but a PDF version will be better for reading and answering the remaining questions.
- Compute the following ratios along with vertical (common size) and horizontal (trend) analysis. Chapter 5 provides guidance on these ratios. To evaluate ratios more than one year is required, so, I would like to see these computed for a six-year period. This will require you to obtain the most recent 10-K report and then the next prior report to give you an overall six-year period to review. Prepare a chart for a six-year period for your company comparing net income to net cash flows from operations. Do you find other information in the annual report to explain any significant differences or similarities?
Hint: Highlight your data, click on Insert, select Chart. There should be a separate line for net income and a separate line for operating cash flows. If necessary, edit the chart by opening the Chart Design tab and clicking Select Data. There should be two series.
- What information is learned from the Management’s Discussion & Analysis (MD&A) section of the annual report? Is this information found elsewhere in the financial statements and notes?
- Did management discuss any non-GAAP earnings? Describe.
- The Balance Sheet is useful for determining liquidity and solvency. In examining the Balance Sheet, do you see any accounts specific to this company’s industry? Are these the assets and liabilities you would expect for this industry?
- When examining the Income Statement:
- Are the statements comparative? Why would a company present comparative data? How many years are presented?
- Are the statements consolidated? What subsidiaries does this company own?
- What types of revenues does this company generate? Are there significant accounting policies or methods of recognizing revenue for this company?
- What types of expenses does this company incur? Was interest, depreciation, taxes reported separately? Why do you think these items are reported separately?
- Were there any unusual or infrequent events? Describe.
- Were there any accounting changes that impacted the company’s financial statements for the period reported?
- Was EPS reported?
- How much income tax expense was reported?
- Did the company have comprehensive income? Type?
- Statement of Stockholder’s Equity – types of stock, treasury stock transactions. Any other significant equity transactions to discuss? Did the company pay dividends – common or preferred?
- Does the company use the direct or indirect method for the Statement of Cash Flows?
- Reviewing the Operating, Investing, and Financing Sections, discuss the outcomes of each section.
- Who audited the company’s financial statements? What type of report was issued? Were there any critical audit matters?
- In examining the Notes to the Financial Statements:
- How many topics are covered in the significant accounting policies?
- What inventory method was used?
- How is depreciation computed for this company?
- Does the company have any fair value measurements? What level?
- Are there any related parties?
- Were there any incidents of errors, illegal acts, or fraud?
- Did the company have any subsequent events?
- Does the company report segments?
- Did the company make a Human Capital Disclosure? Describe?
- Did the company make any ESG disclosures? Describe.
- How many directors and executives does the company have?
- Is executive compensation reported? Amount?
- How much compensation is provided via stock awards?
- Did the company file any 8-K reports with the SEC during the period? If so, what was the purpose?
- When examining the annual report, were there account names or concepts not used in this class? What did you find in the notes to the financial statements or codification research to explain these items?
- In your presentation and written report, please discuss the results of this analysis.
- What did you learn about your company? You are presenting the facts about the company to the board of directors/stockholders. In the ratios, students should indicate what would be expected for the given company and industry and then the results from your chosen company.
- Did you expect these results considering the information presented in the notes and management’s discussion and analysis?
- For each evaluation support your work with your findings from examining the report.
- See the grading rubric for details and time limit of the presentation.
Students will complete this project in groups. The class presentations will inform the class of your conclusions derived from the financial results of the company. The project will be submitted by Monday at 6am prior to the presentation so the instructor may review the submission and become familiar with the company selected.
Deliverables to be submitted on D2L by the due date. – one submission per group, each student to submit the group evaluation form separately.
- PowerPoint presentation including visuals to explain data.
- The typed report, 12 font, Times New Roman, 1-inch margins answering the above questions using a report writing style that flows, reports, evaluates, and summarizes findings with a conclusion supported by facts found in the project. The paper should contain a cover page with all group members names, and introduction, body, and conclusion. This is NOT a question-and-answer paper but should flow smoothly and incorporate all the work by all students in the group. The writing should incorporate introductory and concluding sentences for each section. For citations, referencing the page in the company’s 10-k will be sufficient for in-text. Include any other websites or company annual reports you use in your analysis in the References page. The following website provides guidance on APA style referencing.
- https://owl.purdue.edu/owl/research_and_citation/apa_style/apa_style_introduction.html
- Excel worksheet with ratio computations (using the functions of Excel). The format of the spreadsheet is determined by the group and should be easily read with the financial statements for all periods included as well as any charts developed from the data.
- The company’s annual report, 10-K, in pdf format for all years used in the project.
Macc & Honors – Write a two-page summary of the company’s ESG disclosures and reporting.
Is this on the website – financial statements – what are their ESG scores?
