analyze the financial statements

For Projects 2 and Project 3, you will analyze the financial statements and make projections for a company of your choice. Pick a publicly traded company you like and ‘download’ their financial statements in a way that allows you to analyze and manipulate the data in Excel.

Note: Do not pick a company in the financial services industry, like banks or insurance companies.

You can find financial statements of publicly traded companies on the internet, for example at finance.yahoo.com.  There, you can enter a company’s ticker symbol and you will arrive at a page with lots of different categories of information. You will find a link to Financials and you go there to access the company’s financial statements. You will typically find links to the Income Statement, the Balance Sheet and the Cash Flow Statement, and all three are typically available on a quarterly or annual basis.

Alternatively, you can go to the company’s website. They usually have an Investor Relations (IR) section that also provides financial statements.

In this project, we will use the data you gathered to calculate a series of financial ratios we have discussed in class and to interpret your data and findings.

Instructions

  1. Select a company of your choice and get their financial data into Excel
  • You need Income Statement, Balance Sheet and Cash Flow Statement for the last 5 years; make sure you download annual data
  • On some websites, you can download the data, on others you would have to copy/paste the data. Either way, make sure you captured the data correctly
  • Put all three financial statements onto the same tab underneath each other; this will make it much easier for you to calculate the different ratios
  • Format the financial statements appropriately
  1. Calculate a series of financial ratios
  • We have discussed numerous financial ratios in class and here, you ought to calculate those ratios based on the financial data you have gathered.
  • Below your financial statements, build a section with the following financial ratios and calculate them for each year for your company:
    1. Annual Revenue Growth
    2. Net Income Margin
    3. Return on Assets
    4. Return on Equity
    5. Earnings per Share
    6. Total Asset Turnover
    7. Receivables Turnover
    8. Days Sales Outstanding
    9. Total Debt Ratio
    10. Debt-to-Equity Ratio
    11. Equity Multiplier
    12. Times Interest Earned
    13. Current Ratio
    14. Quick Ratio
  1. Interpret the financial results and ratios
  • Write a paragraph in which you describe what you observe about the financial ratios for your company. Put the paragraph on a separate tab in your Excel file.
  • These observations will vary greatly depending upon the company you are analyzing. Some things you may want to consider are:
    • Are the company’s revenues growing or shrinking?
    • How did the company’s profitability develop over time?
    • Has the company drastically increased or decreased its use of debt?
    • Has ROE been rising or falling? If so, what has contributed to this change?
    • Do you see any major changes in the financial status of the company over the time period?

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