Financial Accounting

ACCT 2301

THE ANNUAL REPORT PROJECT

DUE DATE FOR ANNUAL REPORT BOOKLET OR IF YOU USE THE INTERNET THE COPIES OR BOOKLET WITH THE 4 Financial Statements: MARCH 22, 2005

NOTES TO THE FINANCIAL STATEMENTS: APRIL 12, 2005

DUE DATE FOR FINAL PROJECT: MAY 3, 2005 (Beginning of class)

Instructions:

You must choose a U.S. Company that is publicly traded on the NYSE or the NASDAQ that has inventory and cost of sales in other words a retailer, wholesaler or manufacturer. Immediately after you choose the corporation for your project please sign up since each person in the class must select a different corporation. Requests will be honored based on first person to sign up on the class list will get first choice. Be sure to have more than one company in mind in case someone else picks the company that was your first choice before you get to sign up. When turning in the final project staple your project together and do not use expensive notebooks for your project because I retain your projects. Do not use a borrowed Annual Report because I retain them also.

Grammar and spelling will be considered. Please go to the writing center if you need help. Your term project should consist of a minimum of four double-spaced pages organized according to the following outline:

A. Introduction

Identify your company by writing in complete sentences a summary that includes the following elements:

1. Name of the chief executive officer

2. Home office

3. Ending date of latest fiscal year which is the report that must be used in this project.

4. Description of the principal products or services that the company provides.

5. Main geographic area of activity

6. Name of the company's independent accountants (auditors). In your own words, what did the accountants say about the company's financial statements? Are the financial statements the responsibility of the independent accountants? If not, who is responsible?

7. The closing market price of the company's stock on April 15, 2004, and its dividend per share for the last 12 months if there is not a dividend disclosed in the annual report. If there is a dividend in the annual report please use it. On which exchange is the company listed and what is its ticker symbol?

8. Many corporations have a corporate internet site. If your chosen company has one, what is the internet address for the company?

B. Industry Situation and Company Plans

Minimum of one-half page long preferably longer if that is what it takes to answer the following question completely. Describe the industry and its outlook and summarize the company's future plans based on your library research and on reading managementÐŽ¦s discussion in the annual report. Be sure to read the letter to the stockholders and include relevant information about the company's plans from that discussion. (Footnote sources)

C. Financial Statements

Income Statement: For the last two years reported list the income from continuing operations(also may be referred to as operating profit-see Chapter 3 and 5), the net income and comment on the cause or nature of the increase or decrease of the companyÐŽ¦s net income. If your company is a manufacturer, wholesaler or retailer determine the gross profit percentage(also called gross profit ratio) for the most recent 2 years. Please show your work. (Refer to chapter 6, p. 289)

Balance sheet: For 2 years show that Assets = Liabilities + Stockholders' Equity for the past two years. This should only require 3 numbers per year. Attaching or inserting the whole Balance Sheet does not satisfy this requirement.

Statement of Cash Flows: For each of the past two years are cash flows from operations more or less than net income? What is the companyÐŽ¦s main investing activity?(i.e. Cash Outflows in this section and amounts should be in parentheses) What is the company's most important source of financing?(i.e. Cash Inflow in this section which should not be in parentheses) Overall, has cash increased or decreased over the past two years?

D. Accounting Policies

What are the significant accounting policies, if any, relating to revenue recognition, cash, merchandise inventories, property and equipment (depreciation)?

What are the topics of the notes to the financial statements? List them. Do not get bogged down in the stock option plans and pension plans, although someday it may be important for you to understand such a note, at this time it would be impossible to understand the entire note. Would any of the information in the notes change your opinion of the company?

E. Ratio Analysis

Read Chapter 14 before attempting the calculations because they show you where in the financial statements to get the numbers. Show all the numbers used to calculate the ratios. Reference the location of any number not shown on the face of one of the four financial statements. Calculate the ratios marked with a (*) for the two most current years shown in the annual report. The other ratios need only to be calculated for the most recent year. See page 710 in your text for the basic formulas. Unless otherwise indicated follow the Home Depot example given in Chapter 14.

Tests of Profitability

1. Return on average ownersÐŽ¦ equity

2. Return on average total assets

3. Financial leverage percentage

4. Earnings per share*(Basic)-show the numbers used to calculate this amount using the weighted average shares reported either at the bottom of the income statement or in the notes under such titles as EPS or stockholdersÐŽ¦ equity. Do not use a simple average as shown in chapter 14. If your company has preferred stock use Net Income available to Common Stockholders.

5. Quality