Project Assignment: Analyzing Financial Statements and Cash Flows of a Company, Exercises of Financial Statement Analysis

A project assignment for students to analyze the financial statements and cash flows of a company. The assignment includes tasks such as summarizing revenue and expense recognition policies, computing ebit and ebitda, preparing graphs, reviewing income statements and md&a, reconciling net income and comprehensive income, and comparing financial statements and accounting policies with a competitor. The goal is to gain a deeper understanding of a company's financial performance.

Typology: Exercises

2011/2012

Uploaded on 12/13/2012

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Project Assignment
Chapter 7
1. Summarize your project company’s revenue and expense recognition polices and any
critical estimates that are made in this process.
2. Compute EBIT and EBITDA for you company for the most three recent years.
3. Prepare a graph of Net Income, EBIT, and EBITDA. Comment on anything unusual that
the graph reveals.
4. Review your company’s income statement and also the results of operations section of
MD&A and discuss any reported and unreported nonrecurring items.
5. Prepare a schedule that reconciles Net Income and Comprehensive Income for your
company.
6. Review the investor relations section your project company’s website looking for press
releases that discuss earnings announcements in the past year. Does your company
report earnings on a pro forma basis in these releases? If so, what are the difference
between net income and the pro forma amounts reported?
7. Compute Free Cash Flow and CFO/Total Liabilities for your project for the three most
recent years. Indicate whether the ratio of improving or declining.
8. Computer Operating Cash Flow per Share for the three most recent years. Compare
these amounts to reported Basis Earnings per Share and explain any unusual differences
between the two.
9. Compute Cash Flow Adequacy for your company (using a three year window) and
comment on what it means.
10. Determine a competitor to your company and perform the following analysis
a. Compare the financial statements and comment on differences in items
reported, level of detail, and format
b. Compare accounting policies and critical account estimates noting similarities
and differences
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Project Assignment

Chapter 7

  1. Summarize your project company’s revenue and expense recognition polices and any critical estimates that are made in this process.
  2. Compute EBIT and EBITDA for you company for the most three recent years.
  3. Prepare a graph of Net Income, EBIT, and EBITDA. Comment on anything unusual that the graph reveals.
  4. Review your company’s income statement and also the results of operations section of MD&A and discuss any reported and unreported nonrecurring items.
  5. Prepare a schedule that reconciles Net Income and Comprehensive Income for your company.
  6. Review the investor relations section your project company’s website looking for press releases that discuss earnings announcements in the past year. Does your company report earnings on a pro forma basis in these releases? If so, what are the difference between net income and the pro forma amounts reported?
  7. Compute Free Cash Flow and CFO/Total Liabilities for your project for the three most recent years. Indicate whether the ratio of improving or declining.
  8. Computer Operating Cash Flow per Share for the three most recent years. Compare these amounts to reported Basis Earnings per Share and explain any unusual differences between the two.
  9. Compute Cash Flow Adequacy for your company (using a three year window) and comment on what it means.
  10. Determine a competitor to your company and perform the following analysis a. Compare the financial statements and comment on differences in items reported, level of detail, and format b. Compare accounting policies and critical account estimates noting similarities and differences

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