Assignment 1
Historical Financial Statements: Appendix A [WLO: 3] [CLO: 1]
Any equity research report will include the historical financial performance of the company. The
financial statements form the basis of facts for the company and those facts contribute to the
determination of the buy, hold, or sell investment recommendation. For this assignment, you
will use the Mergent database through the university library to retrieve 3 years of financial
statements (i.e., the income statement, balance sheet, and statement of cash flow) for your
chosen publicly traded company that pays dividends. You should use the same company you
picked for your Post Your Introduction discussion forum. Then you will format that financial
information using a spreadsheet program like Excel. The video below explains how to format
your company’s financial information.
Title this assignment “Appendix A.” Be sure to save both formats (Excel and PDF) of these files
for later use.
Note: You will use all of the assignments in Weeks 1 through 4 for your Week 5 final project for
this course.
Prepare:
Prior to beginning work on this assignment,
• Complete the Week 1 – Learning Activity in Amplifire .
• Select a publicly traded company that pays dividends (per the instructions in the Week 1
– Post Your Introduction).
• Review the BUS401: Principles of Finance Research Guide (Links to an external site.).
o Review the Excel resources in the BUS401: Principles of Finance Research Guide
(Links to an external site.).
• Watch the following video that will help you format the financial statements for
Appendix A:
Retrieving Financial Statements Using Mergent (Links to an external site.)
Research:
Using the Mergent database in the university library,
• Find your chosen dividend-paying company within the Mergent (Links to an external
site.) database.
• Follow the instructions in the video above to retrieve and format the 3 most recent
years of historical financial statements (income statements, balance sheets, and
statements of cash flows).
Construct Appendix A:
• Retrieve the 3 most recent years of historical financial statements (income statements,
balance sheets, and statements of cash flows) for your chosen company using Mergent.
Then using a program like Excel, and based on the instructions in the BUS401 |
Retrieving Financial Statements Using Mergent (Links to an external site.) video.
o Format the income statement.
o Format the balance sheet.
o Format the statement of cash flows.
• Save this Excel file as a PDF and title it “Appendix A.”
Assignment 2
Common Size Financial Statements: Appendix B [WLO: 4] [CLO: 2]
In your first assignment this week you retrieved the financial information for your chosen
company. Analysts must evaluate a company’s financial statements to understand its
performance over time. Common size statements “allow analysts to compare the relative
composition of the company’s accounts over time” (Hickman et al., 2013, Section 11.3, para. 5).
For this assignment, you will take the formatted financial statements you retrieved using
Mergent and construct common size income statements and common size balance sheets for
your chosen company. The video below explains how to construct a common size income
statement and balance sheet using Excel.
Title this assignment “Appendix B.” Be sure to save both formats (Excel and PDF) of these files
for later use.
Prepare:
Prior to beginning work on this assignment,
• Review Chapter 2 and Chapter 11: Section 11.3 in Essentials of finance.
• Complete the Week 1 – Assignment 1, Historical Financial Statements: Appendix A
o You will be using the Excel file from Mergent for this assignment
• Watch the following video that will go over how to create and format Appendix B:
(Links to an external site.)
BUS401| Creating Common Size Financial Statements in Excel (Links to an external site.)
Construct Appendix B:
Using the formatted income statement and balance sheet in Excel from Week 1 – Assignment 1,
and following the instructions in the BUS401| Creating Common Size Financial Statements in
Excel (Links to an external site.) video,
• Calculate and format the common size income statement for the three years.
• Calculate and format the common size balance sheet for three years.
• Save this Excel file as a PDF and title it “Appendix B”.
Assignment 3
Section : Financial Statement Analysis [WLO: 5] [CLOs: 1, 2]
In order to determine if you can recommend buying or selling a stock, you first must
understand how the company has performed recently. Would you want to invest in a company
that has had negative earnings for the past 3 years? What about a company that has increased
the amount of debt on its balance sheet? Or, would you prefer to invest in a company that has
had consistent increases in revenues or net earnings over the past 3 years? As the equity
analyst, your first task would be to determine the evidence of patterns in the recent financial
performance. The financial analysis provides significant insight into the company’s strengths
and weaknesses.
To fully understand a company’s financial performance, you cannot “evaluate performance
using numbers alone. This level of analysis does not involve an understanding of the cause of
performance…an analyst must look beyond the numbers” (Hickman et al., 2013, Section 11.3,
para. 7). In the real world, an analyst spends extensive time and effort researching the business
strategy, operations, marketing, and other elements that have contributed to this financial
performance. For this class, you will limit your investigation of the company to the historical
financial analysis, ratio and competitive analysis, and the valuation of the stock. This Week 1
assignment will become Section 1 of the Week 5 final project.
Prepare:
Prior to beginning work on this assignment,
• Review the Week 1 Model Assignment (Links to an external site.).
• Make sure you have completed both Week 1 – Assignment 1 and Week 1 – Assignment 2.
It is recommended that you keep those Excel or PDF documents available when
completing this assignment.
• Complete the Week 1 – Learning Activity.
• Review Chapter 2 and Section 11.3 from Chapter 11 in the textbook.
• Review the Week 5 – Final Project for this course.
Write:
For this assignment, address the following seven parts in a Word document:
Part 1: Overview of the company (one paragraph)
• State the name of the company.
• Provide a brief overview of the company you selected, including a description of its
business operations.
• State the current market price per share.
Part 2: Income statements (one to two paragraphs)
• Summarize key trends in revenues, operating income, and net income over the last 3
years.
Part 3: Common size income statements (one paragraph)
• Evaluate the trends in gross margin, operating income margin, and net profit margin
over the past 3 years.
Part 4: Balance sheets (one to two paragraphs)
• Summarize key trends in total assets, total current assets, total current liabilities, longterm debt, and total shareholders’ equity over the past 3 years.
Part 5: Common size balance sheets (one paragraph)
• Evaluate the trends in total current assets as a percent (%) of total assets, total current
liabilities as a percent (%) of total assets, long-term debt as percent (%) of total assets,
and total shareholders’ equity as a percent (%) of total assets over the past 3 years.
Part 6: Cash flow (one paragraph)
• Calculate simple cash flow for the past 3 years.
o Show your calculations.
• Summarize the trend in simple cash flow for the past 3 years.
• Compare the simple cash flow to the net operating cash flow from the statement of
cash flows for the past 3 years.
Part 7: Financial analysis conclusion: (one paragraph)
• Determine the strengths and weaknesses of the company based primarily on the trends
in items discussed from the income statements, balance sheets, common size income
statements, and common size balance sheets, as well as the comments on cash flow.
• Create a table that indicates whether each financial fact is a strength or a weakness.
• Determine the overall financial strength of the company based on the financial facts
included as strengths or weaknesses.
o Categorize the overall financial performance of the company as strong, neutral,
or weak.
o Justify your conclusion based on the table you created.
The Section 1: Financial Statement Analysis
• Must be two to three double-spaced pages in length including any tables or calculations
(but not including title and references pages) and formatted according to APA Style
(Links to an external site.) as outlined in the Writing Center’s APA Formatting for
Microsoft Word (Links to an external site.)
• Must include a separate title page with the following:
o Title of paper in bold font
▪ Space should be between title and the rest of the information on the title
page.
o Student’s name
o Name of institution (The University of Arizona Global Campus)
o Course name and number
o Instructor’s name
o Due date
• Must utilize academic voice. See the Academic Voice (Links to an external site.) resource
for additional guidance.
• Must include a separate references page that is formatted according to APA Style as
outlined in the Writing Center. See the APA: Formatting Your References List (Links to an
external site.) resource in the Writing Center for specifications.
• Must cite where the financial statement information comes from (i.e., Mergent)
o For help citing the information from Mergent, see the BUS401: Principles of
Finance Research Guide (Links to an external site.).
Note: Since this is Section 1 of the Week 5 final project, there is no need for an introduction
paragraph.
