Financial Reporting and Analysis Cases



Fingraph( Financial Reporting and Analysis Cases Using CPAnalyst(

Choose a subject from the headings below.

CPAnalyst® - Financial Statements and The Uses of Accounting Information

Choose any company in the CPAnalyst® software on the Fingraph CD-ROM. You will find the company's URL (Internet address) in the heading of the company's spreadsheet located on the CD. Click on the URL to go to the web site and read the Annual Reports to and learn more about the company.

1. In the company’s annual report, find a description of the business. What business is the company in? How would you describe its operating activities?

2. Find and identify the company’s four basic financial statements. Which statement shows the resources of the business and the various claims to those resources? From the balance sheet, prove the balance sheet equation by showing that the company’s assets equal its liabilities plus stockholders’ equity. What is the company’s largest category of assets? Which statement shows changes in all or part of the company’s stockholders’ equity during the year? Did the company pay any dividends in the last year?

3. Which statement is most closely associated with the company’s profitability goal? How much net income did the company earn in the last year? Which statement is most closely associated with the company’s liquidity goal? Did cash (and cash equivalents) increase in the last year? Which provided the most positive cash flows in the last year: operating, investing, or financing activities?

4. Prepare a one-page executive summary that highlights what you have learned from parts 1, 2, and 3. An executive summary is a short, easy-to-read report that emphasizes important information and conclusions by listing them by numbered paragraphs or bullet points.

CPAnalyst® - Accounting Policies and Learning About A Company

Choose any company in the CPAnalyst® software on the Fingraph CD-ROM. You will find the company's URL (Internet address) in the heading of the company's spreadsheet located on the CD. Click on the URL to go to the web site and read the Annual Reports andto learn more about the company.

1. From the company’s annual report, determine the industry(ies) in which the company operates.

2. Find the summary of significant accounting policies that appears following the financial statements. In these policies, find examples of the application of recognition, valuation, and classification.

3. Identify six types of transactions that your company would commonly engage in. Are any of these transactions more common to the industry in which your company operates than for other industries? For each transaction, tell what account would typically be debited and what account would be credited?

4. Prepare a one-page executive summary that highlights what you have learned from parts 1, 2, and 3.

CPAnalyst® - Financial Statements, Accrual Accounting, and Accounting Policies

Choose any company in the CPAnalyst® software on the Fingraph CD-ROM. You will find the company's URL (Internet address) in the heading of the company's spreadsheet located on the CD. Click on the URL to go to the web site and read the Annual Reports and to learn more about the company.

1. Does the company have a calendar year end or other fiscal year? Do you think the year-end corresponds to the company’s natural business year?

2. Find the company’s balance sheet. From the asset accounts and liability accounts find four examples of accounts that might have been related to an adjusting entry at the end of the year. For each example, tell whether it is a deferral or an accrual and suggest an income statement account that might be associated with it.

3. Find the summary of significant accounting policies that appears following the financial statements. In these policies, find examples of the application of going concern and accrual accounting. Explain your choices of examples.

4. Prepare a one-page executive summary that highlights what you have learned from parts 1,2, and 3.

CPAnalyst® - Income from Operations

Choose any retail company from the CPAnalyst® software on the Fingraph CD-ROM and display the Income Statements Analysis: Income from Operations in tabular and graphical form for the company.

Write an executive summary that analyzes the change in the company’s income from operations from the first to the second year. In preparing your response, focus on the reasons why the change occurred by answering the following questions: Did the company’s income from operations improve or decline from the first to the second year? What was the relationship of the change to the change in net sales? Was the change in income from operations primarily due to a change in gross margin or a change in operating expenses? Suggest some possible reasons for the change in gross margin or operating expenses. Use percentages to support your answer.

CPAnalyst® - Short-Term Financial Assets

Choose any two companies from the same industry in the CPAnalyst® software on the Fingraph CD-ROM. The industry chosen should be one in which accounts receivable is likely to be an important current asset. Suggested industries from which to choose are manufacturing, consumer products, consumer food and beverage, and computers. You will find the each companyie’s’ URL (Internet address) in the heading of the companyies’s spreadsheets located on the CD. Click on the URL’s to go to the web sites and read the Annual Reports and to learn more about the companies.

1. Find and read in the annual reports for the companies you have selected any reference to cash and cash equivalents, short-term or marketable securities, and accounts receivable in the summary of significant accounting policies or notes to the financial statements.

2. Display and print for the companies you have selected: (a) the Current Assets and Current Liabilities Analysis page and (b) the Liquidity and Asset Utilization Analysis page in tabular and graphical form. Prepare a table that compares the quick ratio, receivable turnover, and average days’ receivable for both companies for two years.

3. Find and read the liquidity analysis section of management’s discussion and analysis in each annual report.

4. Write a one-page executive summary that highlights the accounting policies for short-term liquid assets and compares the short-term liquidity position of the two companies. Include your assessment of the companies’ relative liquidity and make reference to management’s assessment. Include the CPAnalyst® pages and your table as an attachment to your report.

CPAnalyst® - Inventories

Select any two companies from the same industry on the CPAnalyst® software on the Fingraph CD-ROM. Choose an industry such as manufacturing, consumer products, consumer food and beverage, or computers, in which inventories is are likely to be an important current asset. You will find the each companies’scompany's URL (Internet address) in the heading of the companyies’s spreadsheets located on the CD. Click on the URL’s to go to the web sites and read the Annual Reports and to learn more about the companies.

1. In the annual reports for the companies you have selected, read any reference to inventories in the summary of significant accounting policies or notes to the financial statements. What inventory method does the company use? What are the changes in and relative importance of raw materials, work-in-process, and finished goods inventories?

2. Display and print in tabular and graphical form the Liquidity and Asset Utilization Analysis page. Prepare a table that compares the inventory turnover and average days’ inventory on hand for both companies for two years. Also include in your table the operating cycle by combining average days’ inventory on hand with average days’ receivable.

3. Find and read references to inventories in the liquidity analysis section of management’s discussion and analysis in each annual report.

4. Write a one-page executive summary that highlights the accounting policies for inventories, the relative importance and changes in raw materials, work-in-process, and finished goods, and compares the inventory utilization of the two companies, including reference to management’s assessment. Comment specifically on the financing implications of the companies’ relative operating cycles. Include the CPAnalyst® page and your table as an attachment to your report.

CPAnalyst® - Current Liabilities

Choose any two companies from the same industry in the CPAnalyst® software on the Fingraph CD-ROM. The industry chosen should be one in which current liabilities is are likely to be important. Choose an industry such as airlines, manufacturing, consumer products, consumer food and beverage, or computers. You will find the each companies’sCompany's URL (Internet address) in the heading of the companyies’s spreadsheets located on the CD. Click on the URL’s to go to the web sites and read the Annual Reports and to learn more about the companies.

1. In the annual reports for the companies you have selected, read the current liability section of the balance sheet and any reference to any current liabilities in the summary of significant accounting policies or notes to the financial statements. What are the most important current liabilities for each company? Are there any current liabilities that appear to be characteristic of the industry? Which current liabilities are definitely determinable and which appear to be accrued liabilities?

2. Display and print in tabular and graphical form the Current Assets and Current Liabilities Analysis page. Prepare a table that compares the current ratio and working capital for both companies for two years.

3. Find and read references to current liabilities in the liquidity analysis section of management’s discussion and analysis in each annual report.

4. Write a one-page executive summary that highlights the most important types of current liabilities for this industry and compares the current ratio and working capital trends of the two companies, including reference to management’s assessment.

CPAnalyst® - Long-Term Assets

Choose any two companies from the same industry in the CPAnalyst® software on the Fingraph CD-ROM. The industry chosen should be one in which long-term assets is are likely to be important. Choose an industry such as airlines, manufacturing, consumer products, consumer food and beverage, or computers. You will find the each companyies’s URL in the heading of the companyies’s spreadsheets located on the CD. Click on the URL’s to go to the web sites and read the Annual Reports and to learn more about the companies.

1. In the annual reports for the companies you have selected, read the long-term asset section of the balance sheet and any reference to any long-term assets in the summary of significant accounting policies or notes to the financial statements. What are the most important long-term assets for each company? What depreciation methods do the companies use? Are there any long-term assets that appear to be characteristic of the industry? What intangible assets do the companies have and how important are they?

2. Display and print in tabular and graphical form the Balance Sheet Analysis page. Prepare a table that compares the gross and net property, plant, and equipment.

3. Locate the statements of cash flows in the two companies’ annual reports. Prepare another table that compares depreciation (and amortization) expense from the operating activities section with the net purchases of property, plant, and equipment (net capital expenditures) from the investing activities section for two years. Does depreciation (and amortization) expense exceed replacement of long-term assets? Are the companies expanding or reducing their property, plant, and equipment?

4. Find and read references to long-term assets and capital expenditures in management’s discussion and analysis in each annual report.

5. Write a one-page executive summary that highlights the most important long-term assets and the accounting policies for long-term assets, and compares the investing activities of the two companies, including reference to management’s assessment. Include the CPAnalyst® page and your tables as attachments to your report.

CPAnalyst® - Long-Term Liabilities

Select any two companies from the same industry on the CPAnalyst® Fingraph CD-ROM software. You will find the each companyies’s URL (Internet address) in the heading of the companyies’s spreadsheets located on the CD. Click on the URL’s to go to the web sites and read the Annual Reports toand learn more about the companies.

1. In the annual reports for the companies you have selected, identify the long-term liabilities from the balance sheet and any reference to any long-term liabilities in the summary of significant accounting policies or notes to the financial statements. There is likely to be a separate note for each type of long-term liability. What are the most important current liabilities for each company? What are the most important long-term liabilities for each company?

2. Display and print in tabular and graphical form the Balance Sheet Analysis page.

Prepare a table that compares the debt to equity and interest coverage ratios for both companies for two years.

3. Locate the statements of cash flows in the two companies’ annual reports. Has the company been increasing or decreasing its long-term debt? If increasing, what were each company's most important sources of long-term financing over the past two years? If decreasing, which are being decreased?

4. Find and read references to long-term liabilities in management’s discussion and analysis in each annual report.

5. Write a one-page executive summary that highlights the most important types of long-term liabilities for these companies, identifies accounting policies for specific long-term liabilities, and compares the debt to equity and interest coverage trends of the two companies, including reference to management’s assessment. Include the CPAnalyst® page and your table as an attachment to your report.

CPAnalyst® - Corporate Income Statement and Statement of Stockholders' Equity (1)

Select any two companies from the same industry in the CPAnalyst® software on the Fingraph CD-ROM. You will find the each companyies’s URL (Internet address) in the heading of the companyies’s spreadsheets located on the CD. Click on the URL’s to go to the web sites and read the Annual Reports andto learn more about the companies.

1. In the annual reports for the companies you have selected, identify the stockholders’ equity section of the balance sheet and reference to any stockholders’ equity accounts in the summary of significant accounting policies or notes to the financial statements. Do the companies have more than one kind of capital stock? What are the characteristics of each type of capital stock? Do the companies have treasury stock? Do the companies have an employee stock option plan?

2. Find the earnings per share and dividends per share in the annual reports for both companies. Also, find in the financial section of your local paper the current market prices of the companies’ common stock. Prepare a table that summarizes this information and also shows the price/earnings ratio and the dividends yield.

3. Locate the statements of cash flows in the two companies’ annual reports. Has the company issued capital stock or repurchased its stock in the last three years?

4. Find and read references to capital stock in management’s discussion and analysis in each annual report.

5. Write a one-page executive summary that highlights the types of capital stock for these companies, significance of treasury stock, employee stock option plan, and compares the price/earnings ratio and the dividends yield trends of the two companies, including reference to management’s assessment. Include your table as an attachment to your report.

CPAnalyst® - Corporate Income Statement and Statement of Stockholders’ Equity (2)

Choose any two companies from the same industry in the CPAnalyst® software on the Fingraph CD-ROM. You will find the each companyies’s URL (Internet address) in the heading of the companyies’s spreadsheets located on the CD. Click on the URL’s to go to the web sites and read the Annual Reports toand learn more about the companies.

1. In the annual reports for the companies you have selected, identify the corporate income statement and its summary of significant accounting policies, usually the first note to the financial statements. Did the companies report any discontinued operations, extraordinary items, or accounting changes? What percentage impact did these items have on earnings per share? Summarize the methods and estimates each company uses in a table. If the company changed its accounting methods, was the change the result of a new accounting standard or a voluntary choice by management? Evaluate the quality of earnings for each company.

2. Did the companies report a statement of stockholders’ equity or summarize the changes in stockholders’ equity in the notes only? Did the companies declare any stock dividends or stock splits? Calculate book value per common share.

3. Find in the financial section of your local paper the current market prices of the companies’ common stock. Discuss the difference between market price per share and book value per share.

4. Find and read references to earnings per share in management’s discussion and analysis in each annual report.

5. Write a one-page executive summary that highlights the quality of earnings for these companies, the relationship of book value and market value, the existence or absence of stock splits or dividends, including reference to management’s assessment. Include your table as an attachment to your report.

CPAnalyst® - Statement of Cash Flows

Choose any two companies from the same industry in the CPAnalyst® software on the Fingraph CD-ROM. You will find the each companyies’s URL (Internet address) in the heading of the companyies’s spreadsheets located on the CD. Click on the URL’s to go to the web site and read the Annual Reports toand learn more about the companies.

1. In the annual reports for the companies you have selected, identify the statement of cash flows. Do the companies use the direct or indirect form of the statement?

2. Display and print in tabular and graphical form the Statement of Cash Flows: Operating Activities Analysis page. Prepare a table that compares the cash flow yield, cash flows to sales, and cash flows to assets for both companies for two years. Are the ratios moving in the same or opposite directions? Study the operating activities sections of the statements to determine the main causes of differences between the net income and cash flows from operations. How do the companies compare?

3. Display and print in tabular and graphical form the Statement of Cash Flows: Investing and Financing Activities Analysis page. Prepare a table that compares the free cash flow for both companies for two years. How do the companies compare? Are the companies growing or contracting? Study the investing and financing activities sections of the statements to determine the main causes of differences between the companies.

4. Find and read references to cash flows in the liquidity analysis section of management’s discussion and analysis in each annual report.

5. Write a one-page executive summary that reports your findings from parts 1–4, including your assessment of the companies’ comparative liquidity. Include the CPAnalyst® pages and your tables as attachments to your report.

CPAnalyst® - Long-Term Investments

Select any two companies from the same industry on the CPAnalyst® software on the Fingraph CD-ROM. You will find the each companyies’s URL in the heading of the companyies’s spreadsheets located on the CD. Click on the URL’s to go to the web sites and read the Annual Reports toand learn more about the companies.

1. In the annual reports for the companies you have selected, identify the balance sheet accounts associated with long-term investments and the notes to the financial statements. What type of long-term investments does each company have? Are the investments valued at cost or market? What is the difference between cost and market value? Did the companies report unrealized gains and losses on their investments? Summarize in a table the type of investments, how they are valued, and the amount of cost and market value and unrealized gains and losses.

2. Identify the income statement for the companies you selected. Did the companies report any interest or dividend income? If so, what are these amounts? An examination of the notes may be necessary.

3. Write a one-page executive summary that highlights the types of long-term investments and their valuation, and the impact on net income in the current year, including reference to management’s assessment. Include your table as an attachment to your report.

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