Team Project: Analyzing Financial Statements

* Acquire the financial statements of a large manufacturing

- company, such as General Motors, a large electric or gas utility company, such as Duke Energy Corporation or Ameren Corporation (previously Union Electric Company), and a large bank, such as Wells Fargo & Company. For each company, examine the balance sheet, income statement, statement of cash flows, and footnotes to the financial statements.

Prepare a short report in which you include the following:

a. Compute the proportion of total assets financed by noncurrent liabilities for each company. Which company has financed the largest portion of its total assets with noncurrent liabilities? Are the differences in percentages consistent with the operating characteristics of the three companies? Explain whether or not the results are consistent with your expectations. If not, attempt to find the reason for the difference.

b. Compute the ratio of noncurrent liabilities to total equity and to current liabilities for each company. Do the companies appear to be highly leveraged? Explain.

c. Compare the ratios computed in parts a and b with the ratios of another company in each of the same industries.

How do the proportions of noncurrent liabilities for your three original companies compare with those of the three new companies selected? Do these comparisons lead you to change the judgments you made in parts a and b? Explain.

Be sure to identify the other companies in your report.

d. Analyze the change in long-term debt during the past year for each of your three companies. Examine the beginning and ending balance sheet totals, any issuances or retirements of long-term debt reported in the cash flow statement, and the information presented in the footnotes. Are you able to account for the amount of change during the period? If not, what other reclassifications or activities may have occurred?