BUS 121 Managerial Accounting Summer 2015

Group Project

Overview:

Check the list of companies below and submit your top three selections to me first come, first served as to choices. Your choices must be made by Sunday,

Aerospace & Defense Industry:

Boeing Co. & Northrop Grumman Corp.

Alliant Techsystems Inc. & United Technologies Corp.

Textron Inc. & Raytheon Co.

Lockheed Martin Corp. & BE Aerospace Inc.

Communications Equipment Industry:

Harris Corp. & EchoStar Corp.

Ciena Corp. & Qualcomm Inc.

Exelis Inc. & Rockwell Collins Inc.

Electrical Equipment & Appliances Industry:

Whirlpool Corp. & Acuity Brands Inc.

Diebold Inc. & Belden Inc.

Emerson Electric Co. & Lennox International Inc.

EnerSys Inc. & Hubbell Inc.

Middleby Corp. & SunPower Corp.

Exide Technologies & A.O. Smith Corp.

Your group will function as an investment advisory firm to a large manufacturing conglomerate. Once you have selected your companies and have been approved, your group will begin an in-depth analysis of the two companies. The analysis will be comprised of several elements, such as both companies most recent financial statements, as well as learning all you can about the companies in terms of their products, success within their industry, and any current news that would be relevant to your advisory firm. In your financial analysis, you will be analyzing sales, manufacturing costs, net income, cash, etc. Your analysis will also require you to answer the questions listed below.

You will also take into account other factors that would influence your decision whether or not to recommend purchase of this stock. Some items in this category might include the companys green initiatives, a new product or service, recent cost cutting moves, or consolidation or merger with another company. Finding this information will be part of your research for the project.

Requirements:

The written final report will ultimately recommend to the Board of the Directors of the manufacturing conglomerate (your client) which of the two companies should be considered for acquisition purposes. You will support the reasons for recommending your choice by performing the necessary financial analysis and answering the questions below. The more detail and depth you include in your analysis, the better. I expect you to do a good job of explaining your position. I will not tell you how to do the project, as I want you as a group to develop your own best methods. However, I will act as a resource and a sounding board for suggestions and ideas.

Resources required for the project:

An Excel worksheet that includes your computations

The most recent financial statements for both companies

The report must be a minimum of three pages, a maximum of five, and it must be type-written using MS Word or comparable software, no more than 12-point font and double-spaced with margins of no more than one inch.

It is expected that each group member will actively participate in the project.

Project Grading:

Your project will be graded on completeness, correctness, creativity, and quality of presentation.

Managerial Accounting Group Project

Businesslike presentation:

Cover sheet - names

Grammar/spelling

Background for both companies:

Brief history

Current news

Green emphasis?

New products?

Cost cutting moves?

Questions:

Part 1-Sales

Part 2-COGS

Part 3-Inventory

Part 4-Warranties

Recommendation

Resources:

Excel spreadsheet

Financial statements-both companies

In addition to the above requirements, in order to ensure that all members of a group participate in the project, each member will submit a written evaluation of themselves and the other members of the group. This evaluation is required and will factor heavily in the computation of your individual grade. The evaluation form is to be completed and submitted in Blackboard. See the course menu for the assignment. The form is also shown at the end of this document for you to see before beginning the project so you know what is expected.

I suggest exchanging phone numbers and e-mail addresses to assist in this process. I also recommend that you use a service like www.freeconferencepro.com to meet together as a group if you are unable to do so in person.

I am available to answer questions and provide some guidance, but the goal is for you to use your talents and imagination to figure out the best methods to accomplish the objectives of this project.

Questions:

Part 1 Sales

Identify and record the most current three years sales (in dollars) for both companies using their financial statements.

Using the data in question 1, predict both companies sales activity for the next two to three years. Hint: use trend analysis (Chapter 13). If possible, compare your predictions to actual sales figures for those years.

Use Excel to compute profit margin for both companies for the two most recent years. Comment on your findings.

Part 2 COGS

Use Excel to compute the ratios of cost of goods sold to total expenses for both companies for their two most recent fiscal years. Record answers as percentages, rounded to one decimal place.

Comment on the similarities and/or differences in the ratio results across both years between the two companies.

Which company has a higher ratio of costs, defined as COGS plus total operating expenses, to revenues? Use the two most recent years income statements. Use Excel to show your analysis.

How might the use of activity-based costing help the less competitive company become more competitive?

Part 3 Inventory

Identify the impact on operating cash flows (increase or decrease) for changes in inventory levels (increase or decrease) for both companies for each of the three most recent years. Use Excel for your analysis.

What impact would a JIT inventory system have on each companys operating income? Link this answer to your response in question 1 above.

Would the move to a JIT system have a one-time or recurring impact on operating cash flow?

Part 4 Warranties

Read the Product Warranties section of the Organization and Significant Accounting Policies footnotes for both companies. For each of the three years reported, compare the dollar amounts of the annual warranty expense and actual warranty claims paid. Is the expense higher, lower, or about the same as its claims paid?

Using your answers from question 1 above, which company made more accurate estimates of warranty costs over the most recent three years.

Project Timeline:

Groups established and project information distributed: July 17, 2015

Company picks submitted: July 19, 2015

Final written report submitted: July 28, 2015

Assignments submitted late will suffer a 20% penalty. Late assignments will be accepted no later than July 30, 2015 at 11:59 PM.

Key Resources:

Chapter 13 of your textbook Financial Statement Analysis

http://finance.yahoo.com

www.fool.com

http://www.sharebuilder.com

Here are some suggestions from Rachel Morks Effective Teamwork in 11 Easy Steps:

1. Share Added Value Establish a baseline level of respect and admiration within your team. Set up meetings where the overall purpose of the team is discussed. Focus on what added value each person brings.

2. Build Respect Each student share what he/she brings to the team. Everyone share what parts of the project appeal to their individual strengths. Discuss how the team works well together, along with what areas could use improvement.

3. Brainstorm Ideas As A Group Make some time in your meetings for brainstorming. Allow everyone in the group to contribute ideas for streamlining efficiency, improving the workflow process, or any other area of concern that might arise.

4. Establish A Neutral Procedure To Deal With Conflict Make sure you've established a clear, safe procedure for conflict resolution and complaints. Everyone in the group needs to know that dissatisfaction will be addressed and problems solved to the best of your teams ability.

5. Schedule Progress Meetings Don't let too much time pass as the project progresses. Make sure you hold meetings where concerns and developments can be discussed as a group, allowing all voices to be heard. The point of these meetings should be to deal with conflict, smooth out bumps in the process, and allow team members to voice concerns.

Have fun!

Group Project Evaluations

Your project will be graded on completeness, correctness, creativity, and the quality of presentation in your written report. To ensure that all group members participate in this project, each member will submit a written evaluation of the other members in the group. The evaluation form is to be completed and submitted in Blackboard. See the course menu for the assignment. This evaluation is required and will factor heavily in the computation of your individual grade.

On the evaluation form, you will give your team members (and yourself) a rating on a scale of 100% to 0%. In addition to your numerical rating, you must provide an explanation where you highlight each team members achievements and mention any weaknesses if any.

Be objective in rating the performance of your group members. Members who actively participate in the process and make a contribution should be given a rating that reflects this. Others, who have not made the effort, should not be rewarded for their lack of effort. If someone contributed nothing to the project, you should rate them at 0%. Working with others to accomplish a goal is part of the educational experience, particularly for business students. Interdependence allows us to recognize the value of other peoples talents and skills and how we can use them with our own to create a win-win situation. In this case, it means submitting a project which results in a positive grade.

Heres what the evaluation form looks like:

GROUP PROJECT EVALUATION

You are to give each of your fellow group members and yourself a ranking between 100%-0%. You must include your reasons for the score youve provided for yourself and the other members of your group. If someone did not contribute to the final project, give them a 0% or they will be awarded points for doing nothing.

Remember, your evaluation will count significantly in the grading process, and I am asking you to be as honest and objective as possible.

Additionally, I would love to hear your comments about the project itself at the bottom of the page.

Failure to submit this evaluation when the final project is due means that you have earned a zero for the project grade and will not pass the class.