Financial Analysis Project

Place your responses below each question in this document.

For any question requiring computations, please show your work.

1. Should the company ever pay out dividends? Why, or why not?
2. How much profit has the company retained in the business, after paying out all dividends?

1. From the Balance Sheet, identify any items classified as Unearned Revenue
2. What might they represent?

1. From the Balance Sheet, identify the amount of Accounts Receivable
2. Identify the amount of the allowance for uncollectible accounts.
3. What percentage of Accounts Receivable do they expect to collect? Is that good or bad?

1. From the Balance Sheet, identify any amounts of deferred revenue.
2. What might they represent?
3. When will they be recognized as earned revenue?

1. Identify whether they have any intangible assets on its Balance Sheet.
2. What might they represent?
3. Is their useful life limited, or unlimited?

1. Compute Working Capital, and the Current Ratio.
2. Does the liquidity appear high, or lean?

1. Using Excel, perform a Vertical (common size) Analysis on the Income Statement, and Balance Sheet.
2. Describe any notable proportions identified and indicate why they caught your attention

1. Compute the Interest Coverage Ratio
2. Does it look too high, too low, or somewhat reasonable? Why?

1. Compute the Current Ratio and Acid Test (Quick Ratio)
2. Do the amounts indicate thin liquidity or aggressive cash management?

1. Perform a Horizontal Analysis of the income Statements for the years available
2. Is GP Growing or shrinking over time?
3. Observe the relationships between GP, A/R, Inventory, and A/P.
4. Are they growing in consistent directions? Why or why not?

1. Examine the Income Statements for the Allowance for Uncollectible Accounts.
   1. Evaluate the reasonableness of the amounts in comparison to Accounts Receivable
   2. What might be done to improve collectability of the accounts?

1. Examine the Cash Flow Statement for Foreign Currency Effects on Cash and Cash Equivalents
2. How significant is the amount compared to Cash and Cash Equivalents on the Balance Sheet?

1. Examine the Income Statement.
2. How much is Basic Earnings per share?
3. How much is Diluted Earnings per Share?

1. Examine the Cash Flow Statement
   1. How much is Cash from Operations?
   2. How much is Cash from Investing?
   3. How much is Cash from Financing?
   4. Does the Ending cash balance match the Cash on the balance sheet?
   5. Where does the cash mostly come from?
   6. Where does the cash mostly go to?
   7. What is the ratio of Cash from Operations to Net Income?
      1. Is it good or bad?
   8. What are two major Capital Expenditures?
   9. What is the ratio of Cash from Operations to the sum of the two major Capital Expenditures?
      1. Is it good or bad?

1. Describe your overall impressions and conclusions
2. Would you favor investing in either company? Why?