FINANCIAL STATEMENT ANALYSIS (ACCT 424) PROJECT GUIDELINES PROJECT SUMMARY: From the perspective of a Financial Analyst, you will use the information youve gained in this course, to analyze and compare the financial information for two competing companies. You will review the industry environment, corporate environment, financial statements, annual reports, financial ratios, as well as recent news articles to conduct your analysis. You must determine which company is in a better financial position or more financially viable, and then explain why. COMPANY SELECTIONS: Choose TWO publicly traded companies (APPLE & MICROSOFT) that compete in the same industry. Its important to select publicly traded companies because they are required to report financial data to the SEC; therefore, you should be able to find a wealth of financial data online. Private companies are not required to report; therefore, finding financial reports and data may be challenging. To reduce reporting comparison issues, I recommend that both companies use GAAP as their reporting method. If one of the companies you select uses IFRS, there will be differences in the format of the financial statements, and these differences may create challenges for you when you calculate your ratios.) Also, to avoid the hassle of converting currency, I highly recommend that both companies you select for your report, use the same currency. You will need to compare data and perform ratio calculations, and it would be much easier to do this your two companies use the same currency for reporting purposes. PLEASE NOTE: I must approve your company selections before you can move forward with your project!! There is a separate assignment and due date to submit your companies for approval. If you submit a final project without having your companies approved, you will receive a zero for the project. Company selection requirements summary: Your two companies must be competitors in the same industry Your companies must be publicly traded Highly recommend both companies use GAAP reporting standards Highly recommend both companies report in the same currency Your companies must be approved by me BEFORE you can proceed with your project No two students can use the same companies for their project Sources to Consult: There are many places where you can find information, ideas, and ways to proceed. For example, each module in the textbook spotlights a difference company, and you could use one of 2 those companies, and one of its competitors, for your project. There are hundreds of online resources you can use for your project, especially the websites and annual reports of the two companies you select! Heres a small list of websites/lists where you can find companies for your project, and a wealth of information to assist you: www.onesource.com www.sec.gov www.fasb.org/intl/ Fortune 500 Fortune 1000 Global 500 Wall Street Journal Market Watch (https://www.marketwatch.com) New York Stock Exchange (https://www.nyse.com/index) Macro Trends (https://www.macrotrends.net) FINAL PROJECT REQUIREMENTS: Project Summary: From the perspective of a Financial Analyst, you will use the information youve gained in this course, to analyze and compare the financial information for two competing companies. You will review the industry environment, corporate environment, financial statements, annual reports, financial ratios, as well as recent news articles to conduct your analysis. You must determine which company is in a better financial position or more financially viable, and then explain why. FORMAT REQUIREMENTS: Minimum of 4,000 words o In past semesters, students have complained about having a word count requirement. Ive had a page count requirement in the past, but too many students submit projects with a lot of charts, graphs and exhibits, and very little written analysis. Therefore, I moved to a word count requirement. Given all the items you need to include in this project, you will find it very easy to meet the word requirement. Must be single spaced Use 12-point Times New Roman font for the body of the project (you can use either 10- or 12-point font for the exhibits and tables) Must be a Word document Must have at least 5 sources (APA format) listed on your reference page. 3 PROJECT REQUIREMENTS ARE AS FOLLOWS: Cover page Table of content Reference page - A minimum of 5 references in APA format Introduction of each company Business and Industry Environment: Include an analysis of the industry environment. o Discuss/include Porters Five Forces that confront both companies, and the strategies both companies have implemented to address them. Since both companies are in the same industry, the five forces they face should be the same or very similar, so one combines Five Forces analysis will be fine. o Include a SWOT analysis for both companies. Even though the companies are in the same industry, their SWOT analysis should not be identical. You should have a separate SWOT analysis for each company. Include a summary or condensed Common-size Income Statement and Balance Sheet for both companies: o Use the financial statements for the most recent years available. At this point, all companies should have 2021 and 2020 available on their websites. o PLEASE NOTE: the fiscal years of your two companies may not match. Try to select the years closest to each other. Do not use 2020 for one company and then 2021 for the other. o Provide a brief written analysis of the financial reports (Income Statement and Balance Sheet) for both companies. Ratio analysis: Complete a ratio analysis of both companies from the perspective of a financial analyst. o You may need to convert the financial data to US dollars to complete your ratio comparison. Please disclose this in your report and let me know what tool/method you used for your conversion process. o Choose a minimum of 7 ratios you feel are most relevant. PLEASE NOTE: You can use more than seven ratios, but 7 of the ratios you select MUST BE ratios covered in this course!!! o You CAN use Gross Profit, Gross Profit Margin, Net Profit, and Net Profit Margin in your ratio analysis; HOWEVER, they CAN NOT count toward your 7 ratios. If you use them, they must be in addition to the 7 other ratios you selected from this course. Gross profit, gross profit margin, net profit, and net profit margin are important metrics, so you should incorporate them in your analysis, but they are not NEW metrics that have been introduced to you in this class. o Your ratio analysis must include the following types of ratios: 2 liquidity ratios 2 solvency and/or leverage ratios 3 profitability and/or coverage ratios o Make sure you include a RATIO TABLE or CHART to provide comparison of the ratios for both companies. 4 The table should be a side-by-side comparison of the ratios of both companies. This section must also include the FORMULAS and CALCULATIONS you used for each ratio. Some students combine the ratios and calculations onto one table, and others show them in two separate tables/exhibits. Select the format that works best for you, but you do need to provide both the ratio and your calculations! o Provide a written analysis/summary of each ratio and your findings. This is usually the area where students fall short because they do not conduct a deep dive analysis, to demonstrate a strong understand of the ratios. Make sure your written analysis is strong. What similarities and differences do you see in the ratios? What do the ratios mean? What trend do you see, and why do you think the trend is occurring? What is the industry average? Which company is performing better with each ratio? Wrap up your project with a strong conclusion! Based on your research, tell me which company you feel is more viable and financially sound, and why. Are there any trends or current issues that are concerning to you or promising to you? Which company would you invest in or provide a loan to?