Financial Statement Analysis Acct160Elements of Your Financial Analysis Write-UpYour write-up needs to address each the following area. Plainly label each section. Support your observations with numbers from your ratios or directional (horizontal & vertical) financial statements. For example, if long term debt increased, what caused it? Do you see an increase in property & equipment? Has the interest expense increase? Has depreciation jumped significantly?Sales Growth Are Net Sales Growing? Are there any divisions or product lines growing? Does the annual report give any indication about the reason(s) for this? Does your directional analysis (horizontal or vertical) bear this out? Can we see the sales increase in the inventory turnover ratio?Cost Control are expenses in line with the change in net sales? Look at the levels of costs including cost of goods sold, marketing expenses, and administrative expenses. Look at the COGS% change and the SGA% (selling, general & administrative expenses) changes. Again, support your observation with your directional analysis and/or ratios, Profitability Look at the three levels of profits: gross margin, operating profit and net income. How are they changing from year to year as a percentage of sales (vertical analysis)? Cash Flow and Liquidity - Is cash increasing or decreasing. Does that make sense in light of the profits? What about the liquidity ratios? Did you find a change in the current or the quick ratio? Look at the cash flow statements. Is operations generating or consuming cash? Is the growth of inventory reasonable as compared to the growing of cost of

goods sold? Look at the accounts payable turnover ratio. And dont forget about accounts receivable and its change. Are you concerned with changes in the accounts receivable turnover ratio?Debt Levels Is debt increasing or decreasing? Looks at the change in current and long-term liabilities in your directional analyses. What are the reasons for this change? Look at your debt ratios. Is there anything in annual report or outside articles to explain a significant change in debt, if you find one?Equity and Stock Market Factors Has common stock plus the paid in capital on common stock increased? Has it decreased from a buyback of common stock (treasury stock)? What about the price of the stock, has it changed significant over the years of your analysis. Look at the price to earnings ratio and the dividend yield ratio.Do not put a lot of marketing promotional information into your write-up. If the MD&A from the annual report discussed marketing problems that help explain the financials, that would be useful.DO NOT cut and paste someone elses financial statements and ratios. The point of the exercise is for you to select the numbers and do the math. Put your name and every document you submit, in addition to the proper heading for each document.Be sure to consider the outside article information that you find. It may give you insights into why the financial statements are changing.Before you compare the company to its competitors, look at the trends for the company in the financial area.