Hello need help for my financial statement analysis assignment, I attached 2 files, one for the requirement and the other one is the company financial statements we need to analyse.

A01-16-0005 Graeme Rankine NetSuite reported Q1 results of EPS of $0.06 and $123.0 million in revenue versus consensus expectations of EPS of $0.02 and $120.9 million in revenue, respectively. Billings equaled $135.8 million compared to consensus expectations of $134.1 million. For 2014, we are increasing our revenue forecast to $543.0 million from $541.0 million and increasing our EPS estimate from $0.24 to $0.26. We reiterate our Outperform rating, lower our target price to $125 from $135, and continue to view NetSuite as one of our favorite mid-cap growth stocks in our coverage universe.... We reiterate our Outperform rating, lower our target price to $125 from $135, and continue to view NetSuite as one of our favorite mid-cap growth stocks in our coverage universe.1 James Amphlett, a financial analyst with Xenon Capital LLC, gathered information about NetSuite Inc., a company whose shares Xenon was considering acquiring for its computer software portfolio. Amphlett graduated from Southern Methodist University with an MBA in accounting and finance, and had interned with Xenon during the previous summer. NetSuite provided cloud-based financial and enterprise resource planning computing to customers for an upfront subscription fee. NetSuite experienced substantial growth in revenues, and operating cash flows over the last five years, but the company was yet to report a bottom line profit (see Exhibit 1). The company stock price performance (see Exhibit 2) over the last few years was nothing short of spectacular, having increased from around $10 per share at the end of 2008 to over $110 per share at the end of 2013. NetSuite was one of many companies that provided cloud-based computing services, and were often referred to as software-as-a-service (SaaS) companies. Other SaaS companies such as Concur Technologies, Workday, and Constant Contact had also seen increases in their stock price after going public in an initial public offering (IPO). NetSuite generated sales through both direct and indirect approaches, with most selling activities conducted over the phone. Xenon's portfolio manager had asked Amphlett to pay close attention to the company's accounting methods, particularly its revenue and expense recognition methods. Xenon had become quite wary of companies such as salesforce.com, ADT, and Pre-Paid Legal Services, which experienced significant stock price declines after popular press articles criticized their accounting policies. Such stories invited close scrutiny from the U.S. Securities & Exchange Commission (SEC). Company Background By early 2014, NetSuite Inc. was the industry's leading provider of cloud-based financials/enterprise resource planning (ERP) and omnichannel commerce software suites. In addition to financials/ERP and omnichannel commerce software suites, the company offered a broad suite of applications, including financial management, customer relationship management (CRM), e-commerce and retail management, professional services automation (PSA), and human capital management (HCM) that enabled companies to manage most of their core business operations using the company's single integrated suite. Its real-time dashboard technology provided an easy-to-use view into up-to-date, role-specific business information. NetSuite also offered customer support and professional services related to implementing and supporting its suite of applications. The company's services were delivered over the Internet as a subscription service using the software-as-a-service (SaaS) model. NetSuite's revenue grew from $17.7 million during the year ended December 31, 2004, to $414.5 million during the year ended December 31, 2013. For the years ended December 31, 2013, 2012, and 2011, the percentage of revenue generated outside of the United States was 26%, 26%, and 27%, respectively. The 1990s saw the widespread adoption among large enterprises of packaged business management software applications that automated a variety of departmental functions, such as accounting, finance, order and 1 NetSuite Inc., Credit Suisse, April 28. 2014. Copyright 2016 Thunderbird School of Global Management, a unit of the Arizona State University Knowledge Enterprise. This case was written by Professor Graeme Rankine for the sole purpose of providing material for class discussion. It is not intended to illustrate either effective or ineffective handling of a managerial situation. Any reproduction, in any form, of the material in this case is prohibited unless permission is obtained from the copyright holder. Authorized for use only by yun deng in Financial Statement Analysis at McGill University from Sep 02, 2016 to Dec 04, 2016. Use outside these parameters is a copyright violation. Revenue and Expense Recognition at NetSuite Inc. Cloud Computingor SaaS Medium-sized businesses and divisions of large enterprises have application software requirements that are similar, in many respects, to large enterprises because their core business processes are substantially similar to those of large enterprises. These requirements include the integration of back-office activities, such as managing payroll and tracking inventory; front-office activities, including order management and customer support; and, increasingly, sophisticated e-commerce capabilities. Medium-sized businesses are generally less capable than large enterprises of performing the costly, complex, and time-consuming integration of multiple point products from one or more vendors. As a result, medium-sized businesses can frequently derive greater benefits from a comprehensive business suite. Suites designed for, and broadly adopted by, large enterprises to provide a comprehensive, integrated platform for managing these core business processes, however, generally are not well suited to medium-sized businesses due to the complexity and cost of such applications. Medium-sized businesses and divisions of large enterprises have begun to benefit from the development of the cloud computing delivery model. Cloud computing used the internet to deliver software applications from a centrally hosted computing facility to end users through a Web browser. Cloud computing eliminated the costs associated with installing and maintaining applications within the customer's information technology infrastructure. Cloud applications were generally licensed for a monthly, quarterly, or annual subscription fee, as opposed to on-premise enterprise applications that typically required the payment of a much larger, upfront license fee. As a result, cloud applications required substantially less initial and ongoing investment in software, hardware, and implementation services, and lower ongoing support and maintenance, making them substantially more cost effective to run for medium-sized businesses. To date, the cloud computing software model has been applied to a variety of types of business software applications, including CRM, security, accounting, human resources management, messaging, and others, and it has been adopted by a wide variety of businesses. While cloud applications have enabled medium-sized businesses to benefit from enterprise-class capabilities, most are still point products that require extensive, costly, and time-consuming integration to work with other applications. Medium-sized businesses generally have been unable to purchase a comprehensive business management application suite at an affordable cost that enables them to run their businesses using a single system of record, provide real-time views of their operations, and that can be readily customized and rapidly implemented. NetSuite was the first company to provide a cloud-based integrated suite of business management applications that addressed the needs of medium-sized businesses in the comprehensive manner that Oracle and SAP address the similar needs of large enterprises. NetSuite's comprehensive business management application suite provided an integrated solution for running the core functions of a business. All elements of NetSuite's application suite shared the same customer and transaction data, enabling seamless, cross-departmental business process automation and real-time monitoring of core business metrics. Businesses could deploy NetSuite's solution as a business management suite, or deploy specific applications such as financials/ERP, CRM, omnichannel commerce, PSA, or HCM that could be integrated with existing application investments. In addition, the company's financials/ERP, CRM, omnichannel commerce, PSA, and HCM capabilities provided users with real-time visibility and appropriate application functionality through dashboards tailored to their particular job function and access rights. 2\tA01-16-0005 Authorized for use only by yun deng in Financial Statement Analysis at McGill University from Sep 02, 2016 to Dec 04, 2016. Use outside these parameters is a copyright violation. inventory management, human resources, professional services, sales and customer support. These sophisticated applications required significant cash outlays for the initial purchase and for ongoing maintenance and support. In addition, these applications were internally managed and maintained, requiring a large staff to support complex information technology infrastructures. Most importantly, the applications generally were provided by multiple vendors, with each application providing only a departmental view of the enterprise. To gain an enterprise-wide view, organizations attempted to tie together their various incompatible packaged applications through long, complex, and costly integration efforts. Many of these attempts failed, in whole or in part, often after significant delay and expense. As a consequence, many large enterprises transitioned from multiple point products to comprehensive, integrated business management suites, such as those offered by Oracle Corporation and SAP AG, as their core business management platforms. NetSuite generated sales through both direct and indirect approaches, with most selling conducted over the phone. The company's direct sales team consisted of professionals in various locations across the United States, Europe, and the Asia-Pacific region. Within these regions, the direct sales organization focused on selling to medium-sized businesses and divisions of large companies. Indirect sales were generated through relationships with channel partners in North America, Latin America, Europe, and the Asia-Pacific region. The company's sales process typically began with the generation of a sales lead from a marketing program or customer referral. After the lead was qualified, sales personnel conducted focused Web-based demonstrations along with initial price discussions. Members of its professional services team were engaged as needed to offer insight around aspects of the implementation. The sales cycle typically ranged from one to six months, but could vary based on the specific application, the size and complexity of the potential customer's information technology environment, and other factors. NetSuite tailored marketing efforts around relevant application categories, customer sizes, and customer industries. As part of its marketing strategy, NetSuite established a number of key programs and initiatives including online and search engine advertising, email campaigns and Web seminars, product launch events, trade show and industry event sponsorship and participation, marketing support for channel partners, and referral programs. Competition Oracle Corp. was the world's largest provider of enterprise software and a leading provider of computer hardware products and services that were engineered to work together in the cloud and in the data center. Its offerings included Oracle database and middleware software, application software, cloud infrastructure, hardware systemsincluding computer server, storage, and networking productsand related services. Oracle developed and maintained its products and services to be enterprise-grade, reliable, secure, and interoperable while offering customers a choice in deployment models that best met their information technology (IT) needs. Oracle customers had the opportunity to subscribe to use many Oracle software and hardware products through its Oracle Cloud offerings, or purchase its software and hardware products and related services to build their own internal clouds or on-premise IT environments. Cloud-computing IT environments, including those offered through Oracle Cloud Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS) offerings, were designed to be attractive and cost-effective options for customers as Oracle integrated the software and hardware on the customers' behalf in IT environments that it deployed, supported, and managed. Oracle was a leader in the core technologies of cloud computing, including database and middleware software, as well as Web-based applications, virtualization, clustering, large-scale systems management, and related infrastructure. Its products and services were the building blocks of its own cloud services, its partners' cloud services, and its customers' cloud IT environments. An important element of its corporate strategy was to deliver reliable, secure, and scalable products and services that were built upon industry standards and were engineered to work both together or independently, regardless of the deployment model selected. NetSuite's Future Amphlett's analysis would focus on NetSuite's financial performance using the company's recent financial statements (see Exhibit 3) and footnote disclosures (see Exhibit 4), so that he could more closely analyze the company's accounting methods. He dived into some of the accounting standards that might shed light on whether NetSuite's accounting policies were appropriate (see Exhibit 5), and also obtained information on Oracle Corp., one of NetSuite's leading competitors (see Exhibit 6). And to examine whether NetSuite might be a good long-term investment for Xenon's computer software portfolio, Amphlett gathered some capital market's data (see Exhibit 7). 3\tA01-16-0005 Authorized for use only by yun deng in Financial Statement Analysis at McGill University from Sep 02, 2016 to Dec 04, 2016. Use outside these parameters is a copyright violation. Sales and Marketing Dec13 Dec12 Dec11 Dec10 Dec09 Dec08 414.51 112.78 301.73 (57.50) (70.41) 308.83 79.58 229.25 (30.64) (35.23) 236.33 57.90 178.43 (29.47) (32.01) 193.15 49.27 143.88 (25.57) (27.47) 166.54 45.37 121.17 (23.52) (23.30) 152.48 41.65 110.83 (18.37) (15.86) (0.95) (0.50) (0.48) (0.43) (0.38) (0.26) Cash & Short-Term Investments Total Assets 451.62 772.40 186.13 369.78 141.45 281.18 104.30 217.29 96.36 202.22 123.64 210.33 Total Current Liabilities Long-Term Debt STOCKHOLDERS EQUITY TOTAL 279.56 262.74 210.05 198.26 0.65 158.77 141.57 2.98 128.01 100.11 4.02 106.28 88.94 104.71 90.54 1.22 108.99 Operating Activities - Net Cash Flow Investing Activities - Net Cash Flow Financing Activities - Net Cash Flow Exchange Rate Effect Cash and Equivalents - Change 62.24 (81.02) 285.58 (1.07) 265.72 54.30 (24.11) 13.73 0.49 44.41 36.27 (11.25) 12.18 (0.05) 37.15 18.23 (6.46) (3.89) 0.06 7.94 4.76 (28.73) (3.22) (0.09) (27.28) (8.97) (36.83) (0.87) 0.90 (45.77) (in millions) Sales Cost of Goods Sold Gross Profit Operating Profit Adjusted Net Income Earnings Per Share Basic - Excluding Extra Items & Disc Op Source: S&P NetAdvantage. 4\tA01-16-0005 Authorized for use only by yun deng in Financial Statement Analysis at McGill University from Sep 02, 2016 to Dec 04, 2016. Use outside these parameters is a copyright violation. Exhibit 1.Selected Historical Data for NetSuite Inc. Source: Yahoo Finance. 5\tA01-16-0005 Authorized for use only by yun deng in Financial Statement Analysis at McGill University from Sep 02, 2016 to Dec 04, 2016. Use outside these parameters is a copyright violation. Exhibit 2. NetSuite's Recent Stock Price Performance (versus the NASDAQ Index) NetSuite Inc. Consolidated Balance Sheets (Dollars in thousands) December 31, Assets Current assets: Cash and cash equivalents Accounts receivable, net of allowances of $833 and $701 as of December 31, 2013, and December 31, 2012, respectively Deferred commissions Other current assets Total current assets Property and equipment, net Deferred commissions, non-current Goodwill Other intangible assets, net Other assets Total assets Liabilities and total equity Current liabilities: Accounts payable Deferred revenue Accrued compensation Accrued expenses Other current liabilities (including note payable to related party of $3,054 and $1,584 as of December 31, 2013, and December 31, 2012, respectively) Total current liabilities Long-term liabilities: Convertible 0.25% senior notes, net Deferred revenue, non-current Other long-term liabilities (including note payable to related party of $8,702 and $401 as of December 31, 2013, and December 31, 2012, respectively) Total long-term liabilities Total liabilities Commitments and contingencies (Notes 11 and 12) Total equity: Common stock, par value $0.01, 500,000,000 shares authorized; 75,131,404 and 72,675,265 shares issued and outstanding at December 31, 2013, and December 31, 2012, respectively Additional paid-in capital Accumulated other comprehensive income / (loss) Accumulated deficit Total equity Total liabilities and total equity 2013 2012 $451,577 86,818 $185,859 64,861 38,187 22,622 599,204 48,183 8,405 84,478 20,460 11,669 $772,399 26,959 9,049 286,728 27,210 4,784 35,661 12,420 2,972 $369,775 4,838 211,694 24,535 21,721 16,776 3,476 154,051 18,806 11,974 9,948 279,564 198,255 254,038 12,913 15,832 7,365 5,386 282,783 562,347 12,751 211,006 751 727 658,717 (246) (449,170) 210,052 $772,399 535,853 950 (378,761) 158,769 $369,775 Source: SEC 10-K Filing. 6\tA01-16-0005 Authorized for use only by yun deng in Financial Statement Analysis at McGill University from Sep 02, 2016 to Dec 04, 2016. Use outside these parameters is a copyright violation. Exhibit 3. NetSuite Inc.'s Financial Statements 2013 2012 2011 333,556 80,952 414,508 252,903 55,922 308,825 199,579 36,747 236,326 55,269 79,925 135,194 279,314 41,857 53,706 95,563 213,262 33,083 37,777 70,860 165,466 78,312 210,079 51,693 340,084 (60,770) 52,739 154,294 38,469 245,502 (32,240) 43,531 120,172 31,951 195,654 (30,188) 67 (8,424) (383) (8,740) (69,510) 899 (70,409) $(0.95) 74,085 158 (192) (412) (446) (32,686) 2,543 (35,229) $(0.50) 70,713 167 (181) (34) (48) (30,236) 1,771 (32,007) $(0.48) 66,919 (1,136) (60) (71,605) 659 (78) (34,648) (79) (130) (32,216) 7\tA01-16-0005 Authorized for use only by yun deng in Financial Statement Analysis at McGill University from Sep 02, 2016 to Dec 04, 2016. Use outside these parameters is a copyright violation. NetSuite Inc. Consolidated Statements of Comprehensive Loss (Dollars and shares in thousands, except per share data) Year ended December 31, (In thousands) Revenue: Subscription and support Professional services and other Total revenue Cost of revenue: Subscription and support Professional services and other Total cost of revenue Gross profit Operating expenses: Product development Sales and marketing General and administrative Total operating expenses Operating loss Other income / (expense), net: Interest income Interest expense Other expense, net Total other income / (expense), net Loss before income taxes Provision for income taxes Net loss Net loss per common share, basic and diluted Weighted average number of shares used in computing net loss per share Comprehensive loss: Foreign currency translation gains / (loss), net of taxes Accumulated pension liability Comprehensive loss 2013 2012 2011 (70,409) (35,229) (32,007) 15,668 6,749 7,316 1,041 73,660 55,531 (410) 11,006 4,580 9,177 3,786 616 48,442 45,312 (297) 328 38,315 34,666 (22,305) (70,380) (12,486) (2,329) 1,691 6,173 63,510 8,771 444 62,235 (25,913) (50,504) (443) 818 1,030 940 49,524 5,453 (1,037) 54,298 (12,093) (44,429) (837) 84 725 5,721 30,529 2,376 (68) 36,273 (20,337) (2,056) (58,630) (81,023) (11,843) (3,041) (9,221) (24,105) (8,586) (816) (1,850) (11,252) (726) (1,550) (483) (1,117) 297 (257) 15,968 13,732 486 44,411 141,448 185,859 (269) 14,044 12,175 (46) 37,150 104,298 141,448 310,000 (8,260) (744) (2,612) (30,000) 410 (162) 16,944 285,576 (1,070) 265,718 185,859 451,577 8\tA01-16-0005 Authorized for use only by yun deng in Financial Statement Analysis at McGill University from Sep 02, 2016 to Dec 04, 2016. Use outside these parameters is a copyright violation. NetSuite Inc. Consolidated Statements of Cash Flows (Dollars in thousands) Year ended December 31, Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization Amortization of other intangible assets Amortization of debt discount and transaction costs Provision for accounts receivable allowances Stock-based compensation Amortization of deferred commissions Excess tax benefit stock-based compensation Changes in operating assets and liabilities, net of acquired assets and assumed liabilities: Accounts receivable Deferred commissions Other current assets Other assets Accounts payable Accrued compensation Deferred revenue Other current liabilities Other long-term liabilities Net cash provided by operating activities Cash flows from investing activities: Purchases of property and equipment Capitalized internal use software Cash paid in business combinations, net of cash received Net cash used in investing activities Cash flows from financing activities: Proceeds from issuance of convertible 0.25% senior notes Payments of issuance costs on convertible 0.25% senior notes Payments under capital leases Payments under capital leases and long-term debt-related party Payments to repurchase common stock Excess tax benefit stock-based compensation RSUs acquired to settle employee withholding liability Proceeds from issuance of common stock Net cash provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Revenue Recognition The Company generates revenue from two sources: (1) subscription and support; and (2) professional services and other. Subscription and support revenue includes subscription fees from customers accessing its cloud-based application suite and support fees from customers purchasing support. Arrangements with customers do not provide the customer with the right to take possession of the software supporting the cloud-based application service at any time. For the most part, professional services and other revenue include fees from consultation services to support the business process mapping, configuration, data migration, integration, and training. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. For the most part, subscription and support agreements are entered into for 12 to 36 months. In aggregate, more than 90% of the professional services component of the arrangements with customers is performed within 300 days of entering into a contract with the customer. The subscription agreements provide service-level commitments of 99.5% uptime per period, excluding scheduled maintenance. The failure to meet this level of service availability may require the Company to credit qualifying customers up to the value of an entire month of their subscription and support fees. In light of the Company's historical experience with meeting its service-level commitments, the Company does not currently have any liabilities on its balance sheet for these commitments. For single element sales agreements, subscription and support revenue is recognized ratably over the contract term beginning on the provisioning date of the contract. The Company recognizes professional services revenue using the proportional performance method for single element arrangements. Deferred Revenue Deferred revenue consists of billings or payments received in advance of revenue recognition, and is recognized as the revenue recognition criteria are met. The Company generally invoices its customers annually or in monthly or quarterly installments. Accordingly, the deferred revenue balance does not represent the total contract value of annual or multiyear, non-cancelable subscription agreements. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue, and the remaining portion is recorded as non-current deferred revenue. Cost of Revenue Cost of revenue primarily consists of costs related to hosting the Company's cloud-based application suite, providing customer support, data communications expenses, salaries and benefits of operations and support personnel, software license fees, costs associated with website development activities, allocated overhead, amortization expense associated with capitalized internal use software, and acquired developed technology assets and property and equipment depreciation. Costs related to professional services are expensed as incurred. Deferred Commissions The Company capitalizes commission costs that are incremental and directly related to the acquisition of customer contracts. Commission costs are accrued and capitalized upon execution of the sales contract by the customer. Payments to partners and sales personnel are made shortly after the receipt of the related customer payment. Deferred commissions are amortized over the term of the related non-cancelable customer contract and are recoverable through the related future revenue streams. The Company capitalized commission costs of $70.4 million, $50.5 million, and $44.4 million during the years ended December 31, 2013, 2012, and 2011, respectively. Commission amortization expense was $55.5 million, $45.3 million, and $34.7 million during the years ended December 31, 2013, 2012, and 2011, respectively. Source: SEC 10-K filing. 9\tA01-16-0005 Authorized for use only by yun deng in Financial Statement Analysis at McGill University from Sep 02, 2016 to Dec 04, 2016. Use outside these parameters is a copyright violation. Exhibit 4. Selected Footnotes from NetSuite Inc.'s Financial Statements Exhibit 5. Relevant Accounting Literature Staff Accounting Bulletin 104 Topic 13: Revenue Recognition Source: Securities and Exchange Commission Staff Accounting Bulletin 104. Paragraph 4 of FASB Technical Bulletin No. 90-1: Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts 4. Costs that are directly related to the acquisition of a contract and that would have not been incurred but for the acquisition of that contract (incremental direct acquisition costs) should be deferred and charged to expense in proportion to the revenue recognized. All other costs, such as costs of services performed under the contract, general and administrative expenses, advertising expenses, and costs associated with the negotiation of a contract that is not consummated, should be charged to expense as incurred. Source: FASB Technical Bulletin No. 90-1. Paragraph 5 of Statement of Financial Accounting Standards No. 91: Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases \"Loan origination fees shall be deferred and recognized over the life of the loan as an adjustment of yield (interest income)...\" Source: Statement of Financial Accounting Standards No. 91. 10\tA01-16-0005 Authorized for use only by yun deng in Financial Statement Analysis at McGill University from Sep 02, 2016 to Dec 04, 2016. Use outside these parameters is a copyright violation. \"The staff believes that the incremental direct costs ... incurred related to the acquisition or origination of a customer contract in a transaction that results in the deferral of revenue, unless specifically provided for in the authoritative literature may be either expensed as incurred or accounted for in accordance with paragraph 4 of Technical Bulletin 90-1 or paragraph 5 of Statement 91. The staff believes the accounting policy chosen for these costs should be disclosed and applied consistently.\" May14 May13 May12 May11 May10 May09 38,275 6,628 31,647 14,926 10,955 37,180 6,567 30,613 14,343 10,925 37,121 7,372 29,749 14,057 9,981 35,622 8,030 27,592 12,608 8,547 26,820 5,466 21,354 9,838 6,135 23,252 4,531 18,721 8,555 5,593 2.42 2.29 1.99 1.69 1.22 1.10 ASSETS Cash & Short-Term Investments Net Receivables TOTAL ASSETS 38,819 6,993 90,344 32,216 6,875 81,812 30,676 7,189 78,327 28,848 7,504 73,535 18,469 6,318 61,578 12,624 4,985 47,416 LIABILITIES Total Current Debt Long-Term Debt STOCKHOLDERS EQUITY TOTAL 1,508 22,667 47,447 @NA 18,494 45,145 2,950 13,524 44,087 1,150 14,772 40,245 3,145 11,510 31,199 1,001 9,237 25,090 Operating Activities - Net Cash Flow Investing Activities - Other Investing Activities - Net Cash Flow Financing Activities - Net Cash Flow Exchange Rate Effect Cash and Equivalents - Change 14,921 (7,539) (4,068) (158) 3,156 14,224 (5,956) (8,500) (110) (342) 13,743 (8,381) (6,099) (471) (1,208) 11,214 (6,081) 516 600 6,249 8,681 (10,319) 2,664 (107) 919 8,255 (2,599) (4,422) (501) 733 (Dollars millions) Sales Cost of Goods Sold Gross Profit Operating Profit Adjusted Net Income Earnings Per Share Basic - Excluding Extra Items & Disc Op 11\tA01-16-0005 Authorized for use only by yun deng in Financial Statement Analysis at McGill University from Sep 02, 2016 to Dec 04, 2016. Use outside these parameters is a copyright violation. Exhibit 6. Selected Financial information for Oracle Corp. NetSuite's equity beta (from Value Line, July 18, 2014) Equity market risk premium (from Dimson, Marsh, and Staunton) Common stock price per share (June 30, 2014) Shares outstanding (May 2, 2014): Yield to maturity on 10-year Treasury Bonds, (June 30, 2014) Yield to maturity on Aaa Industrial Bonds (June 30, 2014) Yield to maturity on Aa Industrial Bonds (June 30, 2014) Yield to maturity on A Industrial Bonds (June 30, 2014) Yield to maturity on Baa Industrial Bonds (June 30, 2014) Credit Suisse (April 28, 2014) estimated sales, EBITDA (in millions), EPS in 2014, 2015 1.40 5-6% per year $86.88 75,797,557 2.52% 3.05% 3.56% 4.01% 4.6% 2014 $543.0 $ 58.9 $ 0.26 2015 $697.4 $ 80.8 $ 0.42 12\tA01-16-0005 Authorized for use only by yun deng in Financial Statement Analysis at McGill University from Sep 02, 2016 to Dec 04, 2016. Use outside these parameters is a copyright violation. Exhibit 7. Selected Capital Market Information FSA Fall 2016 End of Term Case Required ACCT 354 Financial Statements Analysis Fall 2016 Final Case 15% of final grade To be done in groups of 4 Due: Thursday December 1st at 8:30 a.m., late cases will be penalized. Reports are to be submitted by email (see instructions below) and must be time stamped before 8:30 a.m. Case: Revenue and Expense Recognition at NetSuite Inc. It is available from either Ivey or Harvard: Western Ivey Publishing Product # A0116005. You can buy it on-line. At https://www.iveycases.com and can search by case name, or number, once you have created an account. Price $3.75 Cdn. Harvard Business School Case # TB0449. You must create a student account and then you can purchase and download a copy. You may have already created an account from the Unidentified Industries case. The link is; http://cb.hbsp.harvard.edu/cbmp/access/54943547 Price is $4.25 U.S. NOTE there is a formatting error in the case (from either source) in Exhibit 7 page 12. The last line of Exhibit 7 should be formatted as follows: Credit Suisse (April 28, 2014) Estimated sales EBITDA (in millions) EPS 2014 $543.0 $58.9 $0.26 2015 $697.4 $80.8 $0.42 Use of GAAP in the case: The company follows U.S. GAAP and some accounting standards are provided in the case related to revenue and expense recognition. For the issues related to the standards provided, use those US standards. For all other discussion you may use IFRS. IFRS and US GAAP are close enough for the issues remaining and we have not spent much time on U.S. GAAP. The exception to applying IFRS would be if it is an issue that we have discussed the differences in, i.e. LIFO is allowed in the US or R&D differences (which do apply in this case) and Valuation allowances in deferred taxes (yet to be covered and not really a difference). 1 FSA Fall 2016 End of Term Case Required Required: Assume the role of James Amphlett at Xenon Capital LLC. You have been asked to prepare a report on NetSuite Inc. for the Portfolio Manager. Your report should address the following: A brief assessment of the industry and company strategy and the implications for the company's financial performance. A financial analysis of the company as at December 31, 2013. A review of the accounting policies used by the company and an assessment of its quality of earnings. An estimate of the company's equity security relative to its current stock price as at that time. Your analysis should be concise because the Portfolio Manager is a very busy person with severe time constraints and appreciates concise and cogent reports. Although not required, if you do decide to use outside resources in your analysis (i.e. their full 2013 annual report) make sure you stick to the time period - that is you can't look up their 2014 annual report or share price and use that information to estimate the 2013 share price. Remember if you do use any outside sources to document those sources and, if those sources include any ratios, that you understand how they were calculated before relying on them. Plagiarism: McGill University values academic integrity. Therefore all students must understand the meaning and consequences of cheating, plagiarism and other academic offences under the Code of Student Conduct and Disciplinary Procedures (see http://www.mcgill.ca/integrity/ for more information). The grading scheme will be: Overall presentation (3) Analysis and Discussion (24 marks) Conclusions (3) Report Format: Length: Written analysis should not be more than 8 - 10 pages long. Some exhibits (max 5 pages) & the Executive Summary may be in addition to that length. (Remember to number the pages.) Spacing: 1.5 line-spaced, with 1" margins on all sides. Font size: Equivalent to Times New Roman 12, or Arial 11. Executive Summary: Your report should have an Executive Summary. An Executive Summary, summaries the content and recommendations of the paper, if the Portfolio Manager does not have time to read the full report, she could read the Executive Summary and understand: the purpose of the report, what analysis was done, and the conclusions drawn. It is not an introduction. It is approximately a page long (should be less, could be slightly more). Inclusion of data in the body of the report: The Portfolio Manager prefers to have summaries of the data included in small tables in the report, or the ratios included directly in the write up. For example 2 FSA Fall 2016 End of Term Case Required DO NOT say: \"As shown in exhibit 1 at the end of the report the current ratio has increased\". Because then she has to flip and find Exhibit 1 somewhere at the back of the report, find the ratio, see the numbers and then flip back to the body of the report and find where she was. By now, whatever train of thought that she had going, is lost. Preferred approaches are: \"The current ratio has increased from 1.5 to 1.8 (details in Exhibit 1) which indicates that the company is...\" or \"As the following table of liquidity ratios indicates both the current ratio and quick ratio increased...\" (then a table of 2 or 3 liquidity ratios is right there). There might be more ratios or numbers contained in an exhibit that are never directly referenced in the report. For example, you might have a vertical analysis of the income statement in an exhibit at the end of the report, but only talk about one or two figures in it in your analysis (like gross margin or sales expenses). But there are no exhibits where none of the data is used in the report (i.e. surplus info you couldn't fit in the 8-10 pages). Submission by Email Reports should be submitted electronically in a Word file. They will be graded electronically and returned electronically. When submitting it, please cc all group members using their @mail.mcgill.ca addresses and then it will be returned to all group members. Ideally the exhibits will be included in the Word file (likely cut and pasted in from Excel). Some Excel tables might be too large to fit co-operatively into the Word document. If that is absolutely the case then a separate well-referenced Excel file can also be submitted for those exhibits. The file name should be: NetSuite_Team X.doc. I will post the team names and numbers on MyCourses once I have all of the teams. Good Luck and Have Fun 3