INSTRUCTION:

This is a group assignment of $4-5$ members are required to perform the following task.

Purpose of the Project

The purpose of the financial statement analysis project is to help students become familiar with

the financial reports of publicly traded companies, to apply the concepts learned in class to a realworld situation, and to familiarize students with researching financial information. At the

completion of the project the student should be able to use financial information to assess the

profitability and solvency of publicly traded company.

The project is in five parts. Due dates will be assigned in class.

Part I Select a company and obtain the Annual Report.

Each team should select a Malaysia. publicly traded company and report to me the name of the

company on this date. Obtain a copy of the companys most recent Annual Report for each team

member. You can usually obtain a downloadable version of the Annual

Report from the companys website. You will also need to obtain some information from the

companys $10$K $($for Part III, question $5)$ which can usually be found on the company website or on

the Securities Exchange Commission website at www$.$bursamalaysia.com$/$ You can also request a

hard copy of the Annual report through the companys Investor Relations group; however, this

should be in addition to the website version.

Part $1-$ The below annual report or sections must be shown to me$.$ Each team member should

have a copy of the Annual Report. However, at least one team member must present or show

them to me$.$ Please make sure that the copy you obtain includes $(1)$ Managements Discussion

and Analysis, $(2)$ The financial statements, $(3)$ Notes to the Financial Statements, and $(4)$ the

Report of Registered Independent Public Accounting Firm.

Part II $-$ Develop $/$ Submit a project completion plan

The team should develop a project plan for completing parts III and IV of the Annual Report

project. At least one representative of each group must provide a typed project completion plan

to me by this date. This project plan should include planned completion dates for the various subsections of the report and who will be responsible for each section of the report. It is advisable

that one or two members of the group take responsibility for the final editing of the completed

project. Hint: the questions section of the report follows the chapters covered in the text. You

should set deadlines based on the coverage of the information in class. Teams should also

consider including a statement about expectations for the team members regarding timely

completion of assignments; how to notify each other about missed meetings or deadlines, etc.

$($Note You will be asked to update this plan at the end of the semester to include comments on

how well you complied with the plan and anything you would have done differently with respect

to completing and coordinating the project.$)$

MERITUS UNIVERSITY Assignment BSCMB

FINANCIAL ACCOUNTING AND REPORTING Page $4$ of $22$

Part III Use the Annual Report to answer the following questions.

This section requires that students use their Annual Reports and knowledge from class to answer

several questions. Some of the questions might not apply to your company. Please be sure to

check carefully before you decide that an item is not applicable. If you are unsure, please ask me$!$

Answers must be in complete sentences and$/$or paragraphs. Yes, or No is not an acceptable

answer. Also, please be sure to carefully cite your sources. It is not acceptable to cut and paste

from the Annual report without attribution. Where it is necessary to quote brief citations, you

should use quotation marks. You should always reference where you obtained the material, for

example: General Motors, $2006$ Annual Report page $63.$

$1.$ Company Background

Provide a summary of the company including a description of primary business operations.

$2.$ Getting to know the Annual Report

Scan the report to identify the major sections of the report. Prepare a Table of Contents that

identifies the page number for the following items:

a$.$ Letter to the Shareholders

b$.$ Managements Discussion and Analysis of Financial Results $($include major sub$-$headings in

your Table of Contents.

c$.$ Income Statement.

d$.$ Balance Sheet

e$.$ Statement of Cash Flow.

f$.$ Statement of Shareholders Equity.

g$.$ Notes to the Financial Statements $($include a list of the individual foot notes$).$

h$.$ Report of the Independent Registered Public Accounting Firm.

$3.$ Read the Letter to the Shareholders.

a$.$ Who is the letter from?

b$.$ What are some of the companys plans for the upcoming year?

c$.$ What is the tone of the letter $($optimism$,$ cautious, non committal$)?$

d$.$ Does it address any problems from the past year?

$4.$ What are the titles of the Companys individual financial statements? When is the companys

fiscal year end? How many years of data does company include in each of its financial

statements?

MERITUS UNIVERSITY Assignment BSCMB

FINANCIAL ACCOUNTING AND REPORTING Page $5$ of $22$

$5.$ In order to begin to understand a companys business, you should know the major sources of

revenue for the company and the trends in revenue. For example, Disney generates revenue

from Media Networks, Theme Parks, Studios, Consumer Products and Interactive. CVS

generates revenue from Pharmacy and Retail segments. $($You will find the information

needed to answer this question from various sections of the $10$K including the income

statement, in the annual report narrative, and in sections or a footnote titled, Segment

Information or Segment Reporting. The company will usually identify revenue by product

lines or in some cases by geographic markets.

a$.$ Refer to the income statement from the annual report. What is the trend in revenue over

the three years reported? Are sales growing or declining versus prior years? Prepare a

brief chart or table showing the revenue trends using the information on the income

statement

b$.$ What are the major sources of revenue $($from the segment reporting found in the $10$K$)$ for

the company; in other words, identify the revenue for each of the major products or

segments. On a percentage basis, how much does each product or product line contribute

to the total revenues of the company? Prepare a chart or table showing the percent of

revenue from each segment reported.

c$.$ Comment on whether the source of revenues $($segments from the $10$K$)$ changed

considerably over the period of time covered by the financial statements? In other words,

did the relative percentages calculated in $($b$)$ change from year to year?

d$.$ Find the revenue recognition disclosures in the Management Discussion and Analysis

section and in the Footnotes to the Financial Statements. Give examples of how the

company recognizes its various types of revenues and explain how this relates back to the

revenue recognition principle.

$6.$ Current Assets

a$.$ How much does the company report in accounts receivable? What information is given

regarding the allowance for bad debts? Where did you find this information?

b$.$ Have receivables increased or decreased? Calculate the AR turnover and Days in AR$.$ Does

the collection period seem reasonable for a company of this type?

c$.$ What method does the company use to value inventory?

d$.$ Calculate the inventory turnover and days in inventory ratios. Does it seem reasonable for

this company? Explain why or why not.

$7.$ Plant Assets

a$.$ What are the major categories of Property, Plant & Equipment reported on the Balance

Sheet? Include additional information included in the footnotes, where available.

b$.$ What depreciation method$($s$)$ are used? What are the useful lives of the assets?

$8.$ Liabilities

a$.$ Analyse your companys liability section of the comparative balance sheets. Has the

composition of current and long$-$term liabilities changed significantly over the period?

b$.$ What types of long$-$term debt does your company have outstanding? What interest rates

are being paid on long$-$term debt? $($This information is available in the footnotes to the

financial statements.$)$ Summarize this information.

c$.$ What payments must be made on long$-$term debt and other long$-$term commitments over

the next year or $12$ months? $($This information is available in the footnotes to the financial

statements

MERITUS UNIVERSITY Assignment BSCMB

FINANCIAL ACCOUNTING AND REPORTING Page $6$ of $22$

$9.$ Stockholders Equity

a$.$ How many shares of common stock are authorized? How many shares were issued? How

many shares were outstanding? Explain what the terms authorized, issued, and

outstanding mean.

b$.$ Did the company pay any dividends on its common stock in the past two years? How

much was the dividend and where did you find this information?

$10.$ Corporate Governance

a$.$ Who are the external auditors for your company? What type of audit opinion did the

auditors issue?

b$.$ How many members are on your companys Board of Directors? How many members of

the Board of Directors work for the company?

$11.$ Other Items

a$.$ Based on your reading of the Annual Report and viewing the corporate website, what are

some of the corporate social responsibility issues that the company has chosen to

highlight? Why do you suppose that they chose these items to highlight?