Press Release Report: Accounting, the Language of Business - Analyzing a Press Release

Overview

To think of accounting as an exercise in "juggling numbers" is to miss the point. The primary purpose of accounting is to provide information that is useful for decision-making purposes. In today's highly competitive business environment, prudent decision-makers, both internal to the firm and external to it, make informed decisions based on as much "hard" financial information as is available. Accounting provides the metrics by which we can gauge the strength of a business in terms of its profitability, liquidity, solvency, etc. Accounting is, indeed, the "language of business".

The primary goal of the project is to provide an opportunity to relate the course content to what is reported in the "real world" via a press release. Secondary goals include the utilization of the Internet to perform basic accounting-related research and the enhancement of written communication skills.

What's a Press Release?

Generally, companies that are publicly owned publish financial results each quarter in the form of a news release sometimes referred to as an "earnings release". Typically, the release contains a few pages of text describing financial results of business operations during the quarter and financial statements are typically attached.

You Need an Earnings Release

Companies will issue press releases for a variety of purposes, includingthe announcement of a new product, a new location, a newly hired executive, or monthly sales reports. While all of these are press releases, none of them is the particular type of press release called an earnings release, which is what you need. It may be called by a different name; the title of it may refer to earnings, profits, results of operations, or financial results.

Probably the easiest way to find the earnings release is to do a Google search on the name of the company followed by the words "investor relations". On the screen that comes up, many companies will provide a link to press releases or news releases. There may be a number of different types of press releases in investor relations. Remember, you want the one that reports the quarters' financial results. Some companies call it a release about the results of operations. Some call it an earnings release. Again, you may need to hunt a bit - patience and persistence may be necessary. The key is to be sure the press release you use concerns itself with reporting the company's earnings for the quarter specified later in this document (earnings may also be called profit or net income) results.

Not Every Company's Release Will Work!

Three companies are listed below. Please select one of these companies - these companies were chosen for a reason - do not substitute your own choice of a company!!!! All 3 companies issued an earnings press release in November 2021 and you should use that release - not earlier and not later.

Here are the three companies.

JW Nordstrom

Etsy

Capri

The Final Product:

Here are the questions that you need to address. Be sure to use the press release released at the time specified above and answer based on quarterly (not the year to date) data.

1. To get started, answer the following.
   1. In the first few pages of our textbook, the author sets out the objective of most businesses. What is that objective? Provide a bit of explanation of the meaning of that objective.So, for example, if the text says that the objective of a business is to "go green" (that is not the answer), explain what "going green" means.
   2. What does the company say in its release about that objective? Make reference to specific data, both dollars, and change from the prior period. In effect, what does the company say about achieving that objective during the quarter?
   3. What does senior management have to say about the company's performance during the quarter?
   4. Give one other piece of information that the company discusses in its press release that is important. Be specific and indicate why.

1. This question is about stakeholders.
   1. What is a business stakeholder?
   2. Select one business stakeholder and tell me which is selected. Then tell me why that particular stakeholder would be interested in the information in the press release. Make it specific - don't say "I chose employees and they are interested because they want the company to do well". You could say that about any business stakeholder...

1. This question relates to financial statements that may be attached to your press release.
   1. Concerning the company's balance sheet:
      1. Is there a balance sheet attached to the press release?
      2. If so, do the words "balance sheet" appear in the title of the balance sheet? If not, what does the company call it?
      3. If the answer above is "no", how were you able to recognize the balance sheet? If the answer is "yes", you do not need to answer this part.
   2. Concerning your company's income statement:
      1. Is there an income statement attached to the press release?
      2. If so, do the words "income statement" appear in the title of the income statement? If not, what does the company call it?
      3. If the answer above is "no", how were you able to recognize the income statement? If the answer is "yes", you do not need to answer this part.
   3. Are the financial statements for your company precise to the dollar? Comment briefly. Hint: begin at the top of the income statement (which is the name of the company) and begin reading down slowly and carefully and you will find the answer.Students frequently answer this question incorrectly. Follow my hint and look carefully. This should be an easy one.

1. Answer the following for the company you have chosen.
   1. What amount of resources owned by the company is reported in its financial statements? How can you tell?
   2. What is the amount of the totalclaim of shareholders against the assets of the company you have selected? How can you tell?
   3. What is the amount of the totalclaim of creditors against the assets of the company you have chosen? How can you tell?

1. Does the company you selected sell to its customers on credit? How can you tell? Be sure your answer is based on information in the press release andnot on anecdotal information. An answer like "I shop there and I know they accept credit cards" willnot work.

1. Does the company you chose have any debt on which it is paying interest? How can you tell - be specific and cite data.