PROJECT: CARMAX INC. & AUTONATION INC.

OBJECTIVE

Financial Statement Analysis project involves a team of students analyzing financial statements of two (2) companies from the same industry and prepare a written analysis as well as recommendations.

ADDITIONAL RESOURCES

In addition to these guidelines, additional information is provided on the companys Web site, library databases and the textbook including: formulas and guidelines for calculations, information about the two (2) companies being analyzed, and any special considerations related to the specific companies or current economic conditions.

DESCRIPTION

The team will be analyzing each companys annual report (10-K filing), which serves as a rsum of a corporation. The Generally Accepted Accounting Principles (GAAP) and by the Securities and Exchange Commission (SEC) provide much of the information in corporate annual reports and in the 10-K. Specifically, GAAP requires annual reports to disclose four financial statements: a Balance Sheet, a Statement of Cash Flows, an Income Statement and a Statement of Retained Earnings. (MY PART ONLY BALANCE SHEET ANALYSIS)

SECTION 2: BALANCE SHEET ANALYSIS

1. Using elements listed on your companys balance sheet, prepare a common size balance sheet using the following format. (Vertical Analysis Chapter 5) each company over the two-year period (2015-2016)

COMPANY #1

Account Current Year % Prior Year %

COMPANY #2

Account Current Year % Prior Year %

2. Using elements listed on your companys balance sheet calculate the increase or decrease in dollars and percent between the years using the following format. (Year to Year Change Analysis Chapter 5)

COMPANY #1

Account Current Year Prior Year +/- $ %

COMPANY #2

Account Current Year Prior Year +/- $ %

3. Using elements listed on your companys balance sheet calculate the ratios and amounts using two years prior as the base year (100%) using the following format. Your answers should all be in percentages (Horizontal Analysis Chapter 5).

COMPANY #1

Account Current Year/Base Prior Year/Base

COMPANY #2

Account Current Year/Base Prior Year/Base

4. In thoughtful, well-organized paragraphs comment on changes you see in the balance sheet with regards to each company over the two-year period.

Among the items to consider:

a. Comment on any significant changes in each company in assets and liabilities. Explain.

b. Comment on any significant changes in each company in the composition of current assets and current liabilities. Explain.

c. Which assets in each company have the most significant investment? Why?

d. Are the companies financed primarily with debt or equity? Why?

e. Is the debt primarily short-term or long-term? Why?

f. Compare the balance sheets of both companies with regards to size and composition of assets, liabilities, and stockholders equity. Identify significant differences.