ACCOUNT 701: Weekly Assignment E (Module 5)
This assignment builds on the understanding gained from the first four modules of ACCOUNT
701. As a reminder, the first four modules provided a foundation to the basics of accounting
and introduce the variety of estimates and classifications that exist within the financial
statements. Module 5, this module, provides the needed tools to perform higher level review,
analysis, and comparison of financial statement information.
To assist with your completion of this assignment, it is
oken down into the following steps.
1. Decide what industry you want to analyze by selecting one of the groupings below.
a. Retail: Walmart or Target
. Clothing: Abercrombie and American Eagle
c. Fast Food: McDonald’s and Yum Brands (KFC, Taco Bell, Pizza Hut)
2. Obtain the Annual Reports (or 10-K’s as needed) for the companies you have selected.
To simplify this process, I have uploaded PDF copies of all six reports on Canvas.
3. Create (and populate) a standardized format for both the Income Statement, Balance
Sheet, and Statement of Cash Flows. You will need to standardize at least two years’
worth of financial data for each company. All the needed information for each
espective company should be available in the most recent annual report. When
standardizing the data between companies, I suggest using groupings similar to the
table below.
Income Statement Balance Sheet Statement of Cash Flow
Sales (or revenue) Cu
ent assets Operating cash flow
Cost of goods sold Property, plant, and equipment Investing cash flow
Gross margin or profit Other assets Financing cash flow
Operating expenses Total assets Total cash flow
Operating income or profit Cu
ent liabilities
Non-operating income Non-cu
ent liabilities
Interest expense Total liabilities
Income tax expense Total equity
Other non-operating expenses Total liabilities and equity
Net income or profit
NOTE: Totals are bolded.
4. Common size (perform vertical analysis) on the income statement and balance sheet for
each of the two companies for the two most recent periods.
5. Perform horizontal analysis on the standardized balance sheet and income statement
for each company. Horizontal change should include the dollar value change as well as
the percentage change between periods. NOTE: You do not have to perform vertical or
horizontal analysis on the Statement of Cash Flow.
6. After standardizing and performing vertical and horizontal analysis on the financial
statements, continue to review the financial statements (and accompanying notes to
the financial statements) to find answers to the following questions. Your answers for
these questions should be placed beneath the common-sized/standardized financial
statement summary from above.
a. What was the depreciation/amortization expense for each of the last two years,
espectively?
. What method of depreciation does the company use (see notes to financials)?
c. What was the per share market value of the company for each of the respective
year-end’s (tip – you have to search historical stock prices to find this)?
d. What were dividends (if any) for each of the two most recent years?
e. Does the company grant terms to customers (Accounts Receivable)? If yes, what
would be the gross amount of receivables, net amount of receivables, and
allowance that is anticipated to be uncollectible?
TIP: If you are not able to find an answer for the question(s) above (for one or both of
your companies) please indicate this in your answer.
7. Create a page of ratios, percentages, and/or numbers that review your selected
companies. In total, you need to have at least six ratios excluding those that have
already been generated based on your vertical and horizontal analysis.
8. Create a memo that will be used as a cover page for your submission. The memo should
e single-spaced and no more than one page in length. An example memo, similar to
what was provided in Module 1, can be found on Canvas. The memo should be as
ief
as possible while still providing answers to the following: (1) an introduction identifying
the work you performed; (2) a summary of the documents that you are attaching to the
memo; (3) your recommendation as to which company is performing better. Support
your recommendation with two to three key points of information that helped form
your decision. Remember, the answer to all of this is really “it depends”; therefore,
support your answer with information that you find relevant.
The finished document should be uploaded to Canvas in a single PDF file. If you are not
familiar with putting multiple documents into a single PDF, please see the video and
instructions I created in the Module 5 assignment area. My belief is you should be able
to submit this assignment with a total of three to six pages. The PDF that you upload
should be organized in the following order.
a. Memo [1 page] (2 points)
. Standardized Financials with Vertical and Horizontal Analysis
[1 to 4 pages] (14 points)
c. Ratio and Percentage Analysis [1 page] (9 points)
Scoring: 30 Points Total (25 for assignment | 5 for appearance and timeliness)