Comprehensive Analysis Project (CAP)
As shown in the syllabus, you have a project to do for this course. Other instructors
have students work in groups, have milestones where specific work has to be done, etc.
Although this is an outstanding way to do a project for this course, I choose to do it on
an individual basis where the students have the option to work with each other. I
elected to use textbook examples and the Internet for supplementing the learning
process replacing the use of Annual Reports of publically traded companies. I feel that
this project will
ing you to an understanding of the Learning Objectives of the project
and would argue that a student seriously interested in his/her future is not limited as to what he/she could learn about
financial statement analysis from this format.
I want to start out by giving you some directions on what you should accomplish and why then later itemize the analysis
questions in the Requirements area.
Overview of the Project a.k.a. CAP
The final project asks you to:
1) Answer general "theory" questions regarding these two companies.
2) Utilize the Internet as resources to understand how to generate useful indicators in the areas of Profitability,
Asset Management, Financial Risk, Liquidity, and Market Strength.
3) Perform calculations and analyses on the financial statement data given.
4) Evaluate the results from your calculations and analyses and form conclusions regarding your understanding
of the companies compared.
5) Discuss this project with others in the class or work in self-created groups (for both online and traditional
classes) to discuss the project where you can learn from each other but ultimately prepare you own
individual analysis. (The level of interaction between students is up to the individual student and while
highly recommended, is not required.)
This case analysis has many important learning objectives which are:
1) to provide a review of important concepts covered in this course
as well as integrating the knowledge you have gained during the
semester so that you can see the "big picture".
2) to expose you to alternative formats for financial statements as
well as terminology that may not be "just like" the textbook.
3) to practice your communication skills (i.e., effective reading,
listening, writing, speaking).
4) to improve
einforce your interpersonal skills by providing
experience in working with other students as a cooperative learning team (see #5 above).
5) to provide a foundation in understanding and using corporate financial statements that will be useful in your
future college courses and professional career, as well as from a potential investor standpoint.
(Adapted from Michael Booth’s Acct 1 Project).
Parts to the Project
The project is divided into two major sections. The first section is ratio analysis also called performance measurement.
In this section, I give you a couple pages I scanned from a textbook of some of the underlying concepts of performance
measurement. To provide you with details on what the ratios are and what they mean, I then included four hyperlinks
to resources on the web. My suggestion is to give each link a quick overview to see which one fits your learning style.
Some are “down and dirty” without much frills and others are more sophisticated and detailed. Remember that you
have your own textbook chapters that you will have completed by the time you put the finishing touches on this project
so you should have no shortage of resources.
Following these resources, I give you the actual textbook problem (problem 14.4) with the Income Statement and
Balance Sheet. I decided to provide all of this information so that you have it all at your disposal and do not have to go
“find” the information yourself. My thinking is that if I provide the information, you can spend your time on the learning
aspect of this assignment. At the end of this first section is the requirements section itemizing what you need to do.
The second section which follows all of the above is a very short section where I want you to write up an analysis of a
horizontal and vertical analysis problem where I give you the problem and the solution. I am looking for a write up of
what the data means. My thinking on this one is that the computer will spit out the numbers and the calculation but
you need to be able to interpret the results.
Here are 2 pages that I scanned from the Needles textbook that will give you a little background information. I hope the
quality is good enough for you to read. See if they helps you understand the overall concepts of Financial Performance
Ratios Defined – Course textbooks:
Just as a reminder: To see a list of the ratios and their formulae, see Chapter 14, page 654 in the Acct 1A - Li
edition Textbook or Chapter 23, pages XXXXXXXXXXin the Acct 159/Acct 6 - Price 13th editionTextbook. You will want to
efer to these pages or from the Internet sites below to find the formulae needed in the requirements section below.
Financial Ratios from the Web
Here are a couple of websites that define the ratios and give you some background. Use this information to paraphrase
your ratios as instructed in the requirements section below. I am looking for you being able to read the explanations
from one of these websites, combine it with what you have read from your textbook and learned from doing your
homework and then tell me in your own words (no direct quotes) what each ratio represents and why it is important. As
you read from these websites, don’t try to understand everything that they are saying as the detail varies site by site.
Focus in on 1) what the ratio is and how it is calculated; 2) what it means (needed for the paraphrase), and 3) why it is
important (needed for the analysis write up). The calculations and the paraphrase is what is required for each of the
first 5 requirements of section one. Your summary for section one will be the “why” part (which is requirement number
6 and is your analysis, also discussed more in the requirements section below). Here are the web links.
atios/. This one is great but when you first enter the site, it runs
some advertisement. Just look to the top-right of the page to click the link that will skip the ads and go directly
to the content. I thought this one would be the best for this project and most students so I put it first.
iz_resources_book-6.pdf. This site is a pdf document that was created by
Zion Bank, a financial institution operating in Idaho and Utah. It is my second choice of great ones to use but it is
a bit long (23 pages).
educ.jmu.edu/~drakepp/principles/module2/fin_rat.pdf. This site is a handout from a professor at James
Madison University in Virginia and contains 14 well written pages but is more like a textbook, which is good if
you want the detail, but involves a bit more time and effort to get thru it.
esources/financial-ratio-analysis. This site has some great information
ut not a lot of detail. It tells you the facts but not as knowledge friendly as other sites.
Here are two links to annual reports (pdf files), one for American Eagle Outfitters, the other for The Buckle.
Requirements Section One
Conduct a comprehensive ratio analysis of each company, using the income statement and balance sheet of each
company and any other available information. Compare the results. Round to one decimal place and consider changes
of 0.1 or less to be indeterminate. For this section, you need to use the data given above. Show me the ratio formula
(you are welcome to copy and paste the formulae text from any source so that you can reduce the amount of typing),
then show the calculation. Next, paraphrase what the ratio means. Do this process for each of Requirements 1-5. I am
looking for your understanding of the ratio and not what you can copy and paste. This format is how I will judge your
understanding of the material. Expected length of the paraphrase is 2 paragraphs, not 2 sentences. If you treat this part
of the project like a recipe, you should be able to efficiently complete this part of the project. The analysis in
equirement #6 is the “Why” discussed above. Be sure to properly quote your paraphrase and anything that you may
quote in your analysis (see the note about proper citation at the bottom of this document).
1) Prepare an Operating Asset Management Analysis by calculating for each company the :
ent ratio b) quick ratio c) receivables turnover
d) day’s sales uncollected e) inventory turnover f) days’ inventory on hand
g) payables turnover h) days’ payable i) financing period
2) Prepare a Profitability And Total Asset Management Analysis by calculating for each company the:
a) profit margin b) asset turnover c) return on assets
3) Prepare a Financial Risk Analysis by calculating for each company the:
a) debt to equity ratio b) return on equity c) interest coverage ratio*
4) Prepare a Liquidity Analysis by calculating for each company the cash flow yield
a) Cash flows to sales b) Cash flows to assets c) Free cash flows
5) Prepare An Analysis Of Market Strength by calculating for each company the:
a) price/earnings ratio b) dividend yield
6) Once you have completed the first 5 steps, write a 1-2 page analysis of the Heckle and
Jeckle corporations. Which one is better off and why? What are their similarities, differences,
strengths, weaknesses, etc.? Which one would you invest in and why? Note: This section is
another opportunity where you can demonstrate your understanding of what you learned this
semester so write as