BAT4M
Financial Statement Analysis Summative
Summative Overview:
Your summative involves the analysis of a public Canadian corporation with shares trading on one of the Canadian stock exchanges. You are required to complete an in depth, written report on a corporation of your choice. Sign-up for companies will be on a first-come first-serve basis. No student may work on the same company. Manufacturing, merchandising and service companies are suggested. Bank, trust, and insurance companies should be avoided as their accounting policies are beyond the scope of this course.
Research:
It is expected that you will use a number of resources to investigate your company including the internet. Annual reports, investor information, product/service information are among the many areas often addressed on corporate web sites. Once a company is chosen, its web site should be reviewed in detail in order to obtain an overview of the company and its financial situation. In addition to the company website information, you are required to obtain a hard copy of the company’s latest annual report. In some cases, this can be requested through the website and, in other cases, you may have to contact the company directly. You may want to consider obtaining copies of the last three annual reports for comparative analysis. Your annual reports must be submitted with the written report.
Additional sources of information for this project include (but should not be limited to) the following:
· Additional information provided by the company
· TSE stock quotations @ http://www.tmx.com/en/index.html
· Newspaper/periodical articles (i.e. Canadian Business and Macleans)
· Dun and Bradstreet Industry Average Ratios
· Accounting texts (Corporate Accounting and Financial/Ratio Analysis Sections)
· Government or industry publications
Report Length:
Your summative must be typed (1.5 – 2 spaced) and should consist of a minimum of 10 pages and a maximum of 15 pages of written analysis. The annual report, ratio calculations, charts, graphs etc, are not part of the written report and should be included in an appendix after the written report. There is no limit on the length of the appendix.
Requirements For The Written Report:
Your written report should contain the following sections:
1. An Introduction
This information includes a summary of general information about the company. This
information is usually contained in the company’s annual report and should include, but
not necessarily be limited to, the following items:
· The name of the company and location of its head office;
· The name of the chairman of the board of directors, the chief executive offices, chief operating officer, president and two directors;
· A brief description of the organizational structure of the company (ie. its divisions, subsidiaries, etc) and their locations
· The name of the firm which audited the financial statements and a brief summary, in your own words, of the accounting firm’s opinion;
· A brief summary of the significant accounting policies followed by the company (i.e. depreciation method, inventory valuation etc.)
Do not simply list this information. Using subtitles, put this section together in two or three coherent paragraphs You may wish to add additional information as well.
2. Company Profile
This section should include:
· A brief history of the company
· A brief summary of coporate objectives and its mission statement.
· A description of the products sold and/or services performed
3. President/C.E.O/Chairman’s Report
· Based on this section of the annual report, summarize, in your own words, the contents of the chief executive’s report.
4. Environmental Analysis
Prepare an analysis of intangible factors and current events that may affect the company’s
current and/or future performance. Consider the company’s competition (direct and
indirect), the state of the economy both national and global, any provincial or federal
legislation; current government policy, taxation laws, and current social and technological
trends. What opportunities and/or threats do these factors play on the future of the
company? What changes, if any, based on this information alone, should the company
consider to remain profitable and competitive.
5. Financial Analysis (See Chapter 18)
a. Comparative Analysis
· Complete a comparative balance sheet and income statement comparing the results of the current and previous year using the Horizontal/Trend analysis technique as well as the Vertical Analysis technique
· The comparative statements should be set up the same way as any other financial statements you would complete. Briefly discuss your assessment of these findings/results.
· See pages 921-952
b. Ratio Analysis
· In this part of the report, you are to prepare a neatly drawn table summarizing selected ratios and measurements for the last THREE (two, if the third year is unavailable) years. If the information to calculate the ratio or measurement is unavailable (please look carefully), please state “N/A’ in your chart. Column headings will include: Ratio, Year 3 (current year, Year 2, and Year 1.
· The following ratios should be included:
þ 4 ratios or other measurements of interest to common shareholders
þ 4 ratios or other measurements of interest to short-term creditors
þ 2 ratios or other measurements of interest to long-term creditors
· The calculations for your analytical review should be included in your appendix.
· Based on the two previous sections, along with the trends and/or significant changes discussed in the environmental analysis, provide an assessment of the financial condition of the company.
c. Stock Market Analysis
· A discussion and analysis of the company’s performance on the stock market over the most recent 1 year period at a minimum.
· This information should be supported by a graph included in your appendix, charting the changes in the share price over the period.
· The Toronto Stock Exchange Website would provide this information.
6. Report to Management
Using the analysis discussed above and any other information which you feel is relevant,
discuss:
· Whether the company would be a good investment from the point of view of a potential common shareholder;
· Your overall impressions on the short and long-term growth potential for the company
7. Memo Preparation
Answer the following two questions in the form of two separate memos (see attached
format) to J. Banks, Manager, from yourself, dated Jan. 15, 2014, with the subject being
the company you're analyzing:
· If you were a major supplier for this company, would you extend them short-term credit?
· If you were a banker, would you loan this company a substantial amount of money in the form of a long-term note?
8. Appendices
The annual report, ratio calculations, charts, graphs etc, are not part of the written report
and should be included in an appendix after the written report. There is no limit on the
length of the appendix.
9. Bibliography or list of works cited.
See attachment for examples of correctly cited work.
You should also use parenthetical notation whenever your quote directly, or use ideas or
opinions taken from your reference materials.
NOTE: Some of the data may be difficult to obtain or may not apply to the company you
have chosen. In such cases, answer as much as you can or state that the item is not
applicable and provide reasons. The more popular the company you select, the
easier it will be to obtain the information required. Please be sure to have your
company approved by the teacher.
CAIRINE FINANCIAL CONSULTANTS INC.
MEMORANDUM
To: J. Banks
From: [ Your name]
Date: 2013 – 01 – 15
Subject: [The Company’s Name]
With regards to your request regarding…….., I would advise that….because…….
BAT4M
Financial Analysis Project
Helpful Planning Due Dates
Topic / Due Date / þ· Review of Summative; and
· Selection of Company / Friday, October,4nd 2013
· Review Company’s website and download of overview of operations and annual report(s) if possible
· Company Profile / Friday, October 18th, 2013
· Obtain Annual Report and at least 6 articles published on the company in the last 12 months
· Introduction
· President/C.E.O Report / Monday, November 15th, 2013
· Environmental Analysis
Based on information
collected on the
company, competition,
economy, etc. / Wednesday, December 13th, 2013
· Analytical review of company’s financial statements
· Comparative, Ratio, and Stock Market Analysis / Wednesday, January 9, 2014
· Graphs depicting share prices over 5 month period. / Monday, January, 13th, 2014
· Submission of Summative
· Putting it altogether along with your Report to Management, your Memo’s, Appendix and Bibliography. / Thursday, January 23rd, 2014