Financial statements analysis The purposes of this assignment are to introduce you to the concepts of financial statements analysis, to help you develop knowledge and skills associated with financial statement analysis, to provide a comprehensive example that can be used for the application of previously learned concepts and skills, and to foster your collaboration and communication skills.
Skills: The assignment will help you develop and practice the following skills
- Understand the components of the Income Statement and Balance Sheet
- Analytical procedures for horizontal and vertical analysis
- Calculate financial statement ratios for liquidity, solvency, profitability, and stock
- Compare and analyze the results for financial statement analysis computations
- Evaluate the results of the financial statement analysis and produce a conclusion
- Judge the results of the financial statement analysis and select the best solution
Knowledge: The assignment will help you apply knowledge learned related to
- Horizontal and vertical analysis
- Ratio analysis for liquidity, solvency, profitability, and stock
- Income Statement components of Revenue, Cost of Goods Sold, Gross Margin, Operating
Expenses, and Net Income
- Balance Sheet components of Short-term Assets, Long-term Assets, Current Liabilities,
Long-term Liabilities, Retained Earnings, and Stockholders’ Equity
- Limitations of Financial Statement Analysis
Assignment Summary:
Throughout chapter 9 we will be evaluating the performance of a company named Milavec Company for
years 3 and 4. We do not have a lot of details about the company’s operations, but we do have an
Income Statement and Balance Sheet for years 3 and 4. We do not know the company’s industry, but we
can determine some facts about the company based on the information presented. Your job will be to
unravel the information available, analyze the financial statements (including the Year 5 financials
provided below,) and draw some conclusions.
Develop groups of 2-4 students. Each group will work together throughout the coverage of Ch 9 to
produce (at least) three analytical assessments and a summary of conclusions. The final result of your
work will be submitted to your Group Folder in D2L and via FlipGrid and we’ll select (as a class) the 3
best submissions. The 3 best will earn extra bonus points added to the final exam. However, the point of the group work is not the bonus points, it’ll be to work together to learn how to do financial statement
analysis using the techniques we will cover in class.
Assignment Specifics:
Part A – 10 pts – To be completed (individually) before we start Ch 9 – Submit individually to the
matching Assignment folder by July 18th.
Before we start Ch 9, review the Milavec Financial Statements as presented in your book or Power
Points (also, attached at the bottom of this assignment – but you do not need to include Year 5 at this
point) and make some initial observations about the company. Individually, come up with at least 3
observations about the company you can share with your group. (For example, by looking at the
Income Statement you can see that the company is currently operating profitably. Your observations
can be simple or complex, broad (like the example provided) or detailed.
Part B – First Group Action – Select your point of view and groups – Submit to your Group
Assignment folder by July 21st (Wednesday)
Each group will be working through the three years of Milavec Financial Statements provided in this
group project assignment sheet from one of 3 perspectives or point of view (POV)
1) Investors considering investing $100,000, who will more purchase Preferred Stock, 6%, $100 par
2) Lenders considering loaning $100,000 for a 10 year term at 8% interest
3) Internal Management tasked with increasing profits over 3 years by 5%
(Please note: your book and Power Points do not included year 5 Milavec results. Please be sure to take
Year 5 results into consideration for your group work, group analysis, and final submissions.)
There will be a group selection process and a POV selection process facilitated by the Groups
feature in D2L. Use the Group feature in D2L to select your group. Once your group is determined,
then select your POV.
Once your group is formed and your POV is selected, work together to share your initial individual
observations. Then considering your group’s POV, develop 3 or 4 additional observations to share
about Milavec Company that will help others understand Milavec and will help your group
formulate an opinion about Milavec that will help you draw a conclusion.
Submit your group name, group members, selected POV, and your group’s initial observations about
Milavec.
Part C – 85 pts – Develop a recommendation and Submit a summary of your group’s analysis and
conclusions/recommendation to the D2L Assignment folder you used previously. – due by
Sunday, July 25th.
Perform analysis on the three years of Financial Statements provided for Milavec. Produce a
summary of your group’s conclusion about Milavec, including the recommendation you make for your chosen point of view. (For example, if you are using the Investor POV you would recommend
“yes, invest” or “no, do not invest”) Provide the analytical tools you used (at least three) that
support your conclusion or recommendation. Be sure to include a description of your analysis in
addition to the computational work. At least some of your analytics need to include Year 5
performance.
Each group should produce
- A visually appealing summary that presents your groups conclusions and provides easy-to
understand analytics to support your conclusion.
- A FlipGrid video that shares your summary
- Supplemental work to provide the supporting calculations/computations and descriptions of
your analysis. However, your classmates will vote for the three “best” submissions based
on your one-page summary.
Part D – 5pts – Each individual should vote for their top 3 summary submissions. Votes will be
collected via a D2L survey. Submit your votes Tuesday, July 27th via D2L Surveys
Your instructor will provide access to the one-page summaries and FlipGrid submissions. Please
select 3 that you think are the best (you decide how you evaluate “best.”) After you have reviewed
the summaries go to the Survey tool in D2L to select your top three choices. You will have the
opportunity to provided feedback on each submission. (Feedback is not required by the voters, but
it is helpful to the groups to receive feedback.) Financial statements analysis
Criteria for Success:
To maximize your points earned, please be sure to complete all parts of the assignment.
Good summaries clearly state the recommendation your group is making and the recommendation is
then followed by defined or named analytics. Each analysis includes clear computations and a brief
description. Both clarity and creativity tend to be valued by the readers (your classmates who are
voting.) When used appropriately, charts, graphs, and visual aids improve your one-page summary.
Unlike typical assignments, success is evaluated by your fellow classmates.
This link provides an example of and description of financial analysis. Scroll down to the section on
Liquidity Ratios to see an example of a clear presentation followed by a brief description.
https://www.investopedia.com/articles/personal-finance/081815/invest-costco-first-understand-its
balance-sheet.asp
Biggest key to success: Have fun with the project and focus on the purpose of
learning financial statement analysis knowledge and skills!