Accounting 1B

Group Project – Financial Statement Analysis

PROJECT:

Your group (4 to 7 members) will collectively choose a publicly traded (in the US) corporation to analyze. Ideally, you will pick a corporation that has been in the news recently and is of interest to the general class. Additionally, one that has experienced financial and/or accounting difficulties can be especially interesting and relevant. However, you do not necessarily have to pick a financially distressed company. There are many possible businesses to choose from such as Enron, AIG, American Airlines, MF Global, or Countrywide to name a few. Your group will prepare both a paper discussing the company as well as a set of schedules in which you use traditional financial tools (Chapter 17) to analyze the company’s published financial reports. Your group will also present a summary of your conclusions to the entire class. The project will last for the remainder of the quarter. Class time will be available to work on the project and you will also need to spend time outside of class to complete the project. The end result of the project will be the written paper and schedules as well as the oral in-class presentation.

REQUIRED:

1. A 1,500 word typewritten paper discussing the company. Your discussion should give a brief history of the company, a more detailed explanation of the financial and/or accounting difficulties that the company faced, any legal or ethical issues surrounding the difficulties, the resolution of the difficulties, and the current status of the company. The paper should also discuss the results of your group’s financial analysis of the company as outlined in the next step. In particular, you should discuss anything you noted in your financial statement analysis related to the difficulties. (Were there any hints that might have warned a savvy investor about the difficulties before they became publicly known?) The written work needs to be your own original thought and words…copying off the internet or from other sources without proper attribution is plagiarism (cheating) and will be dealt with as outlined in the greensheet. The Long Term Group Project paper should be checked for originality on Turn it in.com before you submit the hard copy paper. For instructions on using Turn it in click the link : Turn it in.com instructions PLEASE DO NOT UPLOAD HORIZONTAL, VERTICAL AND RATIO ANALYSIS WORK…only the written essay.
2. Your group should obtain the company’s financial statements for the year in which the interesting events or financial difficulties were experienced. You must use the company’s actual financial statements…not digests of the statements from a third party finance web site. You should be able to obtain the annual report from the company’s website or the SEC Edgar system. Using the phrase “Investor Relations” in searches can usually speed up your search. If you are unable to obtain these financial statements, then you should choose another company for the project. Your group will apply the analytical techniques discussed in Chapter 17 to these financial statements. These techniques include horizontal and vertical analysis of the balance sheet and income statement and ratio analysis using the ratios on page 794. Depending upon the type of company, you may not be able to calculate every ratio given in the text. Do the best you can. (This is an ideal place to use an electronic spreadsheet program such as Excel or Lotus…however, you must do your own work…not copy someone else’s.) The group should prepare and turn in schedules with this analytical information along with the 1,500 word typewritten paper.
3. The group may also want to examine other relevant information. This might include the footnote disclosures, the Statement of Cash Flows, SEC filings, press releases or books such as RMA Statement Studies or Dun & Bradstreet Credit Services. Industry norms and key business ratios, one year. (De Anza library call number:HF5681 .R25 I525 2004-05)

ABOUT THE REPORT: The completed report and supporting schedules are due at the beginning of class on the first class day of the 11^th week. In class oral presentations will also be due on the same date. The presentation should be from 5 to 8 minutes. (Points will be deducted for presentations that exceed 8 minutes). You can use PowerPoint, Excel, Word, the document camera, etc. if you so desire. Make arrangements in advance if you want to use these resources. The group is free to organize the presentation as it wishes, however, it is best to share the presentation with all team members.

ABOUT THE GRADE: This project will be worth 75 homework points. The quality of the typewritten paper and analytical schedules as well as the presentation will all factor into the grade. Committee members will be asked to evaluate the contribution of each member. This will also impact your grade.