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21 Jun 2019

The class should discuss all of the questions listed below as they relate to the financial statements of any U.S. public company of your choice in its latest annual report. You can find the financial statements of any U.S. public company by visiting Morningstar, Yahoo Finance or MSN Money, and using the stock market symbol for your chosen company (which can be looked up on Morningstar, Yahoo Finance or MSN Money). If you work for a U.S. public company, you probably want to use the financial statements of your company - but the choice is up to you.

NOTE: Sometimes Yahoo, MSN Money and Morningstar omit numbers. Only the annual report from the company web site or the SEC form 10-K (for U S Companies) can be guaranteed to have all numbers correct. The 10-K Business section and Management Discussion and Analysis contain valuable information about the business, competitors and what happened to financial results. It can be found on the SEC web site: www.sec.gov. Click on Edgar and then enter the ticker symbol for the company. Search for 10-K.

It is useful to compare financial ratios for a company with financial ratios of its industry. Industry financial ratios can be found on Morningstar.com, Yahoo Finance and MSN Money.

Please answer the following questions:

1) What 3 items of important information does the income statement reveal about the financial performance of the company over the last three years?

2) What 3 items of important information does the balance sheet reveal about the financial position of the company over the last two years?

3) Can you identify the major sources of funding used by the company from the information presented in the company's Cash Flow Statement?

If not, how could you get this information?

4) Who is responsible for: a) the issuance, and b) the content of the company financial statements?

5) What assurance, if any, is there that the financial statements are in compliance with GAAP, and are free of material misstatements?

6) Of what use, if any, are the notes to the financial statements? Give 2 facts learned from reading footnotes.

7) What can you learn from the Business Section of the 10-K? Give two facts about the company that you picked from the Business Section.

8) What can you learn from the Management's Discussion and Analysis of Financial Condition and Results of Operations in the 10-K? Give two facts about the company from this section.

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Beverley Smith
Beverley SmithLv2
22 Jun 2019

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I need help with this problem i have. The company I chose was apple because i figured it would be the easiest. I know i listed the formulas, but i cant find any of the numbers. Can anyone possibly help? I need to know what numbers go in what formula.

Much appreciated.

Company Valuation

1. Analysis of WACC

a. Calculation of WACC for your company:

You will need to identify each component of the WACC formula and calculate the overall WACC.

The WACC formula for a company that uses debt and equity is as follows:

WACC = % Debt * Cost of Debt * (1 - Tax Rate) + % Equity * Cost of Equity

*You should use Yahoo! Finance and / or the company's most recent 10K report to identify all financial statement inputs. You can use the following guide for the inputs. The specific financial statement data are found on the relevant financial statement. Debt = Long-term Debt + Short-term Debt (on Yahoo! this is called, "Short/Current Long Term Debt")

Equity = Market Cap. (This is on the Key Statistics page in Yahoo! Finance)

% Debt = Debt / (Debt + Equity)

% Equity = 1 - % Debt

Cost of Debt = Interest Expense / Debt

Tax Rate = Income Tax Expense / Income Before Tax

Cost of Equity: Use the CAPM equation to calculate this

Cost of Equity = Risk free rate + Beta * (Market Risk Premium)

Risk free rate: look up the yield on 10 year US Treasury bonds

Beta: This is on the Key Statistics page in Yahoo! Finance

Market Risk Premium: Assume 11% minus the risk-free rate

b. Interpretation of WACC for Your Company

*Indicate what the WACC value you derived means for your company.

*What role does the WACC play for company managers when they are evaluating new projects to undertake?

*How would company managers and investors use the WACC for an overall company valuation analysis?

SEC Web Site Demonstration

Demonstrate how to locate SEC data and various financial statements.

Select any publicly traded organization (e.g., your employer may be a good choice). Locate the organization on the SEC’s Web site at http://www.sec.gov. Use the EDGAR database on the SEC Web site to view the organization’s 10k filing. Also, search for the company’s standard industrial classification (SIC) code. Retrieve the different financial statements in the 10k filing. Check out the footnotes in the financial statements. Discuss any emerging issues that are evident on the SEC Web site.

Let's do an example in case you have trouble. You will need to write this down or print it out somehow so you can use this example to get to the information.

Click on the SEC Link in the instructions; it will take you to the SEC Home page. You can explore that for a while. But to get to our sample information, in the second column and under the second blue bar "Filing & Forms (Edgar)" click on "Search for Company Filings".

On that page under "General Purpose Searches" click on "Companies and other Filers".

On the next page type "Wal Mart" (without quotes and make sure you put in the space and do not use a "-"; just Wal Mart) the click on "Find Companies" at the bottom of the box.

Now see "Wal Mart Stores Inc?" Note the SIC Code just below it.

Click then on the 0000104169 and take a look at all the information there. Look down the page at all the information filed by Wal Mart with the SEC. Note you do not see a 10K form???? Click on "Next 40." Not too far from the top you will finally see the 10K!!! Click on "html" for the 10K then on the next page to get to the beginning of it click on "d10K.htm." You are there. Wal Mart's most recent 10k will come up.

Explore this; it is quite long and quite detailed. I suspect you will be amazed to see how much information a company must share with the world and how much is available to you if you go looking. Take a good hard look over this document.

Do some research on this site to tell us just what a 10K is?

Give it a try, and then try another publicly traded company. Try a big one; it will be easier for you to isolate. If you cannot get any further than Wal Mart, you can discuss what you find about them for this assignment. However, TRY to select different companies so the entire class is not researching the same company. We will all learn more this way.

Choose a publicly traded company that interests you. If you don't know how to choose a company, think of IBM, DELL computer, Nike, Apple computer, GM, Ford, Nokia, Home Depot, and on and on. Think of the companies that make things you use everyday. Choose one from them. Part A. Go to COMPUSTAT Research Insights, Reuter�s, Thomson Financial Service, or Bloomberg Financial (E-Trade Financial Learning Center has them all) or any other financial database such as Yahoo Finance to download the historical closing prices (five years) of your company on the monthly basis (twelve data points a year). Use Microsoft Excel to chart the historical prices (like the one below) based on the monthly data. Part B. Based on the financial statements of the latest available annual report, calculate the following financial ratios using only one year data. If the ratios are not available, please explain why. For example, Citibank doesn�t have inventory because it�s a financial company. (Please use spreadsheet software (MS Excel) for this part and show your calculation) Current ratio Quick ratio Fixed assets turnover Total assets turnover Total debt to total assets Profit margin on sales Return on total assets Return on common equity Price/earnings ratio Market/book ratio The final report should include a chart of monthly stock price movements described in part A and the financial ratios in part B above. Based on the materials provided in the annual report and business news from The Wall Street Journal, as well as the financial information from any other sources, such as Datastream, Reuters, and Bloomberg Financial, explain as much as you can the movement of your stock during the last twelve months. Your report should start with a description of the business and the status of financial condition such as Line of business, Competitive positions, and Profitability History (going back five years). Do not turn in a sloppy, rapidly completed report. All papers should have a title page, a table of contents, a statement of purpose, footnotes or endnotes, or a bibliography or reference. The due date for submitting your project is the last date of the class. You will use Assignment manager to submit your project.

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