Week 2
assignment
Financial
Accounting; Understanding Financial Statements (Required)
You may want to
start with this on-line tutorial. It
will take a total of 45 minutes and can be completed over multiple days. It is optional and not graded. It explains accrual accounting and financial
statements is an easy to understand way.
To open click and open in a new window or copy the link into the url
section of your browser.
http://www.baruch.cuny.edu/tutorials/statements/
Our purpose this
week: learning how to understand and interpret financial statements. Show us
that you have read and understood the required readings, links and attached
files – quote them where appropriate.
Assignment:
You should
answer 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. Please use the Securities and Exchange Commission web site as your
primary source for financial statements.
All publicly traded U S companies have their annual reports called the
10-K available through the Securities and Exchange Commission web site. http://www.sec.gov/
NOTE: Not all
companies traded on the New York Stock Exchange are U S Companies. Please request permission from the professor
before choosing a non-US company. For
Example, Sony is not a US company.
Instructions for
use of the site are as follows: About
half way down the home page is a box titled Search EDGAR, free access to over
21 million filings. Enter the company
name or ticker symbol. That brings up a
page called EDGAR Search Results. In the
line “filter results” enter
“10-K” in filing type and hit search.
That will bring up recent company annual reports. Note: You have a
choice of “Documents” or “Interactive Data.” Both contain
all the information. “Interactive
Data” uses Excel and provides the best access to information for questions
1, 2, and 3. “Documents”
provides information that is easy to read for questions 4 through
8. After you click on Documents, click
on the red letters and numbers to the right of the “10-K” heading.
Also 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). Please be aware that
sometimes these services omit some numbers in order to fit their preferred
formats. Many companies have links to the Annual Report as filed with the
SEC. It can be found on the Investor
relations page of the company web site.
If you work for
a U.S. public company, you may want to use the financial statements of your
company – but the choice is up to you.
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 annual report?
Please look at the Statement of Cash Flows, formerly called the Source
and Uses of Funds Statement.
4) Who is
responsible for:
a) the issuance, and
b) the content
of the company
financial statements? (Note: this information may be difficult to find. Look for statements by management and the
independent auditing firm.)
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 an example of something
learned from the footnotes of your company.
7) What can you
learn from the Business Section of the 10-K?
Give two facts learn from reading this secton.
8) What can you
learn from the Management Discussion and Analysis of Financial Condition and
Results of Operations (MD&A)? Give
two facts learned from reading this section.
*************
Post in your
individual assignment folder by the due date. .
Quantitative
analysis tied to the financial statement concepts will add value to your work.
The Power Point
(Financial Statements.ppt) should be very helpful.
Week 2 –
Financial Accounting
In Week 1 we
discussed economics and management decisions. We focused on how choices could
be analyzed and decisions made. Now we turn to evaluating the success of those
choices and decisions, which is the scorecard known as Financial Reporting.
For those of you
who would like more background on financial reporting, some files are attached.
A Power Point
presentation that clearly explains financial statements, and shows you what to
look for in them (Financial Statements.ppt)
A Word file
showing financial statements as diagrams (FinancialStatementDiagrams.doc)
A file that
describes some key features of financial statements (Week2.xls)
A Word file
describing the main SEC filings (Guide to SEC Filings.doc) IMPORTANT
With all of this
information, where does one begin?
Start with the
Power Point presentation (Financial Statements.ppt)
Next view the
Word file (FinancialStatementDiagrams.doc)
Then read the
attached Excel file (Week2.xls) Week2.xls
Next go to
http://www.baruch.cuny.edu/tutorials/statements/
It is strongly
recommended that you use the file provided in the section of this discussion
titled “A Sample Answer To Our Assignment.”
If you wish to
know more about financial statements visit these helpful web-sites:
http://www.sec.gov/investor/pubs/begfinstmtguide.htm
http://www.investopedia.com/university/financialstatements/
If you wish to
find financial statements on the internet, bear in mind that financial
statements for public companies can be found in their required reports to the
U.S. Securities and Exchange Commission (SEC), which are Form 10-K (annual) and
Form 10-Q (quarterly). You can find the financial statements of all public
companies in the U.S. and their Forms 10-K and 10-Q in Morningstar, MSN Money
and Yahoo Finance.
Finally, the
U.S. is planning to switch its financial reporting standards from Generally
Accepted Accounting Principles (GAAP) to International Financial Reporting
Standards (IFRS) by the year 2015. GAAP is a very detailed rules-based system,
whereas IFRS is a very summarized, non-detailed, principles-based approach. For
more visit this link:http://www.ifrs.com/video.html
A separate main
topic has been created for each question. Please post your answers under the
appropriate main topic headings for each question. Each student is expected to
make a significant contribution to the overall discussion.
