Financial Statement Analysis

The purposes of the case project are:

●        To provide an opportunity for you to apply the tools of financial statement analysis in comparing two companies of your choice.

●        To help increase your awareness of the types of industry information which are available, along with the limitations of using such information.

●        To offer another opportunity to become familiar with the FASB Accounting Standards Codification, as a resource that can help provide a greater understanding of financial statement information and disclosures which are presented by companies.  

The case project is worth 80 points.  The project should be typed, double-spaced.  Its length should be no shorter than 3 pages, no longer than ten pages, not including the cover page, and not including the copies of the financial statements which you will include within your document.  The project will be graded based upon content, rather than length.

Selecting Your Companies

For the case project, you will be selecting two companies to analyze.  The two companies that you select do not have to be similar in size, but they must be involved in providing similar products or services (i.e., they must be in the same industry).  Both companies that you select must be publicly-traded, and I would recommend that you choose two companies which are headquartered in the United States.  To help you select your companies, you may use an online resource, Hoovers, which is available through the University of Minnesota Business Library web site.

1.        First, go to the U of M Business Library web site, at https://www.lib.umn.edu/business (a direct link to this site is also available within the Course Resources tab of our course Moodle page).

2.        At that site, go down to the "Databases Related to Business" section, and select "Company Information".  

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3.        At the next page, under the heading Top Resources, select  "Hoovers".  Please Note: If you are using a computer that is off-campus, you may at this point be prompted to log-in using your U of M X-500 user ID and password.  

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4.        You will then be taken to the Hoovers website.  At the Hoovers website, you will see a search tool at the top of the page.  On the left side of the search tool, click on All Categories, and a pop-up menu will appear.  Select “Industries” from this menu.  Then, within the search tool field, type in the name of the industry from which you plan to select your two companies, and click enter.

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5.  Search results of sub-categories within your industry will appear.  Select the sub-category from which you plan to select your two companies.

6.  You will be directed to a summary of information for that industry sub-category.  Scroll down to view a window which lists the Top Companies.  Just below that listing is a selection to “View All Companies In This Industry”.  Choose that selection if you wish to view more companies.  From this list you can select the two companies that you choose to analyze.

7.        One word of caution: certain industries use very specialized accounting practices.  As a result, I would recommend that in making your company choices, you avoid companies within the following categories, unless you have some personal familiarity with these industries:

        ●        Banks              ● Investment Firms     ● Insurance   ●        Real Estate Investment Trusts (REITS)

8.        Also, I strongly recommend that you choose two companies that are both profitable (i.e., generated a positive net income in the most recent period).  If one company is profitable, and the other company is unprofitable, it will be much more difficult to make insightful and discerning remarks when you are performing your analysis of profitability.

Obtaining the Most Recently-Issued Annual Financial Information for Your Companies

As of the date that you begin this project, obtain the most recent annual financial information for the two companies that you have selected.  If more recent reports become available during the time that you are working on this project, you will not be required to incorporate that more recent information into your analysis.

Please Note: The companies that you select may have different fiscal year-ends.  A difference in reporting periods is one challenge that analysts face when comparing companies, but this should not prevent you from making valid comparisons.

Publicly-held companies issue two separate documents which contain annual financial information.  One is the annual report.  This document is typically prepared to distribute to a company's shareholders or other interested parties.  In addition to providing financial information, annual reports also commonly contain information about the company's mission and business strategy.  Many companies use colorful and creative graphics within their annual reports.

For publicly-held companies registered with the Securities and Exchange Commission (SEC), another document, called a Form 10-K is required to be filed annually.  This document contains the same financial information found within the annual report, plus additional schedules.  For the purposes of this case project, either the most recent annual report, or Form 10-K may be used.

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