1. Using elements listed on your companies' income statement, prepare a common size income statement using the following format. (Vertical Analysis Chapter 5)
Company #1
|
Account
|
Current Year
|
%
|
Prior Year
|
%
|
Two Years Ago
|
%
|
|
|
|
|
|
|
|
|
Company #2
|
Account
|
Current Year
|
%
|
Prior Year
|
%
|
Two Years Ago
|
%
|
|
|
|
|
|
|
|
|
2. Using elements listed on your companies' income statement calculate the increase or decrease in dollars and percent between the years using the following format. (Year to Year Change Analysis Chapter 5)
Company #1
|
Account
|
Current Year
|
Prior Year
|
+/- $
|
%
|
Two Years Ago
|
+/- $
|
%
|
|
|
|
|
|
|
|
|
|
Company #2
|
Account
|
Current Year
|
Prior Year
|
+/- $
|
%
|
Two Years Ago
|
+/- $
|
%
|
|
|
|
|
|
|
|
|
|
3. Using elements listed on your company's income statement calculate the ratios and amounts using two years prior as the base year (100%) using the following format. Your answers should all be in percentages. (Horizontal Analysis Chapter 5)
Company #1
|
Account
|
Current Year/Base
|
Prior Year/Base
|
Two years ago/ Base
|
|
|
|
|
|
Company #2
|
Account
|
Current Year/Base
|
Prior Year/Base
|
Two years ago/ Base
|
|
|
|
|
|
4. In thoughtful, well-organized paragraphs comment on changes you see in the income statements for each company over the three-year period.
Among the items to consider:
a. What is the trend, in each company, in total revenues over the three years?
b. What is the trend, in each company, in gross profit over the three years?
c. What is the trend, in each company, in net income over the three years?
d. What is the trend in profit margin over the three years?
e. Comment on any significant changes in revenues or expenses, negative and positive changes for each company.
f. Comment on any significant changes in the discontinued operations, extraordinary items, or changes in accounting policy for each company.
PUBLIC PERCEPTION AND RECENT RESULTS
Regardless of the "on paper" financial strength of a company, decisions are often made based on the public perception of a company. A rumor within the financial industry may make it difficult for a company to obtain a loan. Negative publicity may force other companies and private citizens to "stop doing business" with a company. Even a company who performed well, but missed analyst projections, may see a drop in public confidence and a reduction in stock value. Yahoo finance is a great source for research. Based on current research, answer the following questions:
1. What is the general sentiment toward each company?
2. How does the financial industry currently perceive each company?
BASED ON THE FINDINGS:
3. How has public perception positively or negatively affected the companies?
4. What, if anything, has the company done to counter any negative sentiment that may exist?
5. How, if at all, has the company capitalized on any positive perceptions that may exist?
Finally, obtain the most recent financial reports filed with the SEC by each of the two companies and evaluate recent performance. Answer the following questions:
6. Since the 10-K filing analyzed in the previous Sections, how have each of the two companies generally performed?
7. Were there any noteworthy disclosures in the most recent filings?
BASED ON FINDINGS
8. How has each of the companies' stock performed over the last 24 months?
9. Would you say the company has positive or negative momentum moving in to the close of its next fiscal year?
10. Would you change any of your conclusions or recommendations from the previous section based on current financial information?