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Assignment: Financial Statement Analysis

This assignment applies some of the principles of accounting analysis


learned in this chapter, by analysing the financial statements of a real
company. This assignment may be done individually, or in pairs.

Introduction:
By law, Canadian corporations must prepare annual financial statements and send copies
to the owners of the company the shareholders. The statements are included as part of
the annual report which is sent to shareholders. Included in most annual reports are: a
message from the president; income statement; balance sheet; statement of working
capital; 5-year or 10-year summaries; product summary; future plans; and general
information about the company.
Part A:
Prepare a written report containing the following information:
a) Name of company
b) Name of president and two directors
c) Location of the head office
d) List of the products sold or services performed
e) Date of the financial statements
f) Name of the auditors of the financial statements
g) Method used to depreciate the fixed assets
(A through G can be included as part of an introductory section that introduces
your company, the type of business, etc. This should be written in paragraph format,
or using an appropriate combination of sentences and bulleted points.)
h) Trend analysis for the past five years showing both the dollar change and percentage

change for the following:


i) working capital
ii) net sales revenue
iii) net income
i)

Comparative statement of earnings (income statement) showing the net change for
two years

j)

Comparative balance sheet showing the net change for two years

k) Percentage income statement for this year and last year

A list of five key ratios pertinent to the health and long term goals of the business.
(e.g. the calculation of number to times interest earned would be critical for a
company with a heavy debt load.). Explain why each ratio is important to the
circumstances of the firm.
Part B:
l)

Prepare an analysis and summary of the major financial and non-financial strengths and
weaknesses of the firm. Be sure to include the companys strategies for solving its
problems and its outlook for the future.
Part C:
Based on the analysis you have performed, provide a detailed explanation as to why you
would or would not invest $1,000 in this company.
Additional Requirements:
Report, where applicable, should be in sentence form; use appropriate headings.

Must be computer-generated; lab time will be provided.


Company web pages may be a source of additional info, but keep in mind the date of
your annual report.
Include a title page
Evaluation Key:

Financial Statement Analysis


Criteria
Part A: A G
H

Mark/Out of

/6
/9

IK

/10

/10

Part B

/10

Part C

/5

Overall Mark

/50