ACCT 311 Texas A & M Commerce Balance Sheet Analysis Discussion

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Business Finance

Acct 311

Texas A & M International University

ACCT

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Financial Statement Analysis Project You are required to complete a written paper, semester project, which will cover all of the course embedded assessment objectives listed in the syllabus. The project will be completed throughout the semester as the material is covered. Due dates for Milestones are required to allow sufficient time to complete the analysis, form a conclusion, and write an acceptable analysis of the company. Project Instructions Think of an international company that you assume had a better or worse reporting period in 2020 compared to 2019. You will need to locate comparative financial statements for this company and analyze at least 3 reporting periods (fiscal year, quarter,…). The following outline is provided for guidance. Each part must be included but does not have to be in the same order as the suggested outline. You will analyze the international company by examining the trends, comparing to competitors, evaluating the recent economic impact, and deciding why the company would or would not be a good investment and if your assumption was correct (conclusion). The report should also include an analysis of the international operations of the company. Also, as part of the conclusion, feel free to analyze what the company should do to correct any financial or operational problems. The objective is to write a Financial Statement Analysis paper written in paragraph form. If you are having difficulty with beginning your analysis, start by calculating trends on each of the financial statements and then analyze what those trends mean and how they affect other accounts and/or statements. Remember, the book is a ‘how to manual’ of how to analyze financial statements. In order to analyze sufficiently, you must first read the textbook. Refer to the Descriptive vs Analytical reference in D2L. Feel free to use outside resources, including the company webpage, EDGAR database (competitor analysis), annual report, MD&A, analyst reports, journal articles, news releases, etc. Make sure all sources are appropriately cited. As part of the completed paper, you will need to refer to Chapter 5 and complete a ratio analysis. Are the ratios strong, weak, more or less liquid, contain more or less risk? Again, the following outline is a suggestion of the format to use when compiling the data retrieved on the company. If sufficient analysis is completed on Milestone 1, you will be able to insert that submission into your final paper. The project accounts for 30% of your semester average. The due date for each Milestone is shown in the table below as well as D2L. Late submissions will not receive points but will receive feedback, if needed. The introduction should provide information summarizing and supporting the evidence and data obtained from the analysis; therefore, it is part of the final Milestone. The goal is not a paper that just summarizes the data, but a thorough analysis of the international company. The focus of this exercise is to analyze financial data and to make a formal written recommendation, something you would give to your employer or a client, not merely describe the numbers and trends. Examples of past projects submitted are uploaded in myLeo Online (D2L), which will assist with the formatting and content expected. Recommended Outline I. II. III. IV. V. VI. VII. VIII. IX. Introduction a. Brief description of the company b. Objective of paper c. Assumption of 2020 results d. Summary of findings Firm, Industry, and Environment a. Description of company and its management b. Discussion of competitive environment (use Porter’s 5 Forces located in D2L and data included in the 10K) c. Economic climate and outlook d. Other factors (governmental regulations, labor relations, litigation…) Balance Sheet Analysis- must include common-size statement (Milestone 1) Income Statement Analysis- must include common-size statement Cash Flow Analysis- must include Summary Analysis Ratio Calculation of Financial Statements Summary and Conclusion a. Summary- Basic understanding of the firm, its past performance, its expected future performance, and the justification for your overall conclusion of the firm. This part should be able to stand alone as a summary of your analysis. b. What conclusions do you derive about the company and its potential? Appendix (not included in the 10 page minimum) a. List of all tables, statements, and figures you create, or reference b. Only include those attachments that are relevant for the analysis and discussed in the paper Bibliography/References (not included in the 10 page minimum) Specifics To complete this project, you will work individually. A Submission Folder has been created for each Milestone. The project should be prepared and uploaded in Word using font size 12 Times New Roman, paragraph form, double spaced, and one-inch margins. The minimum length required for the final paper to receive any credit is 10 pages (without parts VIII & IX and any tables/charts). You must prepare a Common Size Balance Sheet, Common Size Income Statement, and Statement of Cash Flows Summary Analysis to analyze and include them in your final paper. Be sure to appropriately cite relevant resources using APA style. You must cite any information or idea that is not yours that you are using in your project. Upon review of the first Milestone submission, the instructor will return comments to the student if glaring issues are evident; if you are on track, the instructor will only indicate the document was submitted timely. Again, late submissions will not receive points but will receive feedback, if needed. Refer to the table below that will be used when grading the project. Your grade will be based on your application of the tools taught throughout the semester to analyze financial statements. Also ensure proper grammar and punctuation is used. Poorly written papers will have points deducted. Plagiarism Plagiarism: Using someone else’s ideas/thoughts and not giving proper credit. Plagiarism represents disregard for academic standards and is strictly against University policy. Refer to the Academic Dishonesty Policy for sanctions. Plagiarized work will result in an “F” for the course and further administrative sanctions permitted under University policy. Guidelines for properly quoting someone else’s writing and the proper citing of sources can be found in the APA publication manual. Project Rubric (10 page minimum required for grading) Exceeds Standards Effective Written Communication Paper was prepared according to written instructions, cited references, and proper use of punctuation and grammar. Analysis of Various Sections Uses financial concepts/tools. Uses concepts from each chapter to analyze the company chosen and its industry and competitors. Paper was clear, thorough, and prepared according to the outline. Followed APA format and had minimal grammatical mistakes. Provided adequate citations. Applied the proper financial analysis, theories, and concepts to the company analysis. Supporting calculations and explanations are included. Meets Minimum Standards Thorough analysis. Included all parts of the outline. Has some grammatical mistakes. Provided adequate citations. Minimally demonstrated knowledge of, and/or capability to apply financial concepts/financial analysis to the company. Fails to Meet Standards Met none of the basic criteria for the outline or failed to follow APA format. Has many grammatical mistakes and hard to read and understand. Failed to demonstrate knowledge of or application of concepts/tools learned. Due Dates and Distribution of Points Milestone 1 2 (Completed paper) % of Project/ % Final Grade 15% (5%) 85% (25%) Due Date 10/17/2020 11/24/2020
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Explanation & Answer

Attached. Please let me know if you have any questions or need revisions.

Running head: BALANCE SHEET ANALYSIS

Balance Sheet Analysis
Instructor
Date

1

BALANCE SHEET ANALYSIS

2
Apple, Inc.

Apple posted its balance sheet for fiscal 2018, and 2019 and the elements analyzed
include the company’s assets, liabilities, and equity. Total assets were $365,705 in 2018 and
decreased to2019 to $338,516. The current assets held by the company include vendor non-trade
receivables, inventories market securities, accounts receivables, deferred tax, cash and cash
equivalents, and other current assets. In 2019, cash and cash equivalents increased to 14.43% of
total assets from 7.09% in 2018. The increase in cash and cash equivalents is caused by increased
cash flow from investment or operation. Inventories also increased from 1.08% in 2018 to 1.21%
in 2019, and slow-moving inventory can cause this. The accounts receivables declined from
7.06% in 2018 to 6.76% in 2019. The decline can be attributed to the decrease in credit sales.
Property, plant, and equipment declined from 11.29% to 11.04%, and this trend can be caused by
a decline in the purchase of new plant and equipment. Current marketable equity securities saw
a significant increase, while non-current marketable equity saw a significant decline.
All current liabilities held include accounts payable, deferred revenue, commercial paper,
and term debt. Short-term debt increased from 2.40% in 2018 to 3.03% in 2019. This increase
can be caused by the business focus to finance operations through debt that equity. Long-term
debt increased to 27.12% in 2019 from 25.63% in 2018. This can be attributed to an increase in
debt financing. Deferred revenue declined from 2.06% in 2018 to 1.63% in 2019. This can be
attributed to a decline in prepayments from customers. The commercial paper saw a significant
decline from 3.27% in 2018 to 1.77% in 2019 due to an overall decline in securities issued by the
company. Shareholder’s equity decreased from $107,147 in 2018 to $90,488 in 2019. The
decrease can be pegged to the liquidation of shares by certain shareholders. In 2018, the common

BALANCE SHEET ANALYSIS
stock contributed 10.99%, while in 2019, 13.34% of total equity. Retained earnings constituted
13.56% in 2019 and 19.25% in 2018 of the total equity.

3

Attached. Please let me know if you have any questions or need revisions.

Apple Inc.
Common-size consolidated Balance Sheet
(In millions except par value)

Current assets:
Cash and cash equivalents
Marketable securities
Account receivable net
Inventories
Vendor non-trade receivables
Other current assets
Total current asset
Non-current assets:
Marketable securities
Property, plant and equipment
Other non-current assets
Total non-current assets
Total assets
Current liabilities:
Accounts payable
Deferred revenue
Commercial paper
Term debt
other current liabilities
Total current liabilities
Non-current liabilities:
Term debt
other non-current liabilities
Total non-current liabilities
Total liabilities
Shareholders' equity:
Common stock and additional paid-in capital
Retained earnings
Accumulated other comprehensive income/(loss)
Total shareholders' equity
Total liabilities and shareholders' equity

2019

$

$

$

$

$
$

%

48,844
51,713
22,926
4,106
22,878
12,352
162,819

14.43%
15.28%
6.77%
1.21%
6.76%
3.65%
48.10%

105,341
37,378
32,978
175,697
338,516

31.12%
11.04%
9.74%
51.90%
100%

46,236
5,522
5,980
10,260
$37,720
$105,718

13.66%
1.63%
1.77%
3.03%
11.14%
31.23%

91,807
50,503
142,310
248,028

27.12%
6.19%
42.04%
73.27%

45,174
45,898
(584)
90,488
338,516

13.34%
13.56%
-0.17%
26.73%
100%

2018

$

$

$

$
$

%

25,913
40,388
23,166
3,956
25,809
12,087
131,319

7.09%
11.04%
6.33%
1.08%
7.06%
3.31%
35.91%

170,799
41,304
22,283
234,386
365,705

46.70%
11.29%
6.09%
64.09%
100%

55,888
5,966
11,964
8,784
33,327
115,929

15.28%
2.06%
3.27%
2.40%
8.94%
31.70%

93,735
48,914
142,649
258,578

25.63%
3.93%
38.75%
70.70%

40,201
70,400
(3,454)
107,147
365,725

10.99%
19.25%
-0.94%
29.30%
100%

Apple, Inc Common-Size Income Statement
(In millions of U.S $ except per share data)
Details

Revenue
Cost of Goods Sold
Gross Profit
Research and Development Expenses
SG&A Expenses
Other Operating Income/ Expense
Operating Expenses
Operating Income
Total Non-Operating Income/Expense
Pre-tax Income
Income Taxes
Other Income
Income from Continuous Operations
Income from Discountinued Operations
Net Income
EBITDA
EBIT
Basic Shares Outstanding
Shares Outstanding
Basic EPS
EPS

2019

%

$
$
$
$
$

260,174
161,782
98,392
16,217
18,245

100
62.182
37.818
6.233
7.013

$
$
$
$
$

196,244
63,930
1,807
65,737
10,481

75.428
24.572
0.695
25.267
4.028

$

55,256

21.238

$
$
$
$
$
$
$

55,256
76,477
63,930
18,471
18,586
2.99
2.97

56.159
29.395
24.572
7.099
7.144
0.001
0.001

ment

2018

%

$
$
$
$
$

265,595
163,756
101,839
14,236
16,705

100
61.656
38.344
5.360
6.290

$
$
$
$
$

194,697
70,898
2,005
72,903
13,372

73.306
26.694
0.755
27.449
8.166

$

59,531

22.414

$
$
$
$
$
$
$

59,531
81,801
70,898
19,822
20,000
3.00
2.98

58.456
30.799
26.694
7.463
7.530
0.001
0.001

Profitability Ratios

Liquidity Ratios

Gross margin = sales-cost of sales/revenue *100
2019, 98,392/260,174*100 = 37.82%,
2018, 101,839/265,595*100 = 38.34%

Current ratio = Current Assets/current laibilities
2019, 162,819/105,718 = 1.54
2018, 131,319/115,929 = 1.13

Net profit margin = Net profit/revenue * 100
2019, 55,256/260,174*100 = 21.24%
2018, 59,531/265.595*100% = 22.41%

Quick ratio = current assets-invetory/current laibilit
2019, 162,189-4,106/105,718 = 1.5
2018, 131,319-3,956/115929 = 1.1

Return on Assets = Net income/total assets
2019, 55,256/338,516 = 0.16
2018, 59,531/365,705 = 0.16

Net working capital = current assets-current liabiliti
2019, 162,819-105,718 = 57,101
2018, 131,319-115,929 = 15,390

Return on equity = Net income/equity
2019, 55,256/90,488 = 0.61
2018, 59,531/107,147 = 0.56

Cash ratio = cash & bank balances + current investm
2019, 48,844 + 105,341 + 51,713 = 1.95
105,718
2018, 25,913 + 51,713 + 105,341 = 1.56
115,929

Apple, Inc Ratio Analysis for Fiscal Period
Leverage ratios

ent Assets/current laibilities

assets-invetory/current laibilities
/105,718 = 1.5
/115929 = 1.1

= current assets-current ...


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