Financial Analysis presentation and interpretation Accounting 610

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I. Project 1: Comparative Financial Analyses

II. Introduction:

All graduate accounting course deliverables use the AICPA Pre-Certification Core Competency Framework to assess competencies deemed essential for success in the accounting profession.

Competencies assessed by this project:

▪ Measurement analysis and interpretation:

o Identify appropriate, reliable, and verifiable measurements. o Analyze data for a given purpose and intended use. o Interpret results of data analysis for the intended user.

▪ Research: o Research relevant professional frameworks, standards, and governing

bodies. ▪ Decision-making:

o Propose effective business decisions based on analysis and professional judgment

▪ Communication: o Communicate clearly in writing and speaking, meeting expectations for

content, purpose, organization, audience, and format, especially APA Style. Scenario:

You graduated with a MS in accounting from UMGC and have recently been hired by a large accounting firm in Washington, D.C. You report directly to the senior accountant, Kathryn Cowgal, who is originally from Colorado and loves to ski when she is not riding horses. Fortunately, you and Kathryn hit it off right away and you are excited to be part of her team. It is Monday morning, you’re at your desk with a cup of coffee and a Danish staring at your long list of emails wondering how you’ll ever have time to catch up on last week’s projects. Your boss Kathryn briskly enters your office, sits down, and says, you are going to love this assignment. I have hand-picked you to prepare a financial analysis of our two newest clients. Kathryn goes on to say your report will be part of a company-wide analyses of the various business sectors in the US. For the analysis, she instructs you to choose from a list of paired public companies that are among the Fortune 500 and to be prepared to present your findings to the client. Kathryn hands you the list of paired public companies, suggested steps to follow, and a list of deliverables.

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Further, Kathryn informs you that she and the CFO will also be attending your presentation to each client. They plan to use your presentation as part of the first quarter review all new employees undergo during the probation period with company. Realizing this project could make or break your opportunity to stay employed beyond the probation period, you decide to collaborate with some of the other new hires as a group. In addition, you plan to review financial analyses techniques, interpreting SEC 10-K reports, and other resources to prepare the report and make a stellar presentation (Appendix A).

III. Steps to Completion:

Step 1: Decision making - Select two companies to analyze

In the Project 1 folder, review the list of paired companies and select the pair you want to study. Using the link provided by your professor, sign up for your selected pair in the online Fortune 500 Paired Companies List. Each student may select only one set of paired companies.

Important notes: a) If you are repeating this course, you must select a different set of paired companies to

avoid a perfect match in Turnitin and demonstrate your current knowledge. b) If either of the two companies incurred a loss in the last two years, you must select

another set of paired companies.

Step 2: Collaboration

To mimic a team approach in accountants’ work environment, you are highly encouraged to collaborate with your study group members. Be helpful but do not provide specific answers to other students. For example, it is fine to explain how to compute earnings per share, but do not perform the calculation for other students.

Step 3: Review

Begin by logging into Becker’s Curriculum Assistance (CPA.Becker.com) and reviewing

FAR Unit 2: Financial 2: Financial Reporting and Disclosures: Module 8: Ratio Analysis.

Step 4: Research

a) Research the corporations you selected: Click Edgar to search for the SEC filings of your chosen paired corporations. See the graphic below for more instructions.

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Download and review the financial statements (Item 8) in the SEC Form 10-K for the most recent year. You may want/need to read How to Read a 10-K by the SEC and or watch the video How to Read an Annual Report – 10K for Beginners.

If you are unfamiliar with the corporations you selected, learn more about each corporations by reading Part I of its SEC Form 10-K. It is also very useful to review the corporations’ annual reports, which are available in the UMGC library.

Note for Success:

Want to impress your professor beyond what’s required? Research the annual reports to learn whether either corporation discloses cybersecurity related risks? Does either company discuss any cybersecurity related incidents? If yes, which costs relate to cyber-attacks are reported? Does either company disclose any actions taken to enhance its cybersecurity? Does the company have a CyberAccounting department?

b) Conduct Industry Research: a. In the UMGC library, you will find the resource Business Research,

which is an excellent starting point for research throughout your graduate studies.

b. On the same site, locate Finding Financial Ratios for Industries. Try several of these database options to select the one you prefer.

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c. Academic journals

i. ABI/Inform is an excellent starting point for business related articles

o Click Peer Reviewed for academic journal articles, d. Federal government Websites such as the U.S. Bureau of Labor, and

e. Big 4 Accounting firm articles published within the last 2 years.

Step 5: Data analytics: using technology and tools to measure, analyze, and interpret.

All students have access to MS Office 365. Using Excel, perform data analysis for this project. If you know or want to learn how to use Tableau, consider using it to create your data visualizations. Click to access a free student Tableau account. You will be required to use Tableau in future classes so now is a good time to start learning a new data analytics app.

Notes for Success:

a) All cells that include calculated numbers must have an embedded formula that begins with “=” and references cells on the same or another sheet.

b) Follow these instructions exactly as written

I. Prepare an Excel spreadsheet that includes the following:

a. Sheet 1: paste the SEC 10-K Income Statement and Balance Sheet for Company A. You will be referencing cells on this spreadsheet so do not paste a screen capture. Cite all sources.

b. Sheet 2: paste the SEC 10-K Income Statement and Balance Sheet for Company B. You will be referencing cells on this spreadsheet so do not paste a screen capture. Cite all sources.

c. Sheet 3: paste the Industry Averages. You will be referring to cells on this spreadsheet so do not paste a screen capture. Cite all sources.

d. Sheet 4: Perform a horizontal analysis and vertical analysis of Corporation A, for the most current year, using the most current two years of financial statements, for the:

i. Balance Sheet and ii. Income Statement

1. Embed formulas in all cells requiring computations. Reference cell on different sheets in your formulas when necessary.

a. If you do not know how to reference cells on other worksheets, post questions in the discussion Post Questions about Project 1, located in the week it is due.

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e. Sheet 5: Perform a horizontal analysis and vertical analysis of Corporation B,

for the most current year, using the most current 2 years of financial statements, for the:

i. Balance Sheet and ii. Income Statement

1. Embed formulas in all cells requiring computations. Reference cell on different sheets in your formulas when necessary.

a. If you do not know how to reference cells on other worksheets, post questions in the discussion Post Questions about Project 1, located in the week it is due

f. Sheet 6: Perform ratio analyses

i. Identify 20 ratios relevant to the industry and available online. If a ratio cannot be computed for one corporation, use a different ratio for both.

ii. Compute the same ratios for Corporation A and Corporation B

iii. Create a comparison of the Industry Averages to Corporation A to Corporation B using 5 columns: 1) Ratio name, 2) Ratio formula 3) Corp. A result, 4) Corp. B result, and the 5) Industry Average

1. Embed formulas in all cells requiring computations. Reference different sheets in your formulas wherever possible.

g. Sheet 7: Report findings and recommendations Sheet 7 is the most important sheet. You will engage your critical thinking skills to demonstrate your understanding of what the ratios mean, your analysis of the financial statements, and how each company compares to its competitors and the industry. Further, you will make recommendations to enhance profitability for each company.

i. Compare the industry averages to your horizontal analyses, vertical analyses, and financial ratio analyses. Your results should be similar to the industry averages. If substantially different, explain why.

ii. Review your results to detect data trends and or data outliers, if any. Make note of data outliers, metrics you found unusual, interesting, or that may potentially impact corporate profitability.

iii. Note how each company performed in response to the global pandemic.

iv. Make recommendations to enhance profitability. v. Cite all sources.

See the graphic below for specific details to setup the sheets in Excel.

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Summary of Sheets in your Excel file: Note for Success: label each sheet as stated in the middle column. For example, Sheet 1 may be Apple, Inc.

Excel Sheet

#

Label each Sheet as follows:

Contents

1 The name of Corp A Balance Sheet & Income Statement of Corp A

2 The name of Corp B Balance Sheet & Income Statement of Corp B

3 Industry Averages Industry averages from Mergent Online, Hoovers, or other reliable sites

4 Corp A Horiz & Vert Horizontal and vertical analyses of Corporation A

5 Corp B Horiz & Vert Horizontal and vertical analyses of Corporation B

6 Financial Ratios 20 Ratio names, formulas, results for Corp A, Corp B, and the Industry Average

7 Recommendations Based on your analyses, provide specific recommendations for increasing profitability, which may include the corporations’ response(s) to the Covid-19 pandemic, global economic issues, supply chain challenges, and other internal and external factors affecting corporations.

Step 6: Communication: Present using written and oral communication with an Industry perspective that engages your effective decision-making skills

I. Prepare a Power Point presentation that includes the following:

▪ Title slide; include your name ▪ Overview slide that summarizes the main topics of your presentation ▪ Information about corporation A ▪ Information about corporation B ▪ Current industry specific information ▪ General economic environment during the past two years ▪ A comparison of the industry averages to your two corporations in table format

Select and present relevant data only using data from Step 5, item d above. ▪ Specific recommendations to improve profitability in both corporations based on:

o Research on both corporations, industry averages, global economy, other internal and external factors affecting the corporations

o Offer specific recommendations you can support from your research, data you collected, analyzed, and presented

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▪ More slides as needed. ▪ Final slide concluding the presentation. ▪ Reference list.

Notes for Success:

Create graphs, tables, and other data visualization tools to explain your findings. If you include data visualization graphs/tables/tools that you did not create, cite the source on the slide.

II. Present the PowerPoint presentation

▪ There are a maximum of three (3) presentation options, at your professor’s discretion. ▪ Preferred method Option 1: Live Zoom Presentation

Using your professor’s Zoom account, you will present your slides to your professor and classmates. Advantages:

▪ This option provides an opportunity to improve your presentations skills to a live audience (if available),

▪ Omits the requirement to add audio to your PowerPoint file, ▪ A recording of your presentation will be provided to you for self-

assessing your presentation skills and style, and ▪ Those in attendance will provide confidential feedback via Zoom’s

private chat feature. Disadvantage:

▪ You should practice before presenting to your live audience. ▪ Option 2: Video Presentation

Without the help of your professor or UMGC technology, you will create a video of yourself presenting your slides to the audience of your choice or an empty room. The slides must be visible to the audience throughout your presentation. If the video file size is too large for LEO, you may upload the video to YouTube or a Google drive folder and provide a link for your professor to view your video. Advantages:

▪ This option provides an opportunity to improve your presentations skills, ▪ Omits the requirement to add audio to your PowerPoint file.

Disadvantages: ▪ You must have your own equipment to record the video, ▪ You should practice before you make the video, and ▪ You may need to upload your video file to a YouTube channel you

create or a Google drive folder and share the link with your professor.

▪ Option 3: Audio-enhanced PowerPoint file You will create an audio-enhanced PowerPoint presentation (file) with accurate transcriptions (or accurate Closed Captioning) suitable to present to your boss and colleagues. The audio enhancement must be embedded and

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run without requiring your professor to click the “Play” button on each slide. When you click “Play from Start” on slide 1, the slides advance automatically, the closed captioning is shown below each slide, there are no background distractions, and the presenter speaks clearly and at a reasonable pace.

Advantages:

▪ You won’t need to practice for a live presentation. Disadvantages:

▪ You won’t have an opportunity to improve your public speaking skills or receive confidential feedback from your classmates, and

▪ Students often have difficulties creating a continuously running slide presentation whereby the audio plays automatically, which results in a lower grade.

IV. Deliverables

This project has two deliverables:

1. Excel workbook with 7 tabs (Sheets) as described above in Step 5

o The financial statements (Item 8) in the SEC Forms 10-K for each corporation will be included in the Excel file as Tabs 1 and 2. Your professor will review the financial statements from the 10-Ks to verify figures in your analyses.

o Highlight figures on the Form 10-K’s used in your analyses o Note: all computations must be computed via an Excel formula that

references other cells and sheets in the file. The Excel file must be prepared by you without the assistance of anyone else.

2. PowerPoint presentation using one of the three options as described above. Your

recommendations must be specific and include your ideas to improve profitability. The presentation file must be prepared by you without assistance except from UMGC tutors.

V. Rubric:

You will find the rubric in LEO under Content>Student Lounge>Assessments: Projects & Rubrics. It is highly recommended that you read the entire project and review the rubric before you start the Steps to Completion. Your deliverables will be graded according to the rubric.

VI. Hints and Tips:

▪ Actively participation in your study group.

▪ Read the grading rubric before beginning the project to fully understand the requirements; ask questions about the requirements if needed.

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▪ Your professor is interested in reading and hearing what you created. You may quote and cite sources to illustrate or support your own thoughts. All written assessment files are automatically submitted to Turnitin.

▪ Use spell check and grammar check. ▪ Seek feedback before submitting your deliverables

o Ask a friend or family member to watch your presentation and share constructive feedback to help improve your grade.

▪ Submit all required files on or before the due date. ▪ Review the Late Policy found in Content/Student Lounge/Late Policy. ▪ University rule - no assignments can be accepted after the last day of class. ▪ Ask questions as needed. ▪ Review the Project and grading rubric one more time to ensure you have

submitted all deliverables.

University “policy expressly prohibits the re-use of prior student work, unless prior authorization is given.” 

None of the graduate accounting courses give such authorization.

If you have taken this course previously, you must select a different set of Paired Companies.

Never re-submit a project/paper you submitted in any semester

in any UMGC course or at any other university.

Doing so will require your professor to submit your work to UMGC’s Office of Academic Integrity and Accountability.