Financial Statement Analysis

Principles of Business I (N8146-01 and -03) Fall 2017 Financial Statement Analysis Project For this project, you need to use the annual, not quarterly, financial data for Sotheby’s on Google Finance (http://www.google.com/finance?q=NYSE%3ABID&fstype=ii&ei=XM1UVomkAdOFecWgk OAF). Based on that information, you should be able to prepare a brief analysis (< 600 words) of Sotheby’s operations and financial position, being sure to address all the questions below as part of your answer. Note that many of these questions will be answered by completing the template, so you don’t need to write sentences to answer all the questions. Profitability and Valuation • What were Sotheby’s revenues and net income for 2016, 2015, 2014, and 2013? • What was Sotheby’s book value at the end of 2016, 2015, 2014, and 2013? • What was Sotheby’s return on equity for 2016, 2015, 2014, and 2013? • What was Sotheby’s market capitalization at the end of 2016, 2015, 2014, and 2013?

(You can use YCharts to find that data: http://ycharts.com/companies/BID/market_cap)? What is Sotheby’s current market capitalization? (Be sure to note the date you used.)

• What trends can you identify within each of those sets of data? What relationships do you see among them?

Financial Position • What are Sotheby’s current assets and long-term assets for 2016, 2015, 2014, and

2013? How do they compare? (Note that Google Finance shows depreciation as a negative number on the balance sheet, but it’s treated as a positive number because it’s an asset.)

• What are Sotheby’s current liabilities and long-term liabilities (i.e., long-term debt and other liabilities) for 2016, 2015, 2014, 2013, and 2012? How do they compare?

• What was Sotheby’s current ratio for 2016, 2015, 2014, 2013, and 2012? How has that ratio changed over time? What can you infer about Sotheby’s solvency from that ratio?

• What was Sotheby’s debt-to-equity ratio for 2016, 2015, 2014, 2013, and 2012? How was that ratio changed over time? What can you infer about Sotheby’s capital structure from that ratio?

Overall Assessment • How have Sotheby’s stock price and market capitalization changed over the past four

years? • Based on your knowledge of financial statement analysis and the art market, how

would you describe Sotheby’s performance since 2012? • What significant changes (e.g., in terms of management, operations, strategy) has

Sotheby’s experienced during the past year? You can refer to other sources (e.g., articles in major newspapers or magazines or specialist publications / blogs) to help answer this question; just be sure you cite them.

• What predictions would you make about Sotheby’s revenues, net income, and equity for the end of 2017? Why?