Finance- Annul report analysis paper

InvestmentsChap.78homework.docx

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Homework for Chapter 7 and 8

Instructions

Write a 2 or 3 page analysis of your annual report. You can find an annual report of a company you like online at the company’s website.

Please write an analysis just like the one on the next page. Just change the name to your company. Your analysis will be for the years 2017, 2016 and 2015. The company I analyzed had sales (or net revenues) that were up and the net profit after taxes was down. You will have to tweak yours a little, if your company’s profits are up for instance. You will also need to say a little more since my analysis is only one page. First say briefly and plainly what your company does. Don’t copy the description online.

The first hard part will be finding in your annual report the Consolidated Statement of Income & the Consolidated Balance Sheet.

The hardest part of your analysis - You will need to “common size” your income statement like in Table 8.1 on page 299 in your text. This means you will need to divide each expense and profit item on the income statement by total revenues. Write the number (that is the %) next to the expense or profit item on the income statement. This way you can see which expense went up or down the most as a % of sales.

In your analysis after you say something like: “sales are up,” prove it with a graph right below what you said. In your analysis you will first comment on sales and then show sales, with a graph like on the next page. Next say which expense went up or down the most, as a percentage of sales and show it, like on the following page.

Analysis of Universal Office Furnishing

Income Statement

Universal Office Furnishing sales increased in 2016 after a significant increase in 2015.

	2016	2015	2014
Sales(000)	$1,938.0	$1,766.2	$1,495.5
% increase	9.7%	18.1%	16.5%

S,G&A expense increased in 2016 causing a decline in profits and the net profit margin.

(% of sales)	2016	2015	2014
SG&A	25.6%	23.8%	NA
Net Profit	7.2%	8.0%	5.0%

(000)	2016	2015	2014
Net Profit	$139.7	$141.8	$74.8

Balance Sheet

Universal’s liquidity declined at 12/31/16 from Y.E. 2015 as evidenced by its current ratio and working capital.

Y.E.	12/31/16	12/31/15
Current Ratio	1.34	1.69
Working Capital (000)	$126.3	$173.8

Leverage declined at Y.E. 2016 from Y.E. 2015 as evidenced by the ratio of long-term debt-to-stockholders equity.

Y.E.	12/31/16	12/31/15
L-T Debt/Stockholders Equity	.6	.9

Conclusion

Universal Office Furnishing financial situation has deteriorated. Profits and margins are down. Liquidity is down, but Universal has managed to reduce its long-term debt during the period, and so reduced its leverage. I would not recommend buying Universal Office Furnishings common stock at this time.