Accouting

ACCT 201

Sections 1, 2, & 3

Fall 2016

Financial Statement Analysis & Stock Tracking Course Project

(Revised 9/7/16)

Executive Summary

· This course project (i) puts you and your team in the role of financial analysts and (ii) requires both individual and group analysis. You will analyze the financial reports of companies in which you hold stock. You will compare your company’s financial performance to its stock price performance. You will render an opinion about the future prospects of your companies.

· Your group will study one industry from those listed on the next page . Each group will have four (4) or five (5) members and you will choose one of the industries listed on the next page. Each group will have a hypothetical $100,000 to invest.

· Each individual in the group will be responsible for one company in one of the industries shown on the next page. Each individual has two reports to submit. The first individual analysis covers your company and is due in class on Wednesday, November 2, 2016. The second individual analysis covers the same company and is due on Friday, December 9, 2016.

· The final group written report is also due in class on Friday, December 9, 2016. The final group report will require both individual contributions and a group analysis.

· You will become knowledgeable about your industry. Completing this project will build skills that will increase your value in the workplace.

I. Individual & Group responsibilities:

A. Four or five-person groups and pick one of the industries after your groups have been formed. No more than two (2) groups in each section can sign up for any one industry. Each student within the group will select one company from the industry with no overlap. Your goal is to become company and industry specialists. The stock ticker symbol that follows each company’s name may help your search for information.

1. Airlines: American Airlines Group (AAL), Delta Air Lines (DAL), United Continental Holdings (UAL), Southwest Airlines (LUV), JetBlue Airways (JBLU), Alaska Air Group (ALK);

2. Apparel Manufacturing: Nike (NKE), VF Corp. (VFC), Phillips-Van Heusen (PVH), Ralph Lauren (RL), Coach Inc. (COH), Under Armour (UA), Lululemon (LULU);

3. Beverage Manufacturing: Coca-Cola (KO), PepsiCo (PEP), Dr. Pepper Snapple Group (DPS), Constellation Brands (STZ), Molson Coors Brewing (TAP);

4. Computers, Office Equipment, & Software: Apple (AAPL), Microsoft (MSFT), Oracle (ORCL), HP (HPQ), NCR Corp. (NCR);

5. Food Services: McDonald’s (MCD), Starbucks (SBUX), Yum Brands (YUM), Darden Restaurants (DRI), Chipotle Mexican Grill (CMG), Jack in the Box (JACK);

6. General Merchandisers: Wal-Mart Stores (WMT), Target (TGT), Macy’s Inc. (M), Kohl’s (KSS), Nordstrom (JWN), J.C. Penney (JCP);

7. Internet Services & Retailing: Amazon.com (AMZN), Alphabet (formally Google) (GOOGL), Facebook (FB), eBay (EBAY), Priceline Group (PCLN);

8. Specialty Retailers - Apparel: TJX (TJX), Gap (GPS), L Brands, Inc. (LB), Ross Stores (ROST), Abercrombie & Fitch Co. (ANF), Urban Outfitters, Inc. (URBN);

B. Your group should meet early in the semester and make an initial determination of (i) what fiscal years you will be covering (see C below) and (ii) how to allocate the $100,000 to the companies in your industry. Note that each company must get a minimum of $5,000 allocated to it. The group has $100,000 (includes 1% in commission ) to invest and must not allocate over $100,000.

C. Download each company’s Securities Exchange Commission (SEC) Form 10-K (the annual filing) in pdf format from the company’s “investor relations” site, e.g., search for “Apple investor relations.” (Please use each company’s most recent 10-K. For companies that have a December 31 year end, you will need to use data from the 2015 10-K. For companies with a mid-year year end (e.g., June), I recommend that you look at past annual filing dates to estimate the release date for the 2016 10-K. For example, a company with a June 30 year end should have data available for the report in September.) However, to best way to access each company’s most recent financial statements can be found directly on the SEC’s website - www.sec.gov (as shown in class: search under company filings, then on company name or ticker, then 10K, then interactive data).

D. D. “Purchase” stock in your company (using the closing price on Wednesday, September 21, 2016) based on the amount of investment dollars your group allocates to you. See 1B above.

E. Track your investments showing at least twice-weekly market activity. For tracking purposes, use a format similar to the one in Exhibit A, a Stock Monitoring Worksheet available on Blackboard. Use Microsoft Excel or similar software. One exhibit must be prepared for each company in your portfolio.

F. Read and prepare a summary of news articles from business magazines (e.g., the Wall Street Journal) or Internet news sites about your company and other relevant industry and economic news, and incorporate highlights from these in your report (with proper citations). (Note that the interactive edition the Wall Street Journal is available free to students who purchase a subscription.)

G. In summary, complete the following for the Assignment #1-IND (for “individual”):

1. Obtain 10-K reports of each company through the SEC website at www.sec.gov or download the pdf file from each company’s investor relations site. Either option is fine but if you use the pdf file, it is searchable – insert the term you want to find in the search window in the upper right-hand corner of the pdf file.

2. Complete one Assignment #1-IND template for each company, which includes:

a) Analyze the 10-K report for your company with emphasis on the financial statements. See the Assignment #1-IND template on Blackboard.

b) Summarize highlights from the Wall Street Journal (WSJ) or other business journals/magazines/Internet sites about your company and other relevant industry and economic news. The minimum is one article per company.

c) Invest in your company using the Stock Monitoring Worksheet (Exhibit A on Blackboard). Each group will have $100,000 to invest and you must decide how much to invest in each company. See 1B above.

H. In summary, complete the following for the Assignment #2-IND:

1. You should already have the 10-K reports of each company.

2. Complete one Assignment #2-IND template for each company, which includes:

a) Analyze the 10-K report for your company with emphasis on assorted details in the financial statements. See the Assignment #2-IND template on Blackboard.

b) Summarize highlights from the Wall Street Journal (WSJ) or other business journals/magazines/Internet sites about your companies and other relevant industry and economic news. The minimum is one article per company.

c) Continue to track your stock, and “sell” the stock of each company using the closing stock price on Wednesday, November 30, 2016. (Exhibit A)

d) Compute the profit (or loss) from your investment in each company (Exhibit A). See footnote #1 for an example.

I. In summary, complete the following for the Assignment #2-GROUP:

1. Complete one Assignment #2-GROUP template for your team, which includes:

a) Compare key financial ratios across all of the companies in your group and to the industry average.

b) Compare the stock price performance of your companies. Plot the stock price of the best and worst performing firms in your industry against a stock price index, e.g., NYSE or Nasdaq.

c) Incorporate your analysis of the 10-K, financial ratios and other business news in forming a summary judgment about each company. Contrast this analysis with the stock performance of your group’s investments. After conducting your analysis of these companies, which companies do you believe will perform best in the future? Provide and discuss your recommendation (e.g., buy, hold, sell) for each company.

II. Other group responsibilities:

A. In addition to the above, groups will do the following:

1. Discuss progress and problems associated with this project

2. Demonstrate the use of positive techniques for resolving educational, cultural, or ethnic differences

3. Train fellow members on how to use appropriate software, especially Excel

4. Share business news about each member’s company

5. Plan in advance to coordinate and prepare written group report as discussed above:

Some web sites for research:

www.finance.yahoo.com/ : Company news, stock prices (search by company name or ticker)

www.wsj.com : Portfolio, briefing books (free with student subscription to the WSJ)

www.sec.gov : Website of the Securities and Exchange Commission, source for 10-K’s

www.investor.com : Company bios, price charts, news, market prices

www.google.com/finance : Company news, stock prices

www.fortune.com : Company rankings and industry info

www.nyse.com : Good source for news and stock quotes

Note: These are just a few of many websites that may be helpful for your research.

� For example, if you spend $43,000 to buy 100 shares of Apple at $430 per share, the total cost is actually $43,430 ($43,000 x 1.01) because of the 1% commission. When you sell, you will have to pay another 1%. Let’s say Apple is at $450 per share on December 3, the day you sell your 100 shares. Your proceeds would be $45,000/1.01 or $44,554 (rounded off to the nearest dollar). In this hypothetical example, your total gain would be $44,544 - $43,430 = $1,114.