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Report
Project
Annual Report Project
To the Student
The Annual Report Project (ARP) provides you the opportunity to analyze a corporate annual
report. You will obtain the annual report of a company and answer questions regarding the
application of concepts studied in your AFM course.
The Annual Report Project:
■ Will increase your interest in financial accounting by allowing you to personally
choose the annual report you will review
■ Provides hands-on exposure to financial statements of real-world companies
■ Emphasizes the importance of the notes to the financial statements
■ Provides an opportunity to examine the application of procedures and methods
discussed in your accounting textbook
■ Encourages you to work with spreadsheets
The Annual Report Project consists of five assignments and is designed to be a useful supple-
ment both for undergraduate financial accounting courses and for introductory financial
account-ing at the M.B.A. level. The following is a list of the topics covered in each Annual
Report Pro-ject assignment:
■ ARP
1 Obtaining the Annual Report
■ ARP Company Information
2
Overview of the Annual Report
■ ARP
The Balance Sheet
3
The Income Statement
■ ARP
4
■ ARP
5
ARP 1 & 2. The first assignment asks the student to select a Fortune 500 company. This limita-
tion enhances the likelihood that the report will contain all the disclosures required in the
assign-ments. Assignment 1 also places some limits on industry type in order to avoid
specialized industry practices. Student may download the annual report from the company’s web
site. This is the preferred method of obtaining an annual report. Fortune.com provides links to
web sites of Fortune 500 compa-nies.
Information for ARP 2 can be obtained from the Internet and business periodicals. Internet
search engines have a menu option labeled stock or stock quotes where students can find a
company profile which will include the information required in the assignment. Another
useful source for students is for-tune.com.
ARP 3. This assignment provides an overview and a table of contents for later assignments. It
helps students familiarize themselves with the content of an annual report.
ARP 4 & 5. Students need to have an understanding of vertical analysis from the financial
statement analysis chapter of their textbook in preparing the common-size balance sheets and
income statements.
Do not select a public utility, financial institution or brokerage firm, insurance company,
co-operative or government entity. In addition, please note that summary annual reports
are not acceptable.
The completion of your annual report project assignments will be easier if you obtain a printed
copy of the annual report rather than retrieve the report from an Internet site. However, your
instructor may allow you to download the annual report from the company Web site.
A useful resource is fortune.com. This site provides links to the Web sites of Fortune 500 com-
panies. To obtain a printed copy of the annual report, contact the company’s Investor Relations
department.
Amazon
List the company’s primary products or services (use brand names where available).
Products
Echo.
Fire Tablet
Kindle
Services
Amazon alexa
Amazon prime
Amazon pay
Amazon Corporate Headquarters Address: 410 Terry Ave. North, Seattle, WA, 98109-
5210.
What were the lowest and highest stock prices during the past year?
52-week low: 133.57 (USD) 52-week high: 188.65 (USD)
4. Obtain a copy of an article about the company. Attach a copy of the article.
Name of article:
Source of article (name of magazine or newspaper, date, page numbers):
Summarize the article. Use complete sentences and well-organized paragraphs. Your sum-
mary should be no fewer than 100 words in length.
a. Make copies of pages 2 and 3 of this assignment after you have completed them. It
will serve as your table of contents for future assignments.
b. Make a copy of the five-year (or more) summary of selected financial data from
your annual report. It contains several key numbers that will be required in future
assignments.
c. Print industry comparisons. One useful Web site is Reuters.com.*
Under the “News and Markets” tab, click on Stocks.
Enter either the ticker symbol or company name.
Across the top of the next screen, you will see an extensive menu of options for
obtaining more information about your company. You will find much of this
useful.
For ratios and industry comparisons, choose the Financials option from this
menu.
Print the resulting pages.
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1. Staple these three items together and place them and your company’s annual report
in the front pocket of a folder that has both pockets and prongs.
2. Write your name on the outside of the folder in the upper right-hand corner.
3. As you complete your Annual Report Project assignments, place them in the prongs
with the most recent assignment on top.
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*Another useful Web site is finance.yahoo.com
Name of company chosen: Amazon
Balance sheet date: 31 December
c. THE COMPANY, ITS PRODUCTS, ITS EMPLOYEES. This section may contain a
number of color photographs and will highlight the products and accomplishments of the
company. Pages. 4
a) Who is responsible for the preparation and integrity of the financial statements?
(Note: There are two independent auditor’s reports: (1) a report on internal control, and (2) a re-
port on the financial statements. The following questions relate to the financial statement audit.)
e) According to the auditor’s report on the financial statements,
what is the auditor’s responsibility?
2. Calculate the company’s current ratio for both this year and the prior year.
Show your computations.
This year:
Explain what information this ratio provides. (Hint: See the Financial Statement Analysis
chapter of your textbook.) Use complete sentences.
Current ratio is more than 1 it indicates that it is an ideal ratio for any company like this .if company will
have 1.5-2.0 then it indicates that the company is efficiently managing it’s working capital.
Has the current ratio improved or worsened? Explain. Use complete sentences.
The ratio of this company has improved from the previous year as we can see the ratio has
increased i.e. 1.050. To 1.1357 .
This year:
A ratio less than 1 indicates indicates that a greater portion of a company’s assets is funded by equity and it
has a ability to raise cash from new debt.
- Current ratio :
a. In which assets does the company have the most significant investment?
b. Is the company financed primarily with debt or equity? Explain using the information ob-
tained in questions 1–4.
d. Comment on any significant changes in individual assets or liabilities. Use the information
obtained in question 4.
e. Comment on any significant changes in the composition of current assets or current liabili-
ties. Use the information obtained in question 4.
f. Evaluate the company’s debt-paying ability. Refer to the information obtained in the previ-
ous questions.
THE BASICS
1. Does the format of the statement more closely follow a single-step or a multiple-step
format? Single step format
How can you tell?
Single-step income statement presents the revenue, expenses and ultimately the profit or
loss generated by a business whereas multi-step income statement follows a three-step
process to calculate net income, separating operational from non-operational revenues and
expenses.
2. Calculate the following ratios for each of the three years presented.
Show your computations.
Current year Last year Two years ago
Return on assets
Net income/average total assets
You will find prior years’ assets in the Five-Year Summary of Selected Financial Data.
3. Compare these ratios to industry averages. (Note: The gross profit rate may also be
called the gross margin. The ratio of operating expenses to sales may also be called the op-
erating margin. The profit margin percentage may also be called the net profit margin.)
Your company Industry
b. How has the gross profit percentage changed over the three-year period?
Refer to the information obtained in question 2.
c. Comment on the ratio of total operating expenses to operating revenues over the three-
year period. Refer to the information obtained in question 2.
d. Comment on individual revenue and expense items that had significant percentage
changes (changes as a percentage of total revenue or total expenses) over the three-year
period. Indicate the percentages.
e. Comment on the overall trend in operating income and net income as a percent of sales
over a three-year period. Refer to the information obtained in questions 2 and 4.