USA-based Macys Financial Statement Analysis

Financial Statement Analysis

 USA-based “Macys”.    Go to the website for that  company – look at investor information and search for the company  “annual report/Form 10-K”. If you miss that deadline, you’ll lose 5 points (and counting !) but  you’ll still need to get that full set together for me to see before you  continue with your paper. If you hand in by due date, but the set is  incomplete or not from most recent year or not taken directly from the  Form 10-K, then you lose the 5 points. Try to hand in early just in case  there is a problem so that you can resubmit by the due date/time.

Now you will continue  your project.  The overall objective is for you to answer the basic  question:

Would you recommend an investment in this company?  (YES  or  NO)

That recommendation will be on the Top of the COVER PAGE of your  report. The report that follows is the argument supporting your  recommendation.

Remember that the majority of your study and conclusion should be based on accounting information.

Here are the specifics:

1) Do some reading/research on your company.  Check into current news  about your company.  Introduce the company to the reader. Consider what  external factors in the economy, in the world, in the region, in the  industry of your company, etc. might an investor (and you) consider  before making an investment in this company?  (Include these comments ~  and assume the reader/potential investor is NOT familiar AT ALL with  your company).

2)  You are to do a full Horizontal Analysis (on the Balance Sheet  and on the Income Statement) for the years presented using the oldest  year as your base year and rolling forward that base year to most recent  year.   In other words, for the Balance Sheet which contains 2 years of  data, you compare the oldest year to the most recent year.   Easy.    But for the Income Statement, there should be 3 years included in your  Horizontal Analysis. I am looking for whole dollars here and throughout  your report. NO PENNIES ! You may also do percents for the Horizontal  Analysis, but that is optional. You must state the whole dollar amount  of the differences if you want credit. For the income statement, the  oldest year gets compared to the middle year first.   Then the middle  year becomes the base year and that base year gets compared to the most  recent year.  Thus, the “rolling base year” concept.

3)  You are to do a Vertical Analysis (on both the Balance Sheet and  Income Statement) for EACH of the years presented.  You must show your  result as a % (not a decimal number) and round your % results to exactly  2 decimal places (ex: 2.07% ~ not 2% ~ not 2.0734566%).

For these analyses, you are to present the actual tables of your  Vertical and Horizontal Analysis. If you only submit commentary on your  results, you lose 20 points.   Each of these analyses MUST SHOW:  statement titles, the name of every single individual account as shown  on the original financial statement, the exact balances as shown on the  original financial statements and then the columns for your  vertical/horizontal calculations.

NOTE: If your tables for #2 and #3 above spill over onto a second  page, you must label the top of that subsequent page with headings of  the statement AND headings on columns, just as would be in a published  report. If these analyses are not user friendly, you will not get full  credit.

4)  Provide some comments on the results of these two studies that  may be relevant to your overall recommendation.  This is key.  Crunching  numbers is one thing, but you must demonstrate that you understand the  value in looking at the end results.

5)  Provide comments on the Cash Flow statement and list them as  bullet points only – no long narratives. Note which observations are the  good (if any) and any that are not so good indicators.   Do not comment  on anything you do not understand in this statement. Saying that an  item “increased” or “decreased” without explanation/interpretation from  you won’t get you credit. I expect at least 7-10  notes/observations from you on the Cash Flow statement.   NOTE: You are  not to comment AT ALL on ANY of the details within the Cash Flow from  Operating Activities section. I’d like you to include a comment on the  grand total Cash Flow from Operating Activities as one of your 7-10  comments, that would be appreciated but No Remarks At All on the details  within that section will be awarded any credit whatsoever.

6)  Do a ratio analysis on the financial data presented.   The six  ratios you are required to calculate follow below.  For each ratio, you  must show the formula you are using AND the numbers you’ve plugged in  for each calculation AND your result. Again, crunching the numbers is  fine, but once those calculations are done, then the most important part  is interpreting the results.  You should list notes/observations as to  the results of each ratio in each year.  Do you see any trends that are a  concern? Saying “increased” or “decreased” is not enough and you will  get no credit whatsoever if those are you only comments. Help the  uninformed reader understand what your results mean.

Here are the 6 ratios you MUST calculate for at least two years (round results to exactly 2 decimal places):

*  Working Capital  (in dollars – this is not a “ratio,” but this calculation is      important to your study).

* Current Ratio

* Debt to Assets ratio

* Debt to Equity ratio

* Return on Investment  (a.k.a. Return on Assets) – IMPORTANT: here I  want you to use “Total Assets” in place of Average Total Assets

* Net Margin

General comments:

This project will be due at the start of class on November 20th  and no later. There is no reason to not submit your term project report  even sooner than that date.   There are no extensions and no late  submissions will be considered.  At all.  NONE.   Late papers get 0%  (F). An email, PDF, online version or any other electronic  format will NOT be accepted. At all.   You MUST hand me a physical copy  of your complete report, stapled neatly together, including copies of the full set of financial statements again,  and including all horizontal analyses, etc (as stated above) by the  time/date specified. Again, I remind you, use whole dollars only  throughout paper (no pennies please !)

You can do as much or as little as you’d like on this term project,  but the above parameters set the minimum.  You may want to comment about  competitors, company plans for the future, your own personal  experiences with this company or its products, why you chose this  company, etc.  That is your choice.  The more you do, the neater and  clearer your report ~ the more credit you will be awarded (that’s  assuming you do include the minimum requirements, as stated).  Remember  the reader knows nothing about your company or about accounting. Submit a  paper to me that you are truly proud of having completed.

An Excellent paper gets an Excellent grade.

An average paper gets an average grade (C).

An incomplete &/or incorrect paper gets whatever grade is deserved.

BOTTOM LINE:  Please – show me that you have understood the  “financial accounting” concepts and principles that we’ve studied.  Show  me that you are able to understand the value of that information and  apply it to this type of real world decision.  You will lose points for  not meeting any of the minimum requirements as stated above, so be  careful to include everything.

Thank you.  I look forward to reading your final report !

(Reports will not be returned to you, so be sure to keep a copy for yourself.)

Here’s the 10 point grading grid (each of these 10 sections is worth 10 points)

Cover Page: Your Name, 204 + Section number, Co. Name, “BUY” or “DO NOT BUY”

1) Description of company/company news

2) Horizontal Analysis   (Income Stmt AND Balance Sheet)

3) Vertical Analysis       (Income Stmt AND Balance Sheet)

4) Comments on 2 & 3 above

5) Cash Flow Statements (7-10 solid comments – bullet points – keep it brief)

6) Ratio analysis (all 6 ratios for all years, with formulas shown and values you inserted into formulas – otherwise no credit)

7) Comments on EACH ratio (keep it brief)

8) Final Summary    (Tie it all together)

9) Full set of financial statements (5 points for handing in set by  9/25/18 (“0” points if miss deadline) & 5 points for attaching full  set to your final report.

10) Your conclusion included on top of cover page. Paper is beautiful, neat, comprehensive, and user friendly.

There may be an extra credit option for making a brief presentation  of your term project company to the class. Those details to follow in  the future.


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