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OBTAINING THE ANNUAL REPORT
Obtain the most recent annual reports of two U.S. corporations which are Fortune 500 companies and are traded on a national stock exchange (NYSE, NASDAQ). You will obtain two annual reports so that you will have an alternate if you are unable to use your first choice.
The easiest way to obtain annual reports is to download them from the company Web site. A useful resource is fortune.com. This site provides links to the Web sites of Fortune 500 companies. To obtain an already printed copy of the annual report, if time permits, contact the company’s Investor Relations department.
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.
OTHER USEFUL SOURCES ARE:
1. Choosing a company
Choose companies in which you are interested. Perhaps the company has been featured in the news lately. Perhaps you own stock in the company. Perhaps you would like to own stock in the company. If you want to look at a list of possibilities, find a copy of the April issue of Fortune magazine which lists the Fortune 500 or try www.fortune.com
2. Download your annual report and answer the following questions.
Names of companies chosen: (Remember that you will conduct a thorough analysis of one of the companies. Please list the companies in the order of your preference.)
Company Fortune 500 Rank
a. ________________________________________ ______________
b. ________________________________________ ______________
Why did you select these particular companies?
OVERVIEW OF ANNUAL REPORT
This assignment will provide both an overview of the annual report of your chosen company and a table of contents to help you complete future assignments more efficiently.
Name of company chosen: __________________________________________
Balance sheet date: ________________________________
1. REVIEW THE ANNUAL REPORT THAT YOU HAVE RECEIVED. IT WILL CONTAIN
SEVERAL SECTIONS (not necessarily in this order):
This section contains the balance sheet (also called statement of financial position), income statement, statement of cash flows and statement of stockholders’ equity. The accompanying notes, as indicated at the bottom of each of the above statements, are an integral part of the financial statements. The financial statements cannot be understood without reference to the notes.
The financial statements and accompanying notes will be the focus of your Annual Report Project
Balance Sheet Page_______
Income Statement Page________
Statement of Cash Flows Page_______
Statement of Stockholders’ Equity Page_______
Notes to the financial statements:
Summary of significant accounting policies: Note #_____ Page_______
Inventories: Note #_____ Page_______
Plant assets: Note #_____ Page_______
Long-term debt: Note #_____ Page_______
Income taxes: Note #_____ Page_______
Commitments and contingencies: Note #_____ Page_______
Report on internal control: page_______
Report on the financial statements: page_______
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2. REVIEW THE MANAGEMENT AND AUDITOR’S REPORTS.
Locate the management report(s) and the independent auditor’s report(s). Page(s)_______
Answer the following questions.
a) Who is responsible for the preparation and integrity of the financial statements?
b) Does the company maintain a system of internal controls? Why?
c) What is the name of the independent public accountant (auditor)?
(Note: There are two independent auditor’s reports: (1) a report on internal control, and (2) a report 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?
f) According to the audit report, what is an audit?
g) Summarize the auditor’s opinion.
On a separate piece of paper calculate the following ratios by showing your work and then discussing their meaning.
Receivables turnover ratio =
Average collection period =