ANNUAL REPORT PROJECT QUESTIONS
a) Most annual reports begin with a letter to shareholders. From that letter
or opening statement, determine whether your company had a good year
or a bad year.
b) What are the principal products or services of the company and its major segments?
c) Who is the Chief Executive Officer?
d) What accounting firm has attested to the fairness of the financial statements? What type of opinion did they issue?
In annual reports, income statement and statement of cash flows amounts generally are shown for the three most recent years, while balance sheet amounts generally are presented for the two most recent years.
a) Using the income statement, evaluate and discuss the trend over the past three years in net income. Consider, as well, the trend in operating income, if operating income is provided.
b) Using the statement of cash flows, evaluate and discuss the trend over the past three years in cash provided by (or used for) operating activities. Compare the trend of net operating cash flows to that of income from operations.
a) What is the format of the income statement (single-step or multiple-step)?
b) How is net income affected by non-operating revenues and expenses, gains and losses? Describe them.
c) Did your company experience any extraordinary items and/or discontinued operations during the period covered by the annual report? If so, describe the impact on net income reported by your company.
What were the Earnings Per Share for your company for this year? Was there any dilutive effect? If so, what affect did they have on the EPS?
Which classification of assets (cash, receivables, inventory, investments, PP&E, and intangible assets) is the largest component of total assets?
Does your company report inventory? If so, do they use FIFO, LIFO, or some other method of reporting? What is the advantage to the company of that method?
What percentage of total assets is represented by intangible assets? What are the major types of the intangible assets? How are they being amortized?
Was it determined by management that any asset or asset category suffered any impairment during the period (tangible, intangible, inventory, accounts receivable)?
What method(s) of depreciation are used to allocate the cost of property, plant, and equipment to expense? To what extent are the fixed assets depreciated? (For this, compute the ratio of Accumulated Depreciation to Total Property, Plant & Equipment).
Review the statement of cash flows for the most recent year. Which activities (operating, investing, financing) provide net cash inflows? Which activities result in net cash outflows? What method (direct or indirect) is used for the preparation of the operating activities section of the cash flow statement?
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