Prior to beginning work on this discussion forum, read Chapter 13 in the course textbook, Using Financial Accounting Information: The Alternative to Debits and Credits.
Using the same company and annual reports that you chose for your Reading and Using the Annual Report Case Study in Week 1,
- Prepare common-size balance sheets, income statements, and statements of cash flows for your chosen company for the latest 2 years. Identify one company that competes with your chosen company, obtain their financial statements for the most recent two years, and prepare common-size balance sheets, income statements, and statements of cash flows for your chosen company for the latest 2 years.
- Explain why common-sized financial statements are a convenient way to compare financial statement items within the same period, between periods, and between competing companies.
- Perform a vertical analysis of at least one item on the common-size balance sheet, income statement, and statement of cash flows you prepared for the most recent year. Compare each item to the same item on the common-size financial statements for the previous period and to the same item on the common-size financial statements you prepared for the competing company.
- Discuss what this comparison tells you about your chosen company’s current financial condition, how it compares to the previous year, and how it compares with the financial condition of your chosen company’s competitor.