Business Report
This is the 2nd of five projects you will write to incorporate course concepts with information found within your corporation’s SEC10K report. Focus on telling a story about your corporation and its financial performance and position.
SCENARIO:
You are a new hire for a major corporation completing your eight-week rotation relating to accounting, financial reporting, budgeting, cost control, and profit maximization. As part of your rotation you are learning how accounting information is used by managers throughout the organization to make managerial decisions. This report will address the below topics, providing senior management a report introducing, explaining, and providing analysis of the financial reports. Assume senior management does not understand basic accounting concepts and unable to read and interpret the reports without your assistance. Incorporate and explain accounting concepts learned within the course material (readings and discussions) and provide financial analysis as completed within the SEC10K discussion posts.
REQUIREMENT:
Prepare a report for your chosen corporation’s senior managers to interpret and explain the SEC10K financial reports. The report should be one to two full in pages in length: single spaced, 12 pt. font, one-inch margins, and in your own words. Make note of the grading rubric which requires you to address project questions, display critical thinking, analysis, research, application of course concepts, write in your own words, and demonstrate a high degree of effective communication (i.e., formal business writing with proper grammar and punctuation).
The following are concepts you should consider for discussion within your report:
Accounts Receivable:
Your SEC 10-K company should have accounts receivable and inventory, both typically large dollar values within the balance sheet.
Who owes money to your SEC 10-K company?
How is the inventory described?
For these questions read the Notes to the Financial Statements presented immediately after the financial statements. This is usually part of section 8 of the SEC 10-K.
Analysis of Accounts Receivable and Inventory:
Using the resources of our course materials calculate and consider the concept of the financial ratios: days sales in Accounts Receivable (AR) and Inventory.
Due to limited information presented within the report, use the ending balances of inventory and accounts receivable when calculating these ratios (and not the average balance as the formulas require).
This should allow you to compare this year to last year. Some companies require and analyze these values each month.
Formulas:
Days Sales in A/R = Ending Balance in Accounts Receivable/ [Sales Revenues / 365]
Days’ Sales in Inventory = Ending Inventory Balance/[Cost of Goods Sold / 365]
Calculating ratios is only the first step in the analysis process, the ratios results need interpretation.
What do the result indicate about the financial performance?
Consider how these values are changing. Interpret these changes as positive or negative for the corporation. What can be done to counteract negative trends, or continue with positive trends? What actions do you recommend management take?
Also, relate changes in revenues and cost of goods sold values to changes in accounts receivable and inventory from year to year. Do the changes in revenues and cost of goods sold agree with the changes in accounts receivable and inventory?
Note: The amounts listed within the SEC10K report are typically “in millions.” Read the SEC 10-K for examples of how to write these dollar values (such as $123 million).
Weekly Homework
The primary reading material source is http://www.principlesofaccounting.com/
(For additional information, use the OpenStax textbook available within LEO as a secondary resource.)
SCENARIO:
You are a new hire for a major corporation completing your eight-week rotation related to accounting, financial reporting, budgeting, cost control, and profit maximization. As part of your rotation you are learning about the accounting process and how to use accounting information to make managerial decisions.
Read the assigned chapters to learn the accounting concepts, then submit a written report in the LEO assignment folder summarizing your knowledge of the week’s concepts.
You should create this report to provide documentation/evidence of your assigned chapter readings and self-assessment exercises (Fill in the Blanks, and Multiple Choice questions at end of each chapter). (A series of projects focused on your SEC10K corporation will be completed and submitted separately.)
REQUIREMENT:
As described above, upon completion of the readings and quizzes (the week’s assigned chapters are detailed below) write a report as a Word document and upload it to this week’s Homework assignment folder. Summarize what you learned through your readings and practice quizzes. Demonstrate an understanding of the week’s concepts. The more detailed writeups documenting a solid understanding of the material will earn the highest homework points.
Week 5:
A. Read and complete the self-graded questions for ch 9, 13, 15, & 16 including statement of cash flows (indirect method only; ignore the direct method of preparing the statement of cash flows) at (http://www.principlesofaccounting.com/).
B. Review your SEC 10-K company’s statement of cash flows.
There are three main sections to the statement of cash flows: Cash flows from Operating Activities, Cash flows from Investing Activities, and Cash Flows from Financing Activities.
The balance sheet and income statement provide important information used to prepare the statement of cash flows. The relationship between these two financial reports with the statement of cash flows may be summarized as follows:
1. Net income (from the income statement) is a measure of operating activities but the income statement reports net income based on financial accounting, not based on cash flows. Thus, net income is adjusted from a financial accounting measure back to a cash flow by adding back expenses that do not affect cash (such as depreciation), subtracting non cash gains on sale of assets, adding back non cash losses from sales of assets, and adjusting for changes in current assets and current liabilities (information from the balance sheet).
2. Cash flows from the sale and purchase of long term assets are reported in the investing activities section.
3. Cash flows from changes in long term liabilities and owners’ equity are reported in the financing activities section.
Reviewing your corporation’s statement of cash flows: what do you learn about your SEC 10-K company as you view the four financial statements together? Do you see net income from the income statement on your statement of cash flows? Can you recalculate the amounts reflected as changes in current assets and current liabilities from your balance sheet(s)?
What is the main source of cash? Operating, financing, or investing activities? Is this a financially healthy way for the corporation to obtain cash flows? What type of activities provide the healthiest source of cash flows (i.e., operating, investing, or financing activities)?
Additionally, provide a summary of the accounting concepts learned through the readings and practice quizzes for this week. Demonstrate your understanding of the week’s concepts. If you need ideas regarding topics to discuss, see ideas below. The more detailed your write-up documenting your understanding the higher it will be graded.
Complete the report below as a Word document and submit in the Assignment Folder for week 1 Homework.
Additionally, here are some topics to consider:
How does the intent of management (as to length of time) impact how investments are reported?
What are bonds, and how does issuing bonds above or below their par value affect the amount of interest expense recorded each accounting period?
What are the key assumptions upon which accounting depends?
What topic(s) gave you trouble this week (if any)?/What topic(s) do you feel you were able to grasp? Post questions in the homework discussion thread!
The most important aspect of this write-up is to document your understanding of the week’s concepts!
Remember all submissions and postings in our class must be in your own words.
Deliverables are to be single spaced with double spacing between paragraphs. These are business reports, thus proper spelling, grammar, and professional writing is expected. Your report submission serves as your new hire eight-week rotation report to your supervisor regarding the knowledge learned for this week’s material related to accounting and financial reporting.
Discussion
SEC 10K Project: Statement of Cash Flows
Respond to one or more question(s) from each of the three categories below.
Category: Operating Activities
1. Describe where Net Income is shown on the Statement of Cash Flows and state the amount. Refer back to the Income Statement to verify the amounts reported for Net Income are equal.
2. What amount(s) is reported for depreciation and or amortization?
3. Are any gains or losses reported on the Statement of Cash Flows? If so, provide a summary of transaction(s) that resulted in the gains and or losses. [Hint: you may need to review the Notes to Financial Statements to learn which transactions resulted in gains/losses].
Category:
Investing and Financing Activities – Review your statement of cash flows, and answer the following questions based on information reported within the “Cash Flows From Investing Activities” and “Cash Flows From Financing Activities” sections of the statement of cash flows.
1. Discuss any investment(s) (type and amount) purchased, sold, or retired during the current period?
2. Describe financing activities used by your corporation to increase cash (or other assets).
3. Discuss financing activities that reduced cash.
Category: Analysis
1. Which of the activities (operating, investing, or financing activities) is the primary source of cash flows for the corporation? Is this a financially healthy way for the corporation to provide its cash inflow needs?
