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  2. Explain the difference between LIFO and FIFO and document the method used for each of the three companies.

Explain the difference between LIFO and FIFO and document the method used for each of the three companies.

Write a five- to seven-page comparative financial statement analysis of the three companies listed below, formatted according to APA style as outlined in the Writing Center. In this analysis, you will discuss the financial health of these companies with the ultimate goal of making a recommendation to other investors. Your paper should consist of the following sections: Company Overview, Comparison of Accounting Methods, Ratio Analysis, Final Recommendation, Conclusions. You will also submit an appendix as a separate document. Additional research may be necessary to provide company background information, or to support your analysis and recommendations. Your paper needs to include a minimum of two scholarly, peer-reviewed, and/or credible resources in addition to the textbook as references.

Download the Form 10-K for each company.

Here is a breakdown of the sections within the body of the assignment (Use paragraph headings to indicate each section):

Company Overview
Provide a brief overview of the three companies (at least two pages). What industry is it in? What are its main products or services? Who are its competitors? Where is the company located?

Ratio Analysis

  • Calculate the current ratio, quick ratio, gross profit percentage, inventory turnover, accounts receivable turnover and asset turnover ratios for all three companies for the current year.
  • Note: Cash includes cash and cash equivalents and short term investments.
  • Explain how the ratio is calculated and discuss and interpret the ratios that you calculated.
  • Discuss potential liquidity issues based on your calculations of the current and quick ratios.
  • Are there any factors that could be erroneously influencing the results of the ratios?
  • Discuss liquidity issues of the three companies.

Comparison of Accounting Methods

In your paper, ascertain from the notes of the financial statements the following:

  • Explain the difference between the allowance method and the direct write off method for accounts receivable. Document the method used for each of the three companies.
  • Explain the difference between the straight line, double declining balance and the unit-of-production depreciation methods. Document the method used for each of the three companies.
  • Explain the difference between LIFO and FIFO and document the method used for each of the three companies.
  • Explain the different categories of intangible assets and document the method used for each of the three companies.

Recommendation
Based on your analysis, would you recommend an individual invest in these companies? What strengths do you see? What risks do you see? It is perfectly acceptable to state that you would recommend avoiding this company, as long as you provide support for your position.

Conclusions

Include an appendix in a separate document. The appendix must include screenshots of the financial statements and information obtained for the receivables, intangible assets, depreciation, and inventory. You can get help with creating an appendix in APA format by using the Writing Center’s guide,

The Financial Statement Analysis Final Paper

  • Must be five to seven double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the Writing Center
  • Must include a separate title page with the following:
  • Title of paper
  • Student’s name
  • Course name and number
  • Instructor’s name
  • Date submitted

 


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