Profitability Analysis Exercises And Problems


As a financial statement analyst, select two organizations in the same industry and analyze their financial statements over time. The financial analysis period must be, at a minimum, the three most recent years. Since you will be spending a considerable amount of time on the project, ensure that you pick organizations that interest you.

The Form 10-K reports, which the organizations filed with the SEC, may be the best place to learn about a particular industry, organization, and organizational strategy, and to obtain reported financial statements.  The reports are accessible at http://www.sec.gov/edgar.shtml (Links to an external site.)Links to an external site.. An alternative means to obtain the report is by clicking on the SEC filings link on an organization’s website to obtain the latest Form 10-K filings. You can also find current stock valuation and other relevant stock information from financial portals such as Yahoo finance, Google finance, and Reuters.

Your Portfolio Project must include the following for the two organizations:

  1. Executive Summary
  2. Analysis Overview
  3. Industry economics and strategies
  4. Assessment of financial statements’ quality
  5. Financial analysis including:
    1. Credit (risk) analysis liquidity, capital structure, and solvency ratios)
    2. Profitability analysis (return on investment, operating performance, and asset utilization ratios)
    3. Cash flows analysis (flow of funds ratios)
  6. Market measures ratios
  7. Projected financial statements including income statements, balance sheets, and statements of cash flows*
  8. Valuations

*You will need to make necessary adjustments for material non-recurring or unusual income or expenses as well as off-balance sheet assets or liabilities, among others as covered in the course. The adjustment will improve comparability and ensure accurate representation of the organizations’ economic performance. Be sure to identify important assumptions regarding the companies, industry and business environment, and other important assumptions for estimates and forecasts, including their business strategies.

Include the financial statements you analyzed and other information used as exhibits after the reference page. Your project must be formatted according to CSU-Global Guide to Writing and APA Requirements (Links to an external site.)Links to an external site.. Be sure to check out the Portfolio Project rubric to guide your project writing and presentation.
Important information and corresponding modules for each section:

  1. Executive Summary: brief summary focused on important analysis results
  2. Analysis Overview: background material on the companies, industry, economic environment, and strategies (Module 1)
  3. Assessment of financial statements’ quality: Include important assumptions you used (Module 1)
  4. Financial analysis including:
    1. Credit (risk) analysis (liquidity, capital structure, and solvency ratios) (Modules 1 and 2)
    2. Profitability analysis (return on investment, operating performance, and asset utilization ratios) (Modules 1, 5, and 6)
    3. Cash flows analysis (flow of funds ratios) (Module 5)
  5. Market measures ratios (Module 1)
  6. Cash flows analysis (flow of funds ratios) (Module 5)
  7. Projected financial statements including income statements, balance sheets, and statements of cash flows: Include important assumptions you used for estimates and forecasts, and adjustments made, among others (Module 7)
  8. Valuations: Include important assumptions (Modules 1 and 8)

Leave a Reply