THIS ASSIGNMENT WILL COMPOSE 5-15% OF YOUR FINAL MARK

1. The annual report you are researching provide a great deal of information on past performance, policies, etc.. Drawing your information from the annual report, prepare a brief profile of the company and its principal activities.

2. Answer each of the following questions and briefly explain where in the statements, notes, reports by auditors, and other information in the annual report, or special schedules you located the information used in your answer.

a) The comparative financial statements include income statements, balance sheets, statements of retained earnings, and statements of changes in financial position. Were all of these statements audited by a firm of public accountants? Name the firm that audited some or all of these statements.

b) Are these financial statements prepared for a single legal entity or for a parent corporation and its subsidiaries?(Hint: What does consolidated mean?)

c) Write out the total dollar amount of the company's net sales using words rather than numbers.

d) What was the total amount of dividends declared by the company?

e) What valuation method was used for finished goods inventories?

f) What is the 'outlook' of the company as envisaged by the chief executive officer?

g) Research the market price of the company's stock from a newspaper.

3. Using the financial statements given in the annual report you acquired, calculate the following values and ratios as at December 31, using the following criteria.

* Show clearly the method and figures used to arrive at a final answer

* Final answers should be rounded off to two decimal places

* If the annual report you are using does not contain any of the information needed for a calculation then state the difficulty for your answer. You should then confer with me as it may be possible to improvise a figure.

a) Current ratio
b) Quick ratio (Acid Test Ratio)
c) Working capital
d) Inventory turnover and days sales in inventory
e) Accounts receivable turnover and the average collection period
f) Profit Margin
g) Asset turnover
h) Payout ratio
i) Interest Coverage
j) Rate of return on total assets
k) Earnings per share
l) Price-earnings ratio
m) Dividend yield
n) Operating expense ratio
o) Equity Ratio (equity to total assets)
p) Debt Ratio (debt to total assets)
q) Book value per share of common stock
r) Using three consecutive years prepare a trend percentage for (a) net sales, (b) net income, and (c) net earnings per share.

4. Assume that you are the credit manager of a potential supplier of the company you are analyzing. The company you are analyzing wants to make credit purchases from your company of between $10 million and $20 million per month, with payment due in 60 days.

Your company assigns each customer one of the four credit ratings listed below. Assign a credit rating to the company you are analyzing and write a memorandum explaining your decision. (In your memorandum, you may use any computations that you have calculated in question 3 and may refer to any information in the financial statements.)

Possible Credit Ratings

A Outstanding. Little or no risk of inability to pay. For customers in this category, we fill any reasonable order, without imposing a credit limit. The customer's credit is reevaluated annually.

B Good. Customer has good debt paying ability, but is assigned a credit limit that is reviewed every six months. Orders above the established credit limit are accepted only on a cash basis.

C Marginal. Customer appears sound, but credit should be extended only on a 30-day basis with a relatively low credit limit. Credit status and credit limit are reevaluated every 90 days.

D Unacceptable. Customer does not qualify for credit.

5) Assume that you are an investment advisor who publishes a monthly newsletter with recommendations on buying and selling common stocks. One of the common stocks you will evaluate this month is that of the company you are analyzing.

Write a statement for your newsletter in which you recommend that your clients take one of the following actions with respect to the company's you are analyzing stock:

Buy (Your positive recommendation; you think the market price of the stock will go up.)

Sell (Your negative recommendation; you feel that the stock is overpriced and will fall in value.)

Hold (A relatively neutral position; you feel that the stock is priced at a fair value with good but not exceptional prospects.)

Explain the reasoning behind your recommendation. (In your statement, you may use any computations that you have calculated in question 3 and may refer to any information in the financial statements.)

In addition to the information developed in other parts of this problem and any information in the annual report, your recommendation should consider the facts about the current economic environment.