What is the date of the most recent balance sheet. What fiscal years are reported?
The company that my team and I have been approved for is the discount store industry using Dollar Tree, Inc. and Five Below, Inc. as our selected companies.
Requirements: 3 to 4 pages
Financial Statement Case Analysis
Learning Objectives
This case is intended to:
increase your understanding of financial statements.
enhance your ability to apply the concepts we have covered to actual company financial statements.
broaden your critical thinking skills by considering your analysis within an industry context.
provide you with experience navigating the benefits and challenges of working in a team environment to achieve a common outcome.
Assignment Guidelines
The is a Group/Team assignment.
Complete the case analysis using the industry and companies that have been approved for your team.
Submit one case analysis per team.
The submission must include one Word and two Excel files (three files in total), as explained below.
A Peer Evaluations Form must be completed as part of the case. However, these evaluations are an individual (not a group) assignment and will be submitted through a separate Canvas assignment link.
Assignment Requirements
Use the EDGAR database to download the most recent 10-K report and the Excel version of the 10-K financial statements.
Use the 10-K report to respond to the relevant questions below. Do not submit the 10-K report.
Use the Excel financial statements to complete the relevant questions below. Both Excel files will be submitted with the assignment.
Submit the full set of financial statements for both companies. Do not delete any of the sheets in the Excel files.
Save each Excel file separately using filename: Team#_CompanyName.
Respond to the items below for both companies. Insert your responses below each question.
You are expected to provide complete responses, written in full sentences, for every question.
Prepare a cover page with each team member’s name and the names of your companies.
Include a summary page that describes each team member’s contribution to the case analysis.
Save this Word file as Team#_FSCase.
Company and Industry Description and Competitive Analysis
Provide the company name and ticker symbol. What is the date of the most recent fiscal year?
In the 10-K report, review the Management Discussion & Analysis and other information about the company. Briefly describe the nature of the company’s business operations, primary products and services, and in what other countries they operate.
Briefly describe the industry in which your companies operate and the competitive landscape of the industry. Porter’s Five Forces might be helpful here. After doing your research on the internet, use your own words when responding to this question. Provide references with links.
NOTE: For the computational questions below, perform all calculations directly in the respective Excel files using Excel formulas entered directly into the cells and clearly label your work. Manual inputs of computed amounts will earn zero points.
Balance Sheet
Prepare a common-size balance sheet by expressing each item on the balance sheet as a percentage of total assets. Do this for all years reported on the balance sheet. Complete this task directly in the Excel file next to the balance sheet of each company.
Respond to the following items for each year reported on the balance sheet. The common-size balance sheets should be used, when applicable, to respond to the questions.
What is the date of the most recent balance sheet. What fiscal years are reported?
What percent of total assets are short-term assets and what percent are long-term assets? How do these percentages differ between your companies.
What percent of total liabilities are short-term liabilities and what percent are long-term liabilities? How do these percentages differ between your companies.
Describe any significant changes in the composition of current assets or current liabilities. Do you observe any noteworthy differences between your companies.
In which assets does the company have the most significant investment? Do you observe any pattern when comparing your companies?
What are the company’s largest liabilities? Do you observe any pattern when comparing your companies?
Describe any significant changes in long-term assets or long-term liabilities. Do you observe any pattern when comparing your companies?
What percent of total assets is financed by equity (owners) and what percent is financed by debt (non-owners)? How do these percentages differ between your companies.
Describe any significant year-over-year changes in the company’s capital structure (i.e., owner financing vs. non-owner financing.
Income Statement
Prepare a common-size income statement by expressing each item on the income statement as a percent of total sales or total revenue. Do this for all years reported on the income statement.
Use the income statement to respond to the following items for each year reported on the income statement:
What is the period covered in the income statement?
Discuss the trend in total revenue during the three-year period. Is it increasing or decreasing? Compare your companies on this metric.
Discuss the trend in net income as a percent of sales during the three-year period. Is it increasing or decreasing? How do your companies compare on this metric?
Compute gross profit margin and discuss how it has changed over the three-year period? How do your companies compare on this metric?
Discuss the trend in operating income as a percent of sales during the three-year period. Is it increasing or decreasing? How do your companies compare on this metric?
What are the largest expenses? What percent of total revenue does each major expense represent? Do you observe any significant changes in the cost structure during the three-year period? Do you observe any pattern when comparing your companies?
Are there any unusual or discontinued items reported on the income statement? If so, are they large in magnitude?
Compute return on assets (ROA) for the last two years and comment on the trend. Note: You will need balance sheet information for three years to do this computation.) How do your companies compare on this metric?
Based on your responses to items a) through h), explain whether the changes indicate a positive or negative trend for the company.
Which of your two companies do you think has performed better? Explain your answer.
Statement of Cash Flows
Use the statement of cash flows to determine the size and direction (i.e., net cash source or use) of cash flows from operating, investing, and financing activities. Do this for every year reported on the statement. One goal is to understand each company’s pattern of cash flows and to form an opinion about the general strength of its cash flows.
What is the period covered in the statement of cash flows?
What are the cash flows from operating activities? Are they positive or negative?
Compare net income to net cash provided/used by operating activities. Explain why they are different and whether operating cash flows smaller or larger than net income.
Did the company “generate” or “use” cash from investing activities? What is the amount?
Did the company “generate” or “use” cash from financing activities? What is the amount?
How much cash did your company use for expenditures for property, plant and equipment? Highlight the amount on the Cash Flows statement in your Excel file.
Did your company pay a dividend during the year. What is the amount? Highlight the amount on the Cash Flows statement in your Excel files.
Discuss any significant changes in cash flow items. Is there an observable pattern?
Book Value and Market Value
What is meant by a company’s book value? What is meant by market value? Explain why these values often differ for a particular company. (Hint: the differences are explained in the textbook.)
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