Horizontal and vertical analysis of the Income Statements for the past three years (all yearly balances set as a percentage of total revenues for that year). This Portfolio Project has two parts: calculations and a 4- to 6-page essay.

While the calculation requirements of this assignment are important, equally

important are your discussion and analysis of the quantitative results. You

will submit two documents: 1) a spreadsheet containing your horizontal and

vertical analysis (and perhaps your ratios) and 2) a word document

containing your essay.

Choose a publicly traded company and perform an expanded analysis on the

financial statements. Please use the most current 10K statements available

You will submit both parts

separately.

Part 1: Please complete the following for your chosen firm in an Excel

spreadsheet:

Horizontal and vertical analysis of the Income Statements for the past three

years (all yearly balances set as a percentage of total revenues for that year).

Horizontal and vertical analysis of the Balance Sheets for the past three years

(all yearly balances set as a percentage of total assets for that year).

Ratio analysis (eight ratios of your choosing) for the past three years PLUS a

measurement for the creditworthiness of your firm as measured by Altman’s

Z-score. Note that if you used your chosen firm for our ratio-related

discussion posts, then you MUST also present industry-average ratios or

current year competitor ratios for your ratio analysis. Comparing your firm’s

ratios to a close competitor or an industry-average ratio makes your analysis

much more meaningful.

Part 2: The Paper:

4-6 pages in length.

Include a proper introduction and conclusion.

Include a reference page.

Your paper should provide your reader with an overall understanding of the

financial health of your chosen firm including the following:

Discussion of the ratio analysis results, including rationale for the ratios

chosen.

Discussion of all horizontal and vertical analysis from above.

Discussion of four items from the management discussion of the firm that

support the conclusion formed in your discussion of the financial results.

Much of this course has concentrated on learning the financial statements,

primarily because there was not an accounting prerequisite. Because of this

concentration, you may find this assignment challenging. However, if you

understand the financial statements, then the horizontal and vertical analysis

should (hopefully) be rather intuitive. For example, if you see sales rise by

20%, then shouldn’t you also see net income rise by 20% or more if the

managers are effective at controlling costs? If you see sales rise by 20% and

assets rise by 40%, we have to ask why this is happening. It would appear

that assets have risen too far given the sales that are generated from those

assets—why did this occur? You may have to research that type of question

and discuss it in your analysis.

The link below demonstrates the completion of vertical and horizontal

analysis on Nike using Excel. Dr. Jill Bale, the course writer, demonstrates

the use of Excel equations and discusses some of the issues you may face

when working on the spreadsheet for your portfolio project. If you would like

some additional guidance on the spreadsheet requirement of the portfolio

project, please watch the video. Note that the video does not discuss adding

the 8 required ratios to your spreadsheet; however, you are required to

submit your company ratios on this spreadsheet as well as the

vertical/horizontal analysis. As always, your instructor is available for

follow-up questions.

Bale, J. (2013, August 19). Demonstration of Vertical/Horizontal Analysis

using Excel [Video file].

Retrieved from

_Vertical_analysis_-_MP4_with_Smart_Player_(Large)_-_20130819_10.10.04AM.html

You’ve had some experience with financial ratios through Discussion Board.

I’d suggest that you start your ratio analysis with the four ratios found in the

DuPont equation. If you discover a weakness in one component of the

DuPont ratios, then it would make sense to look at ratios that are closely

related to the troublesome ratio. For example, if you discover that the asset

turnover is declining over time, then take a look at some related ratios such

as the inventory turnover rate or the average collection period. If you

discover that the equity multiplier is increasing (indicating greater reliance

on debt), then look at some related ratios such as the debt ratio or Times

Interest Earned. These ratios are discussed in our textbook, even though

you may not have been assigned to thoroughly read the chapters.

Finally, please read through the rubric that will be used to grade your

assignment—