Managerial Accounting Analysis

Project instructions:
This is an accounting project
The company selected is American Apparel

General Instructions:
Step 1 ? Form Your Team:
Students will form their own teams, consisting of four students.
Step 2 ? Select Your Company:
The instructor will provide the class with a list of companies approved for this project. Your team must select its top five choices from this list. You will be asked to send your choices via email to a graduate assistant assigned to the accounting department (contact information will be posted on Blackboard). Companies will be assigned on a ?first come, first serve? basis. If all five companies selected have already been assigned, your team will be asked to make three additional selections. You will be notified via email of your company assignment.
Step 3 ? Complete Part I – Company and Industry Research (specific requirements are listed at the end of these general instructions):
Part I of the project involves researching your company and its industry and will be handed in separately from Part II. Since you will use this research to complete Part II, it is in your best interest to be thorough when gathering your information. You will gather your information by using the following sources:

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Form 10-K (available through sec.gov)

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Definitive Proxy Statement (available through sec.gov)

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Financial databases such as IBIS, Hoover?s or Mergent?s (available through Bryant library)

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Business periodicals and newspapers (available through Bryant library)

Company Research: Start with Form 10-K. Most of the information needed to complete this project will be found in this document. You must read through Management?s Discussion and Analysis (MD&A) and Business and Risk sections of the Form 10-K. The Definitive Proxy Statement will contain the company?s compensation committee report and related executive compensation programs. Additional helpful information can be found at the company?s website.
For Industry Research: Identify the industry in which your company operates. Search business databases and find at least two (2) articles in business periodicals and/or newspapers that discuss the company, its competitors or its industry. What is happening in the news may affect their business and/or stock price. Take care when selecting articles. Be sure they are published after January 1, 2012 and are NOT press releases issued by your company?s management. The major purpose of your industry research is to identify and understand the major trends or developments that are occurring in your company?s industry.

When completing Part I, be sure to ?Cross-reference? your document to the specific sources. For example, where you use the company?s 10-K or definitive proxy statement to obtain information, note the source and the page reference in parentheses following the information. In addition, highlight or circle that information in Form 10-K or definitive proxy statement in order to ?cross-reference? the information contained in your document with the source used. These highlighted pages must be turned in with the report for part I. Where you use business periodicals and/or newspapers to obtain information, be sure to properly cite your sources in MLA format bibliography. Failure to do so is a serious offense and one which will severely impact your grade on the project (and probably the course).
Part I will be handed in separately from Part II. Include the following:
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Cover page ? containing company name, course section number, time of day your class meets, name of each team member.

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Team evaluation form (available soon) ? As a team, you must agree on the contribution made by each team member to completion of the Part I. Each team member must sign the evaluation form indicating their agreement to the evaluation. The evaluation form MUST be handed in with Part I so the instructor has all of the information necessary for grading in one place.

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Typed report – (12 font ? Times New Roman) – Show question number, question, and answer below the question.

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Works cited page

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Cross referenced pages from 10-K report.

 
Step 4 ? Complete Part II, Financial Analysis: (specific requirements are listed at the end of these general instructions)
Use Excel to perform the analysis required in Part II, items 1 and 2. Your Excel worksheets must be submitted through the link under ?assignments? on Blackboard. To receive full credit for this portion of your project, you must incorporate basic Excel skills when creating your workbook. At a minimum, you are expected to ?

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Create and manipulate formulas, columns, and rows, labels, and titles within a worksheet

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Link cells and worksheets within an Excel workbook

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Format worksheet information so each worksheet has a professional appearance when printed as part of your report

Each team must create a presentation using Voice Thread, an online tool for preparing presentations. You will receive instructions on how to use this tool before this part is due. Each team will be required to view the Voice Thread presentations prepared by other teams and provide constructive comments. The Voice Threads will also be evaluated by the instructor. The Voice Thread presentations, along with the Excel workbook, will be submitted through a link in Blackboard. A second team evaluation will be completed for Part II. This Voice Thread presentation will not be required this semester.
Part I: Company and Industry Research

Locate and summarize the following information about your company.

1.
Company name & headquarters address

2.
Website address

3.
Ticker symbol

4.
Stock exchange on which company trades

5.
Fiscal year end

6.
Date of most recent 10-K

7.
Key products

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List your company?s key products

8.
Geographic market
Indicate where your company operates (not just their headquarters location)
9.
Companies and segments operated by your company

10.
Main competitor
List your company’s main competitors both those provided on the Pre-Approved Company list and those you found in your research

11.

Relative size
How does your company compare in size to their competitors and within its industry?

What about the Fortune rankings of your company versus its competitors?

Size can also be measured in number of locations, employees, etc.
12.
Business Segments
Large companies often breakdown their company operations into ?segments?. Segments can represent different product lines, brands or geographical markets. This information can be found in the footnotes to the financial statements and maybe discussed in the MD & A section of Form 10-K. What segments are reported for your company? Describe each segment. What percent of the company?s overall profit does each segment represent? Speculate on how these segments relate or contribute to each other and/or the company?s operations as a whole. For example, does one segment provide product or service support to another segment.

13.
Comment on the recent financial results
Use the information provided in the company?s current year and past two years annual reports.
Do you see any upward or downward trends?

14.

Industry and risks
Describe the industry in which your company operates
Describe the industry outlook and any major trends

15.
Management’s discussion and analysis
What does management have to say about the company?s recent results?
Does management appear pessimistic or optimistic about the future?

What are the plans for the future?
Describe three (3) challenges your company faces

16.

Impact of industry trends on your company
Use info you gather from current events readings. Incorporate any current events/news articles you have included in your current events log thus far that may shed some light on the industry, your company and/or its competitors.

 
Part II: Financial Analysis

Use Excel to summarize the financial information for your company and its major competitor.
1.
Within your Excel workbook, create two worksheets; one labeled ?Balance Sheet? and the other labeled ?Income Statement?. Perform a vertical and horizontal analysis on your company?s balance sheet and income statement using the three most recent years reported in their 10-K.

2.
Use either Hoover’s or Mergent’s financial databases to obtain the ratios you feel are indicators used by company management to evaluate their operations. You can access these databases through ?Articles and Databases? on the Bryant library website. You may use either database; however, once you choose a database, you must use it consistently throughout this project. DO NOT MANUALLY CALCULATE THE RATIOS!

a.
Create a third worksheet in your Excel workbook and label the tab ?Ratios?. List each ratio you choose to analyze for the three most recent years, for both your company and its major competitor. You must choose at least 3 ratios from each profitability, liquidity, and solvency. In other words, three ratios from profitability, three from liquidity and three from solvency.)

3.
As a team, analyze the horizontal, vertical analysis worksheets for your company and the ratio analysis worksheet for your company and its competitor. Make some observations and draw some conclusions about the company?s performance and how they compare to their competitor. Discuss the following items:

a.
Current performance and performance for the previous two years

b.
Referring back to what you discussed in Part I ? Company and Industry Research ? Item 15, what ratios or trends would you, as a manager, monitor to determine whether the challenges are being addressed?

c.
Consider the company?s industry and products. What are the main variable and fixed costs? Describe what you feel is the company?s ?cost structure?. Given the three profitability ratios you analyzed, how and why might management want to change the cost structure? How might these ratios be affected? Support your responses with examples.

d.
In addition to your company?s Form 10-K, a Definitive Proxy Statement is filed containing the company?s compensation committee?s report on executive compensation. Review this report and then answer the following questions:

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What performance evaluation system(s) is (are) utilized in your company? (Give specific examples of performance evaluation metrics such as stock compensation that are currently used by management.)

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Do you feel this performance evaluation system is effective in motivating managers to achieve company objectives? Why or why not?

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