Question:
Insight concerning the performance and financial condition of a company often comes from evaluating its
financial data in comparison with other firms in the same industry.
Required:
Obtain annual reports from three corporations in the same primary industry. Using techniques you learned
in this chapter and any analysis you consider useful, respond to the following questions:
1. Are there differences in accounting methods that should be taken into account when making
comparisons?
2. How do earnings trends compare in terms of both the direction and stability of income?
3. Which of the three firms had the greatest earnings relative to resources available?
4. Which corporation has made most effective use of financial leverage?
5. Of the three firms, which seems riskiest in terms of its ability to pay short-term obligations? Long-term
obligations?
Note: You can obtain copies of annual reports from friends who are shareholders, from the investor
relations department of the corporations, from a friendly stockbroker, or from EDGAR (Electronic Data
Gathering, Analysis, and Retrieval) on the Internet ( www.sec.gov ).
Answer:
The objectives of this case are to motivate students to obtain hands-on familiarity with an actual annual
report and to apply the techniques learned in the chapter. You may wish to provide students with multiple
copies of the same annual reports and compare responses. Another approach is to divide the class into
teams who evaluate reports from a group perspective.
Insight concerning the performance and financial condition of a company often comes from evaluating its
financial data in comparison with other firms in the same industry.
Required:
Obtain annual reports from three corporations in the same primary industry. Using techniques you learned
in this chapter and any analysis you consider useful, respond to the following questions:
1. Are there differences in accounting methods that should be taken into account when making
comparisons?
2. How do earnings trends compare in terms of both the direction and stability of income?
3. Which of the three firms had the greatest earnings relative to resources available?
4. Which corporation has made most effective use of financial leverage?
5. Of the three firms, which seems riskiest in terms of its ability to pay short-term obligations? Long-term
obligations?
Note: You can obtain copies of annual reports from friends who are shareholders, from the investor
relations department of the corporations, from a friendly stockbroker, or from EDGAR (Electronic Data
Gathering, Analysis, and Retrieval) on the Internet ( www.sec.gov ).
Answer:
The objectives of this case are to motivate students to obtain hands-on familiarity with an actual annual
report and to apply the techniques learned in the chapter. You may wish to provide students with multiple
copies of the same annual reports and compare responses. Another approach is to divide the class into
teams who evaluate reports from a group perspective.
