Question:
Performance and profitability of a company often are evaluated using the financial information provided
by a firm’s annual report in comparison with other firms in the same industry. Ratios are useful in this
assessment.
Required:
Obtain annual reports from two 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. How do earnings trends compare in terms of both the direction and stability of income?
2. Which of the two firms had greater earnings relative to resources available?
3. How efficiently are current assets managed?
4. Has each of the companies achieved its respective rate of return on assets with similar combinations of
profit margin and turnover?
5. Are there differences in accounting methods that should be taken into account when making
comparisons?
Note: You can obtain copies of annual reports from friends who are shareholders, 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:
This case encourages students to obtain hands-on familiarity with an actual annual report and library
sources of industry data. They also must 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.
Performance and profitability of a company often are evaluated using the financial information provided
by a firm’s annual report in comparison with other firms in the same industry. Ratios are useful in this
assessment.
Required:
Obtain annual reports from two 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. How do earnings trends compare in terms of both the direction and stability of income?
2. Which of the two firms had greater earnings relative to resources available?
3. How efficiently are current assets managed?
4. Has each of the companies achieved its respective rate of return on assets with similar combinations of
profit margin and turnover?
5. Are there differences in accounting methods that should be taken into account when making
comparisons?
Note: You can obtain copies of annual reports from friends who are shareholders, 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:
This case encourages students to obtain hands-on familiarity with an actual annual report and library
sources of industry data. They also must 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.
