BAT$4$ME $-$ Aug $2024$

Culminating Activity $(30\%$ of Final Grade$)$

Annual Report Analysis

Total mark $=40$

Introduction

You will analyze and compare the current annual reports of two Canadian corporations in the same industry. Your final report will be presented in a word processor document with accompanying spreadsheets. It $($word doc$)$ should include a title page, table of contents and a works cited page, which will include the citation for both annual reports.

The annual reports that you choose must meet all of the following criteria:

detailed financial statements that provide you with enough data to calculate ratios;

company follows Canadian GAAP, International Financial Reporting Standards;

the company$$s stock trades on the Toronto Stock Exchange;

most recent annual report available. $(2023$ and $2022,$ but may use $2021$ if $2023$ is not yet available$)$

Tips for Success

In order to get the best $$results$$ from this assignment:

use SEDAR and$/$or Industry Canada to determine the industry;

you may also do a google search $($list of companies on TSX$)$

choose corporations that had profitable results, i$.$e$.$ net income not a net loss, for the past two years;

do not choose corporations in these industries: investment companies and funds, financial management, conglomerates, scholarship plan;

do some investigating and reading before making your selection.

Before you begin the analysis:

Submit the names of these two corporations along with the dates of the annual reports to your teacher for approval $-$ including a link to the annual reports. Your teacher will give you the go$-$ahead to proceed with your analysis or suggest a change if necessary. $($Submit your companies in the discussion forum.$)$

Report Contents

Your report will contain the following information for both corporations.

Part $1-$ Background Information FOR EACH COMPANY $($bullet form$/$ table$)-$ Word Doc

Describe the company including:

$-$its name and the name of its CEO$/$president

$-$the address of the head office of the corporation $($may research beyond Annual Report if needed$)$

$-$the area$($s$)$ of business activity$/$ industry

$-$the number of branches or production facilities or store locations $($franchises$)$

$-$its TSX ticker symbol and its name per stock quotations

$-$the length of time it has been in existence

$-$the fiscal period covered by the annual report

Who are the auditors? $($ie$.$ KPMG$,$ Deloitte, EY$,$ PWC$,$ etc.$)$ What did they conclude?

What are the company's major sources of revenue?

What valuation method was used for the corporation$$s inventories?

If your company doesn$$t have$/$ sell inventory, include this in$/$ as your answer

What depreciation $($depletion$,$ amortization$)$ method$($s$)$ did the company use?

Describe, in detail, the share capital of this corporation.

ie$.$ total number of outstanding shares $($common and preferred$)$

Did the company have a successful year according to the CEO? Explain.

What is the "outlook" of the company as outlined by the CEO?

For questions $7$ & $8$: if there is no message from the CEO in the Annual Report, include this in$/$ as your answer

Any other important or interesting fact

Part $2-$ Ratio & Trend Analysis $-$ Spreadsheet $($calc$)$ & Word doc $($final figures and analysis$)$

Wednesday, August $21$st Lesson:

Ratio Analysis: Calculate of the THREE following ratios, for each corporation, from the data provided. Use a spreadsheet to do your calculations and display your answers.

Current Ratio

Inventory Turnover or Receivables Turnover

Profit Margin

Return on Assets

Return on Equity

Debt $($to Total Assets$)$ Ratio

Interest Coverage $<-$ changed to Equity Ratio $($ie$.$ option g$)$ should be Equity Ratio not Interest Coverage$)$

$*$Earnings per Share$*-$ most annual reports include this so you do NOT need to analyze this $($but can if you WANT to $-$ no extra marks for $4$th ratio comparison$)$

Monday, August $19$th Lesson:

Horizontal Analysis

Using a spreadsheet, prepare a horizontal analysis of the balance sheet. Calculate the increase or decrease in each account from the previous year, in both $ and $\%.$

Using a spreadsheet, prepare a horizontal analysis of the income statement. Calculate the increase or decrease in each account from the previous year, in both $ and $\%.$

Vertical Analysis

Using a spreadsheet, prepare a vertical analysis of this year$$s balance sheet and the previous year$$s balance sheet. Calculate component $\%$ for each B$/$S account, compute as a $\%$ of total assets.

Using a spreadsheet, prepare a vertical analysis of this year$$s income statement and the previous year$$s income statement. Calculate component $\%$ for each I$/$S account, compute as a $\%$ of net sales. Use Net Income if your company does not have inventory $($ie no Net Sales$)$

Part $3-$ Conclusion $-$ Word Doc

In this section, you will pull together all of the information you gathered and analyzed in the first two sections. You will compare and contrast:

The main similarities and differences in the two annual reports.

Each corporations$$ financial positio