Financial Reporting and Analysis Group Project ACCT6351 Spring 2020 *** Warning: The financial ratios presented in the sample projects are different from what required in the current projects. Therefore, you CANNOT directly follow the samples. Some modification is needed. The specific purposes of the projects are: 1. Apply to actual companies the knowledge and analytical techniques learned from our course. 2. Perform vertical and horizontal analysis and various ratios on the financial statements. 3. Compare the calculated results with competitor and across different years. 4. Summarize the analyses and make investment recommendations. You will be analyzing the following firms: Home Depot (HD) b. Lowes (LOW). a. Please check the blackboard for the financial statements. Project The required tasks are detailed below: (1) Prepare vertical common-size income statements and balance sheets for both companies. Note: Use "Total Sales" and "Total Assets" as the denominators for income statement and balance sheet, respectively. Compute for 2018, 2017, and 2016. (2) Prepare horizontal analysis on income statements and balance sheets for both companies, (3) Prepare ratio analyses (for 2018, 2017, and 2016) for both companies. You should include the following ratios in your computations: . O Profitability ratios Gross Profit margin o Profit margin Return on assets Return on equity Productivity Inventory Turnover o days inventory outstanding o PPE Turnover o Asset Turnover Solvency o Debt-to-equity o Times interest earned Return on Financial leverage Liquidity O Current Ratio o Quick Ratio o Working capital O (3) Comment on the analytical results of the two companies based on your work in excel. In addition to contrasting the ratios between the companies, you should interpret the numbers and make suggestions as to why the ratio of one company might be higher/lower than the other. Note: General discussions of the ratios are given in our textbook, which will help you structure your comments. (4) Write a conclusive summary on the firms you have studied. Based upon your conclusions, recommend the better performing firm for potential investment. Your conclusions should be based upon, and specifically reference, the analyses prepared in this report. 2 Financial Reporting and Analysis Group Project ACCT6351 Spring 2020 *** Warning: The financial ratios presented in the sample projects are different from what required in the current projects. Therefore, you CANNOT directly follow the samples. Some modification is needed. The specific purposes of the projects are: 1. Apply to actual companies the knowledge and analytical techniques learned from our course. 2. Perform vertical and horizontal analysis and various ratios on the financial statements. 3. Compare the calculated results with competitor and across different years. 4. Summarize the analyses and make investment recommendations. You will be analyzing the following firms: Home Depot (HD) b. Lowes (LOW). a. Please check the blackboard for the financial statements. Project The required tasks are detailed below: (1) Prepare vertical common-size income statements and balance sheets for both companies. Note: Use "Total Sales" and "Total Assets" as the denominators for income statement and balance sheet, respectively. Compute for 2018, 2017, and 2016. (2) Prepare horizontal analysis on income statements and balance sheets for both companies, (3) Prepare ratio analyses (for 2018, 2017, and 2016) for both companies. You should include the following ratios in your computations: . O Profitability ratios Gross Profit margin o Profit margin Return on assets Return on equity Productivity Inventory Turnover o days inventory outstanding o PPE Turnover o Asset Turnover Solvency o Debt-to-equity o Times interest earned Return on Financial leverage Liquidity O Current Ratio o Quick Ratio o Working capital O (3) Comment on the analytical results of the two companies based on your work in excel. In addition to contrasting the ratios between the companies, you should interpret the numbers and make suggestions as to why the ratio of one company might be higher/lower than the other. Note: General discussions of the ratios are given in our textbook, which will help you structure your comments. (4) Write a conclusive summary on the firms you have studied. Based upon your conclusions, recommend the better performing firm for potential investment. Your conclusions should be based upon, and specifically reference, the analyses prepared in this report. 2