Who is responsible for the financial statements and maintaining effective internal control over financial reporting? Where did you find this in the annual report?

What accounting rules are required to prepare the financial statements and accompanying footnotes? Where is this stated in the annual report?

What independent auditors (public accounting firm) performed the audit? On what date did the independent auditors complete their work?

What type of audit opinion (unqualified, qualified, adverse, or disclaimer) did the independent auditors issue on the company’s financial statements? What type of audit opinion did they issue on the company’s internal control over financial reporting?

What rules (standards) did the outside auditors follow when conducting their audit of the financial statements?

What is the percentage increase in sales (or revenues) from Year 1 to Year 2 and from Year 2 to Year 3? Based on this information, is the company growing?

Calculate the gross margin (profit) percentage (the ratio, not the amount) for Years 1, 2, and 3. Is the trend going in the right direction? Explain.

What is the company's largest expense for Year 3? Did you expect this to be the case? Why or why not?

What is the amount of depreciation expense and amortization expense for Year 3?

What is the amount of advertising/marketing expense that the company incurred to promote its products and services in Year 3? What is the percentage of this expense to sales (or revenues)?

What is net income for Year 1, Year 2, and Year 3? Is the trend going in the right direction? Explain.

Compute the return-on-sales ratio for Year 1, Year 2, and Year 3. In what year did the company do the best job of controlling expenses? Explain how you came to this conclusion.

Compute the return-on-assets ratio for Year 2 and Year 3. Explain what this ratio means and indicate whether the trend is positive or negative.

Compute the return-on-equity ratio for Year 2 and Year 3. Explain what this ratio means. Indicate whether the ratio is improving or deteriorating from Year 2 to Year 3 and why.

What is basic earnings per share (EPS), also known as net income per common share, for Year 3?

Write the accounting equation (A = L + E) for Year 3, using the three numbers provided in the financial statements.

What is the largest asset for Year 3? Does this surprise you? Why or why not?

Determine the average days to collect accounts receivable for Year 3. Do you feel this is reasonable considering your company's operations? Why or why not?

What is the allowance for uncollectible receivables for Year 2 and Year 3?

Calculate the inventory turnover for Year 3 and also the average days in inventory ratio. Is this reasonable considering your company's line of business? Explain.

What is the net book value of property, plant, and equipment as of the end of Year 3?

What method of depreciation (e.g., units of production, declining balance, straight line) is used for property, plant and equipment?

Calculate the current ratio for Year 2 and for Year 3. Explain the ratio and what the trend is telling you.

Compute the debt-to-assets ratio for Year 2 and Year 3. Explain whether debt is financing a larger or smaller proportion of the company’s assets in Year 3 compared to Year 2. Is the company more or less risky from Year 2 to Year 3? Explain.

What is the par value of the common stock?

How many shares of common stock are authorized at the end of Year 3?

How many shares of common stock are outstanding at the end of Year 3?

What is the total amount of cash dividends declared on common stock during Year 3? What is the total amount of cash dividends paid on common stock during Year 3? [Hint: They may not be the same amount.]

What is the amount of difference between net income and net cash provided (used) by operating activities for Year 3? What one or two items are most responsible for the difference?

How much cash did your company pay to purchase property, plant, and equipment during Year 3?

Did cash and cash equivalents increase or decrease from Year 2 to Year 3? By how much?