Overview Accountants must know how to set up multiple years' worth of financial statements for review. They must also know how to do different types of analysis work like vertical, horizontal, and ratio analyses. Directions: There are two parts for this milestone: the relevant tabs of the Project Workbook Template and the Financial Analysis section in the Business Valuation Template. Project Workbook Template: Balance Sheet and Income Statement For the Project Workbook Template part of this milestone, you will complete the financial analysis for the company you selected by reviewing five years of historical financial statements beginning with the most recent year filed. You will focus on the balance sheets and income statements published by the company in their annual SEC 10-K filings. Remember, assets = total liabilities + owner's equity. The common-size statements and Milestone Ratio tab will auto-calculate. Use these sections to check your work for the Milestone Balance Sheet and Milestone Income Statement tabs. Enter the year on the balance sheet first to auto-populate the rest of the years correctly. Insert the name of the company and the dates of the period covered on every tab since these do not auto-populate. Insert how values are being reported in the heading, whether it be in thousands or millions. The template will provide a check digit for the Milestone Balance Sheet tab to help you make sure your balance sheet is in balance. Use the check digits to check your work prior to submission. Complete this portion of the milestone first before publishing your findings in the Business Valuation Template. Note: You may choose to complete an assignment using a desktop program instead of SNHU's virtual desktop (VDI); however, technical support will not be provided by SNHU if you select this option. Business Valuation Template: Financial Analysis For this milestone, you will complete only the Financial Analysis section of the template. Specifically, you must address the following rubric criteria: Project Workbook Template Prepare the company's balance sheet accurately and completely on the Milestone Balance Sheet tab in the workbook. Include the following details in your response: Ensure the total assets, total liabilities, and owner's equity agree with the company's published financial statements in the 10-K filings. Ensure the balance sheet is in balance for all five years. Ensure all 10-K financial statements are reporting in the same dollar amount (i.e., thousands or millions). Make adjustments in the workbook accordingly. Prepare the company's income statement accurately and completely on the Milestone Income Statement tab in the workbook. Include the following details in your response: Subtotal the income statement in your workbook only to the published income statement line items for net income before tax for all five years. Include the gross profit margin even if the company does not report a gross profit margin on the published income statement. Identify the direct cost of goods sold. The following sections are found in the Business Valuation Template: Balance Sheet Analysis . • • • • • • Explain the findings regarding the company's asset accounts for the previous five years. Include the following details in your response: Describe in detail the material changes in the asset accounts, including changes in cash, AR, inventory, property, plant and equipment, and goodwill. Explain what these changes might be related to. Explain the findings regarding the company's liability accounts for the previous five years. Include the following details in your response: Describe in detail the material changes in both current and long-term liabilities. Explain what these changes might be related to. Explain the findings regarding the company's equity accounts for the previous five years. Include the following details in your response: Describe in detail the changes to equity accounts, including common stock, treasury stock, or additional paid in capital (i.e., whether the company raised funds or retired stock). Explain how the changes compare to the net income or other sections of the balance sheet. Identify whether the company paying out dividends. Explain in detail how the company's dividend payouts have changed over the past five years. Describe in detail the changes in “total equity” (representing the current “book value” of the company). Explain what the company's current and prior year liquidity and debt-to-equity ratios say about the company's financial health. Consider the following questions to guide your response: What is an appropriate level of debt? How does this year's performance compare to the previous year? Income Statement and Cash Flow Analysis • Explain the profitability ratios that are included in the company's financial statements. Include the following detail in your response: • Explain any trends and relate any changes back to the balance sheet and income statement accounts used in the ratio calculation. Explain the profitability of the company for the prior and current years. Consider thefollowing questions to guide your response: What does a vertical analysis of the company's gross revenue show you? What is the percentage (%) of change year over year for these past five years? How are the company's COGS and gross profit margin being managed? How are the company's sales, general, and administrative expenses being managed as a percentage of sales? What does this tell you about the company's current business cycle? Remember that it is normal for this percentage to rise when sales are dropping and fall when sales are rising. If this is not happening, what might be the reason? Describe what free cash flow is and how it is calculated. • Explain the free cash flow history for the company. • • • • Explain the data reported in the cash flow statement for all five years reported. Include the following details in your response: Identify the amount of cash flow reported from operations. Identify the amount of cash flow reported from investments. Identify the amount of cash flow reported from financing. Explain the correlation between each of these categories of cash flow for the past five years. Normalization Adjustments Analysis Define the term normalization adjustment. Identify three examples of balance sheet normalization adjustments that might appear. • Identify three examples of income statement normalization adjustments that might appear. Summary Summarize your findings for the valuation team. Include the following details in your response: Explain what you learned as you researched the company. Identify the key points the valuation team needs to be aware of. Create at least one effective visualization that supports key points. Include the following detail in your response: Provide appropriate labels for the visualization(s). If you need writing support, access the Academic Support module of your course. What to Submit ➤ Project Workbook Template Submit the Project Workbook Template with the following tabs completed: Milestone Balance Sheet, Milestone Income Statement, Milestone Ratios. Note: You will be using this same file for this milestone and your project. Business Valuation Template Submit the Business Valuation Template with the Milestone Two: Financial Analysis section completed. The Financial Analysis section should be an additional 4- to 6-page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins in addition to the current page count. Sources should be cited according to APA style./n