The purpose of this assignment is to practice internet search for annual reports, and to review actual income statements and statements of cash flows based on what we have learned from chapters 4 and 5.
This assignment is meant to be a group project. You need to select five companies whose names begin with the alphabets you chose. Don't pick a bank, insurance company, financial institution, or public utility. And it would be nice to select companies that you know something about or have an interest in. I know a web site that links to many annual reports online and you do not have to register or pay fees. It is "Annual Report Gallery" at "http://www.reportgallery.com/content/main_aak.htm". The linkage to this web site is available on my web page.
Please retrieve the most recent income statement and statement of cash flows for each company, print them, read them, and then use data for the most recent year to answer the following questions. Please attach the statements with your assignment and please type!
1. What are the companies that use the single-step approach to report its income from continuing operations? What are the companies that use the multiple-step approach?
2. What companies report "special charges", "restructuring charges", or item in this nature in the "income from continuing operation" section.
3. What companies report discontinued operations, extraordinary items, or cumulative changes in accounting principles?
4. What companies report positive (negative) net income (after tax) from continuing operation, but net loss (income) at the bottom line?
5. Now let us turn to statement of cash flows. For the operating cash flows, what are the companies that use the direct method? Who use the indirect method? For each of the companies that use the indirect method, what is the largest adjustment to net income in calculating cash from operation?
6. What companies report net income from continuing operations on its income statement (net income) and positive operating cash inflows (OCF)? Who report net income/negative OCF, net loss/positive OCF, and net loss/negative OCF, respectively?
7. One naive method to estimate operating cash flows is "bottom-line income plus depreciation and amortization". For each of the companies that use the indirect method, please compute this amount and then subtract this estimated amount by the amount of OCF reported on the statement of cash flow, and divide the difference by the reported OCF. Convert these figures to percentages. These percentages give us an idea about how good is the naïve estimate. Do you think the naïve method work well for your companies?
8. What is the cash flow pattern of operating activities, investing activities, and financing activities for each company? Please use the categories mentioned in your textbook for the proper classifications.