Understand the accounting information for your focal firm and its three competit

Understand the accounting information for your focal firm and its three competitors:
– For the most recent fiscal year and your focal firm: What accounting standards are used, US GAAP, IFRS or
others? What is the date of the fiscal year-end? Who are the company’s auditor(s)? Are any concerns raised in
the audit report?
– For the most recent 4 years with available data: Prepare common-size financial statements (IS, BS, and SCF)
• If financial statements for fiscal year 2020 have not been available, use the fiscal year period 2016-2019, but you should use
the same fiscal year period for all firms (your focal firm and its competitors) in your analysis
– Analyze common-size B/S and I/S:
• Identify accounts/items on B/S and I/S that are important to your focal firm
• Conduct time-series analysis and cross-sectional analysis for important items on common-size B/S and I/S
– Specifically, analyze your focal firm over the period (4 years) (i.e., time-series analysis); analyze
company against its three competitors (i.e., cross-sectional analysis)
– Bonus: conduct a combined time-series and cross-sectional analysis. For instance, compare the
time-trend of your focal company with the time-trend of its competitors for important items
• Some questions to consider:
– Are there any major differences over time and between companies? Do any patterns emerge?
– B/S: what are the company’s largest assets? What proportion of total assets is financed by owners
vs. non-owners?
– I/S: what is the level and trend for revenues? What are the major expenses? Are there any unusual
or discontinued items? Are they large in magnitude (if the magnitude is large, the items are likely to
be material for investors)?