Annual Report Project

Annual Report Project

Manufacturing or Trading Company


This project requires students to obtain an annual report of a Manufacturing or Merchandizing Company.  Then, students are required to analyze key trends in the company’s income statement and balance sheet, to discuss the company’s major sources and uses of funds, to discuss non-financial statement items like the Independent Auditor’s Report and Management Discussion and Analysis that would be important to consider before investing in a company in the industry, and to make an investment recommendation.

Thus, the project develops students’ business knowledge by requiring the students to understand the drivers of success in a particular industry and to evaluate a particular company’s performance with regard to key issues.

The project develops students’ technical knowledge by requiring that students accurately report the changes that have taken place in a particular company’s financial accounts, understand the underlying causes of the changes, and understand the relationships among financial statement accounts.

The project develops students’ critical reasoning skills by requiring that students identify issues which would be particularly important to investors in the industry, assess company performance in regard to those areas, and make and defend investment recommendations. In addition, the project develops students’ communication skills by requiring students to prepare concise written reports.

Some Annual Reports are bulky but do not get overwhelmed with the information, just concentrate on the background information, independent auditors report, the financial statements, and some notes accompanying the statements.



Part 1: Background (The Company I choose is Starbucks) But you can choose whatever company you feel like doing


Obtain the most recent annual report for one company in the industry of your choice. The reports should contain at least three years of income statement data and two years of balance sheet data.

Provide a brief history of the company, and the nature of the business in not more than 350 words: outline the history and nature of business of the company you have selected.


Part 2:  Income Statement

  1. Convert the income statement for each year into common size format and present neatly in columns. Label this as Table 1.
  2. Analyze at least five (five) items on the income statement for your company that would be important to an investor and discuss whether your company’s performance related to these items appeared to be improving, deteriorating, or remaining stable. Justify your answer.



While responses do vary with the industry, common analyses included in the income statement section include discussion of:

  • The level and percentage changes of total revenues, the components of revenues, cost of sales, major expenses, operating income, net income, or earnings per share over the period being analyzed;
  • The trend in the relationship between revenues and cost of sales, revenues and operating income, or revenues and net income over the period being analyzed;
  • The causes of changes in the components of income statement accounts;
  • The effect of “one-time” gains or losses on net income and on the calculation of trends in earnings; and
  • The effect of major acquisitions or divestures on revenues, expenses, or net income.



Part 3:  Balance Sheet


  1. Convert the balance sheet for each year into common size format (vertical analysis) and present neatly in columnslabelling it as Table 2.
  2. Analyze at least 5 (five) items on the balance sheet for your company that would be important to an investor, and discuss whether your company’s performance related to these items appeared to be improving, deteriorating, or remaining stable. Justify your answer.



Common analyses included in the balance sheet section include discussion of:

  • The level and percentage changes in cash, inventory, working capital, fixed assets, and debt;
  • The trend in the current, acid test, debt-to-assets, and debt-to-equity ratios;
  • The relationship between cash and investments, cash and current liabilities, and investments and debt;
  • The relationship between changes in receivables or inventory and changes in revenues;
  • The relationship between increases in fixed assets and a company’s desire to expand operations; and
  • The potential implications of having large cash balances, in terms of acquiring other companies or being an acquisition target.



Part 4:  Statement of Cash Flows

  1. Analyze your company’s operating, investing and financing activities for the most recent year as identified in the statement of cash flows, specifically identifying the two largest investing activities and the two largest financing activities. Discuss whether you agree or disagree with the investing and financing strategies that your company appears to be employing. Also comment on the operating activities.



Common responses included in the statement of cash flows section include discussion of:

  • The appropriateness of increasing fixed assets in order to expand;
  • The appropriateness of divestitures of businesses in underperforming areas;
  • The appropriateness of investing in securities rather than in core productive assets;
  • The risks and appropriateness of obtaining financing through debt or equity;
  • The appropriateness of early retirements of debt;
  • The reasons for acquiring treasury stock and the appropriateness of such acquisitions;
  • The appropriateness of paying or increasing dividends, and the trade-off between paying dividends and reinvesting in the company; and
  • The negative aspects of decreasing dividends.




Part 6: Recommendation
  1. Choose 2 most important ratios in each of the areas of profitability, liquidity, solvency, and activities; calculate them and comment about them.If you were making a decision to invest in the company, what are the good reasons to do so and what are the ratios that indicate that the company is not doing as well? (Note: your answer in this section mustinclude some financial as well as non-financial issues, but your answer need not be limited to a discussion of financial issues.)



Common responses in the comparison and recommendation section include discussion of:

  • The relative sizes of the two companies being analyzed and the impact of size differences on company stability and flexibility;
  • The two companies’ trends in revenues, costs, operating income, net income, earnings per share, and dividends;
  • The relative ability of the two companies to meet their obligations as evidenced by working capital, acid test ratios, current ratios, and debt-to-asset ratios;
  • The two companies’ strategies in terms of levels and areas of expansion;
  • The relative performance of the two companies’ equity shares on the stock market;
  • The relative rankings of the companies on customer satisfaction surveys and in market share;
  • The relative quality and stability of company management; and
  • The importance of determining whether an investor is looking for short-term returns or long-term growth.


  1. A minimum of four-page report, in an essay format,using appropriate headings for each part.The report needs to be typed using 1.5 lines spacing, Times New Roman 12 point font, leaving a 1” margin on all sides.
  2. Your analysis must include page references to relevant portions of the annual reports, and the relevant portions of the annual reports must be highlighted or referenced. Your report must also contain appropriate quotation marks for quoted material and appropriate citations for material taken from sources outside the financial statements.
  3. Write your name and class with the respective section on the bottom of every page on the left-hand side (use a footer option).
  4. Submit the Report with appropriate headingsvia the project link on the Blackboard.
  5. Assignment due date April 30, 2018 (This is a hard deadline, NOExtension).


IMPORTANT Note: This is a writing assignment.  Make sure you paraphrase the information and write in your own words. The assignment will pass through a safe-assign software and if the matching index is more than 30%, please contact me immediately to see if the project is acceptable.

Last Updated on February 10, 2019

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