Financial Analysis Case

Name: 

Part 1 Financial Analysis Case relates to the textbook Module 1 including Appendix 1A and 1B, and Module 2.

Requirements: Upload your completed Part 1 template by clicking on the Part 1 Financial Analysis Case link.  Enter you name on page 1 in area provided above.  Please save your file with the initial of your first name and your last name.

Compare and Contrast the size of the net assets (same as book value or same as equity) of the two companies.

Compare and Contrast the size of sales and net income of the two companies.

Compare and Contrast and comment upon the findings.

Compare and Contrast the information provided in the report.

Comment:

Preparation instructions before starting the Financial Analysis Case:  

During this course, you will apply what you are learning in the area of financial analysis to two publicly traded companies within the same industry.  We will be analyzing the
10-K Reports of Home Depot Inc. (HD) and Lowe’s, Company Inc. (LOW). This financial analysis case is set up in four parts, which will be submitted in parts throughout the term.   I have adapted the ongoing project at the end of most of the modules in developing this financial analysis project. You will need to upload each part of the case to the to the applicable partassignment link that is set up in the assignment area—Financial Analysis Case Folder.  The parts to the case will become available at least 2 weeks before they are due.  You should not wait until the last minute to complete the assigned part of the case analysis.  Each part of the case will probably take between 10-15 hours to complete, so make sure you use time management.

After you have completed this Financial Analysis Case you should have met the following objectives from the course:

1. Analyze financial statements to assess financial performance, risks, and opportunities.
2. Communicate financial performance using financial accounting terminology, concepts, reports, and financial statements.
3. Report financial information using computer technology (Excel).
4. Explain the importance of internal controls and security in the business environment.

You should review and read Module 1 including Appendix 1A and 1B, and Module 2.  You will probably find the following supplemental information helpful to read and view before starting the first part of the financial analysis case:

1. Read: Beginners’ guide to financial statements.
   Citation:  Beginners’ guide to financial statements.  Retrieved from: 
2. Read: How to read a 10-K.
   Citation:  How to read a 10-K. SEC website.  Retrieved from:
   
   3.  Read: What is a 10-K and why should an investor read it?
   Citation:  Kennon, Joshua. (July 26, 2017). Retrieved from:  http://beginnersinvest.about.com/od/annualreports/a/10k.htm
   
   4.  Read: definition of what is a publicly traded company.
   Citation:  Financial Dictionary Retrieved from:  http://financial-dictionary.thefreedictionary.com/Publicly-Traded+Company
   
   5.  Read: over the Quick Edgar Tutorial so you have an understanding of how to use the Edgar system.  There are other informative information linked in the left column, so feel free to read more detailed information.
   Citation:  Quick Edgar Tutorial.  SEC website.  Retrieved from:https://www.sec.gov/edgar/quickedgar.htm
3. View: video of What is Financial Statement Analysis?
   Citation:  Routh, Brian.  What is Financial Statement Analysis?  Retrieved from:  https://youtu.be/8DmChanpSmw?list=PL6597091D71EE7599  3 minutes.
4. Read: How to compare financial statements between businesses?
   Citation: Bowlin, Kelly.  How to compare financial statements between businesses?  Retrieved from:  http://smallbusiness.chron.com/compare-financial-statements-between-businesses-24903.html
5. View: Ratio analysis-Introduction.
   Citation:  Tutor2u. Retrieved from:  https://youtu.be/GoKIZqSFMIE  7 minutes

Part 1 Financial Analysis Case relates to the textbook Module 1 including Appendix 1A and 1B, and Module 2.

Requirements: Download the template I am providing for you to complete Part 1.  Upload your completed Part 1 template by clicking on the Part 1 Financial Analysis Case link.  Please save your file with the initial of your first name and your last name. Use single space with proper English.  I will take off .25 pts. for each grammar and spelling error.  Please answer the requirements in the order they are set up on the template, which follows the requirements listed below.    Also include your name on the first page of the template submission.  Use the SEC EDGAR website:  www.sec.gov  to locate the Form 10-K Document forHome Depot, Inc. (Ticker HD) for fiscal year ending January 29, 2017and Lowe’s Companies, Inc. (Ticker LOW) for fiscal year ending February 3, 2017.  Use Module 1 Appendixes 1A and 2A and Module 2 as a guide to assisting you in finding the applicable 10-K and the other resources I provided above in this document.  Answer the following questions using the 10-K document for each company posted on SEC EDGAR.  Do not use the interactive Data file to answer Part 1 of the Financial Analysis Case.

1. Provide the URL address of each of 10-K reports at the SEC EDGAR website and give the state the company is incorporated in for each of the companies for the period ending January 29, 2017 for The Home Depot, Inc. and for the period ending February 3, 2017 for Lowe’s Companies, Inc.
2. Summarize the company’s business operations as discussed in the beginning of the company’s 10-K in Item 1 for each company. Provide the page number(s) for each of the 10-Ks you are using to support your response.
3. What are the total assets, the total liabilities, and the total equity using the audited financial statements for the fiscal year ended January 29, 2017 for Home Depot and February 3, 2017 for Lowe’savailable in Item 8 of the 10-K? Provide the dollar amounts stated in the financial statements and the name of the financial statement as stated in the 10-K.   Compare andContrast the size of the net assets (same as book value or same as equity) of the two companies.
4. What are the sales or net sales, cost of sales, and net income or net earnings of the two companies using the audited financial statements available in Item 8 in the table of contents for Home Depot and Lowe’s? The companies may not use the exact same titles I have used, but you need to be able to identify the account title that means the same thing as what I have listed. Provide the dollar amounts and name of the financial statement you found the information at.  Compare and Contrast the size of sales and net incomes of the two companies.
5. Compute the average assets, return on assets (answer should be shown in percentage terms), profit margin (answer should be shown in percentage terms), and asset turnover (answer should not be in percentage terms) for the most recent year of the 10-K using the table provided in the template. The companies may not use a variation of the account used in the calculation, so adapt to what is provided in the financial statements.  You are required to show calculations to earn credit.  Take calculations to 2 decimal points.  Please review pages 1-19 and 1-20. Compare and Contrast and comment upon the findings.  Your comments should include how the profit margin and asset turnover are impacting the return on assets.
6. Analyze the Consolidated Statements of Cash Flows for each company for the fiscal year ended January 29, 2017 for Home Depot and February 3, 2017 for Lowe’s, by answering the questions in the table provided in the template.
7. Make sure you have read over Module 1 Appendix 1B before you complete this part of the project. Find and read the audit report of the consolidated statements.  Do not provide the report of the internal controls for each of the companies, since this is a different report.  Make sure you are providing the correct report of independent registered public accounting firm on consolidated financial statements.  Provide the following information in the table provided in the template for each company:  Who is the report addressed to?  Who are the auditors?  What is the nature of the opinion?  Compare and Contrast the information provided in the report.
8. Make sure you review page 1-18 in Module 1 that discusses the requirement of the CEO and CFO to sign the annual report and to take responsibility for the annual report and it is management’s responsibility under the Sarbanes-Oxley Act (SOX).  Find the page(s) signed by the CEO, CFO, and the Board of Directorspursuant to the requirements of the Securities Exchange Act of 1934.  Review the information provided in Item 9a of the 10-K. Explain what each company has provided to their shareholders per the Security Exchange Act of 1934 in Item 9a.
9. Access the D&B Business Browser database in the Bellevue University Online Library databases. Please click on this link to access the Bellevue University D&B Business Browser Tutorial is a short video on how to use the Bellevue University Online library https://vimeo.com/147731613

The D&B Business Browser database can be found at the library webpage, which can be accessed through the Student Services tab.  You should click the Find drop down and pick A-Z Database List and then click on “D” and click D&B Business Browser.

Search for each company (Home Depot, Inc. Inc.-ticker HD and Lowe’s Companies, Inc.-Ticker LOW), under the Company area and access the SWOT analysis through the D&B Business Browser database.  Review the SWOT analysis for both companies and summarize the competitive landscape by referencing information provided in the SWOT analysis as it relates to the competitive landscape.  Your summary must include specific information about the competitive landscape for each of the companies.  You need to understand the competitive position of each company so that you can assess the company’s financial statements in a broader context.  In Module 1, the author discusses the analysis of analyzing the competitive environment starting on page 1-22.  Please review this part of the text when analyzing the SWOT analysis of each of the companies.

10. Review the corporate governance guidelines document of each company by visiting the company website atHome Depot http://ir.homedepot.com/corporate-governance/overview
    and Lowe’s Please make sure you have reviewed the discussion in Module 1 page 1-30 on corporate governance. What is the main purpose of this document and list out 5 areas that were referenced from each of the company’s corporate governance guidelines?
11. Determine the market capitalization for the year end we are working on for each company. Please review pages 2-11 and 2-12. Here is an easy read article comparing book to market:
    Gad, Sham. May 31, 2017. Market Value versus Book Value.  Investopedia. http://www.investopedia.com/articles/investing/110613/market-value-versus-book-value.asp

You can determine the number of shares outstanding from the balance sheet of Home Depot and Lowe’s.  Make sure you are using outstanding shares of stock which can be determined by referencing the balance sheet.  You can obtain the stock price on the last day of the fiscal year we are reviewing if it is not a weekend.  For Home Depot use the closing price for January 27, 2017, since it is the last market day for the fiscal year by going to the Market Watch Website for Historical Stock prices.  http://www.marketwatch.com/tools/quotes/historical.asp   Make sure you pick up the closing price for January 27, 2017 for Home Depot and February 3, 2017 for Lowe’s.

Complete the table on the template for each company and comment on the companies’ market to book ratios, which is also called the price-to-book ratio.  You need to show your work on how you are calculating your numbers to earn credit.  Also, provide comments on your results.

Last Updated on May 29, 2020