Locate and analyze your company’s Form 10-K, for the last 3 years. This document is located on the company’s website under Investor Relations. Prepare the following requirements as individual worksheets within an Excel spreadsheet:
Horizontal analysis of the prior 3 years’ income statements and balance sheets.
Vertical analysis of the prior 3 years’ income statements and balance sheets.
In a summary of 500-750 words, analyze the financial strengths and weaknesses of the company you are examining, based on the results of the horizontal and vertical analyses. Your analysis should be more than just a restatement of the results of the ratios. The analysis should provide some possible reasons for why the ratios increased or decreased over the last 3 years. Consider the relationships between the types of accounts and correlations that should (or should not) occur. You are encouraged, but not required, to include any graphs or charts that help explain the ratios. Only include graphs/charts that help you explain the ratios.
In addition to your vertical and horizontal analyses, refer to the FASB Codification and find the definitions for changes in estimate and changes in accounting principle. How might a company’s change in accounting estimate impact your horizontal and vertical results? How would a change in accounting principle influence the ratio results you calculated? Finally, consider how a company can skew the ratio results with changes in accounting estimates. Summarize two or three ratios you calculated that could be manipulated by management with the use of estimates.
Your submission will consist of two items for this assignment:
An Excel file with separate tabs for the horizontal and vertical analyses.
A Word document with your analysis summary.
While APA style is not required for the body of this assignment, solid academic writing is expected, any documentation of sources should be presented using APA formatting guidelines, which can be found in the APA Style Guide, located in the Student Success Center.
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