1 annual report project template fq 2010[1]

o Note: that you should choose a company in which you are interested and a company for which there is an annual report to the Securities and Exchange Commission (called the 10-K).

o I suggest avoiding federally regulated companies such as banks, insurance companies, and brokerages.

o I suggest choosing a company that sells a product which you understand and with which you are familiar.

o Your Name: .

o Company Name: .

CHAPTER 1 - INTRODUCTION

Chapter 1: Select a Company and Gather Documents—Question 1

Fill in the page numbers on the annual report where the following are located.Required information for this workbook project.

Page No.

Required information for this workbook project.

Page No.

Management’s Discussion and Analysis (MD&A)

Statement of Cash Flows

Income Statement

(Statement of Earnings)

Notes to Financial Statements

Balance Sheet

(Statement of Financial Position)

Report of Independent Accountants or Independent Auditors’ Report

Statement of Change in Stockholder’s Equity

Five- or Ten-Year Summary of Operating Results

Management’s Report (Responsibility) on Internal Control over Financial Reporting

(Item 9A. Control and Procedures in SEC 10K)

Chapter 1: Identify Why You Selected This Company—Question 1

A) What are your motivations and interests in selecting this company?

A)

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What question(s) are you seeking to answer? List at least five questions?

B) Remember to list at least five questions you seek to answer from your analysis of the company’s annual report.

1)

2)

3)

4)

5)

6)

7)

8)

9)

10)

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Company and Annual Report Essentials

Chapter 1: Company and Annual Report Essentials—Question 1

What is the company’s complete name?


What is the address of your company’s corporate headquarters?


Identify the company’s Internet site.


Identify the e-mail address of the company’s Investor Relations Department.

E-mail address:


Which stock exchange lists your company?


What is your company’s stock exchange trading symbol?

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What is your company’s Standard Industrial Classification (SIC) and code?

You may skip this question.


Locate the board of directors listing. You may have to look on the company’s web. How many board members does your company have?


How many of the directors are company employees, labeled inside directors? And how many are non-company directors, labeled outside directors? Why does a company want and need outside directors?

(Inside and outside directors can usually be identified as such by their title and company. For example, an inside director will be employed by the company and an outside director will be an employee of another company or perhaps no longer employed.)

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Leadership addresses the stockholders, typically, once a year at the annual stockholders meeting. Identify where and when this occurred, if this information is reported in your annual report.

Company Strategy and Business Environment

Chapter 1: Company Strategy and Business Environment—Question 1

Review the chairman’s message of your company’s annual report or from the investors’ relations link on your company’s website. Does it appear to be uplifting or somewhat apologetic? Identify phrases that support your position.


Check below the one primary company strategy identified in the chairman’s message. Support your answer with phrases found in the chairman’s message that pointed you to the identified corporate strategy.

Growth: Vertical Horizontal Concentric Conglomerate .

Not growth but rather Stability or Retrenchment .

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Phrases to support your conclusion:


Briefly summarize the company’s discussion found in Item 1 of SEC Form 10-K.

Type of business:

Major business segments:

Primary customers:

Primary products and/or services:

Other:


Identify broad-based social, political, economic, and technological concerns that may affect your company. This will require some thought since most companies are impacted by each of these categories in some way. Put N/A if one of the categories does not apply.

Social:

Political:

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Economic:

Technological:

Other:

Wrap-up

Chapter 1: Wrap-up—Question 1

After further review of additional information you should now be confident in identifying the one primary company strategy, beyond the insight provided by the chairman’s message?

Check below the one primary company strategy identified in the chairman’s message and all other supporting documents. Support your answer with phrases.

Growth: Vertical Horizontal Concentric Conglomerate .

Stability Retrenchment .

Phrases to support your conclusion using all the information gathered from the chairman’s message, from Item 1 of the 10-K and other insight gained from completing chapter 1.

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CHAPTER 2 - ANNUAL REPORT STRUCTURE

Chapter 2: Financial Highlights—Question 1

Review the financial highlights of your company’s annual report. Identify net sales or revenues, net income, basic earnings per share (BEPS), and total assets for the current and preceding years. These are the most common values included in financial highlights. If your company reports something different, simply cross out an item here and recap what is reported.

Example:

Current Year One Year Prior Two Years Prior

Net sales or revenues

Net income

Basic EPS

Total Assets

Based on your preliminary review, is your company performing better than, equal to, or less favorably than in the prior year? Briefly explain.

General Company and Marketing Information


Chapter 2: General Company and Marketing Information—Question 1

Identify other types of general information found within the annual report. Look for pictures of product and people that are colorful and send a positive signal to the reader.

Exclude the specific components identified in Chapter 1: Select a Company and Gather Documents—Question 1.

Category

Example: Volunteer Activities

Message

Ongoing and contributing to the success of the community

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Management’s Discussion and Analysis

Chapter 2: Management’s Discussion and Analysis—Question 1

Results of Operations:

Identify the primary drivers/issues that explain current and future results of operations discussed in the MD&A. For example, the gross profit percentage increased because of improved buyer/supplier relations resulting in greater overall operating performance. Or an increase in operating expenses because of increased fuel costs reduced profits. List the six major drivers/issues of performance you find in the MD&A section of the annual report.

1.

2.

3.

4.

5.

6.

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Liquidity:

Recap in your own words (do not copy and paste) what you find about your company’s liquidity in the MD&A section of the annual report. Look for information about the ability of the company to satisfy short-term cash needs and the ability to generate operating cash flows, for example.

Capital Resources:

Recap own words (do not copy and paste) what you find about your company’s capital resources in the MD&A section of the annual report. Look for information about cash reserves and credit availability. For example, your company’s MD&A section may have a disclosure about an established lined of credit to fund future growth.

Reports by Management

Chapter 2: Reports by Management—Question 1

Review the Management’s Report (Responsibility) on Internal Control over Financial Reporting in your company’s annual report. Answer the following questions.

Who is responsible for maintaining the internal controls designed to provide reasonable assurance that the books and records reflect the transactions of the company?

Record the statement that identifies management’s conclusion about internal controls.

Who audited management’s assessment of the effectiveness of your company’s internal control over financial reporting?

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Independent Auditors’ Report

Chapter 2: Independent Auditors’ Report—Question 1

Review the Independent Auditors’ Report of your company’s annual report and answer the following questions.

Who was the company’s auditor and where is it located?

What is the responsibility of the auditor?

Who is responsible for the preparation of and information within the company’s financial statement?

The audit was conducted in accordance with what?

What was the opinion of the auditor?

Financial Statements and the Related Notes

Chapter 2: Multi-year Summary of Operating Results—Question 1

Identify the major components provided in Item 6. Selected Financial Data of the 10-K annual report. Summarize the insight provided by each. Look for stable, increasing or decreasing trends. Consistent, slightly improving performance signals management has control of the business. Inconsistent performance signals management does not have control of the business.

Component

Example: The Home Depot Statement of Earnings Data

Summary of Insight

Sales and earnings have grown significantly over time. Operating expenses are growing at an increasing rate.

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CHAPTER 3 - FINANCIAL STATEMENTS

The Balance Sheet

Chapter 3: Balance Sheet—Question 1

Identify the date shown at the top of your selected company’s balance sheet.

Current Year Prior Year

25th September 2010 26th September 2009

Does the company’s fiscal year follow the calendar year? No

If not, why do you think it is different?

The company’s fiscal year is the 52 or 53 week period that ends on the last Saturday of September.


Review the current asset section of your selected company’s balance sheet. Explain why the order of individual items begins with cash. In your opinion, would it be more or less appropriate to order these items according to dollar magnitude? Explain.

The order of Individual items begins with cash , because cash is the most liquid item and current assets should always be displayed in the order of liquidity.Arranging the current assets according to the dollar magnitude could be one way of display, but it would be a less appropriate way of arrangement as per my opinion, because the prime criteria of current asset, which is liquidity is ignored then.


Review your company’s balance sheet (or SEC Form 10-K) and compare accumulated depreciation to the historical cost of Plant and Equipment (PE) using the following ratio.

Compute the following:

Accumulated depreciation= Plant and Equipment $ in million 2466/7234= 34.09%

Percentage of Asset Life Used Up

High percentage means older assets

Low percentage means newer asset.

As per this ratio of 34.09% approximately 1/3 rd life of the asset has been used

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Show your work by specifying the amount of Accumulated Depreciation and the amount of Plant and Equipment

Is the investment in fixed assets, on average, relatively recent? If not, can we assume that these assets will be replaced shortly?

No the asset does not required to be replaced shortly as 2/3rd of the asset life is still remaining.


Since property, plant, and equipment (PPE) and long-term investments in stock represent a company’s investment, why do we distinguish between them in the balance sheet?

Though all property, plant and equipment and Long term investments in stock represent a company’s investment, it should be distinguished from each other as Property, Plant and Equipment (PPE) is a depreciable asset and Long Term Investments are non depreciable assets.


Review the noncurrent asset section of your company’s balance sheet. Are any intangible assets listed? If so, identify the types of intangible assets and the percent of total assets that the intangible assets represent.

Intangible Asset 1: (Goodwill and other Intangible assets ) 90.77%

Intangible Asset 2: (Trade Mark) 9.23%

Intangible Asset 3:

Total Intangible Assets Total Assets = 1.44%

If this company were to be acquired by another company, would the intangible assets influence the purchase price? Explain your answer.

If this company were to be acquired by another company, the intangible asset would definitely influence the purchase price as that is inclusive of registered Trademarks and even acquired goodwill. But as it’s a very negligible portion of Total asset of the company i.e. only 1.44%, the influence to the purchase price would be also very negligible.

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The company has a greater investment in current assets than non current assets

Chapter 3: Balance Sheet—Question 6 Now review your company’s total assets for the most recent year. What percentage of total assets is current? Noncurrent? Indicate the amounts of each.

Current Noncurrent

55.44% 44.46%

Should companies have a greater investment in current assets or noncurrent assets, or does it depend on the nature of their business? Explain your answer.

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. The company has very high cash and cash equivalent and has a high investment in short term marketable securities. The nature of business does not require such high investments in current assets.

Chapter 3: Balance Sheet— Question 7



Identify the information that relates to the stockholders’ equity section of your company’s most recent balance sheet.

Number of common shares authorized? 1,800,000,000

Number of common shares issued? 915,970,050

Number of common shares outstanding? 899,805,500

Number of treasury shares held by the company? NIL


Answer the following questions relative to the stockholders’ equity section of the balance sheet.

By what amount did retained earnings increase or decrease from the prior year?

( $ in Million ) 13,816

Was the increase or decrease in retained earnings equal to the company’s current year net income or net loss?

No, the increase in retained earnings was not equal to the net income of the company for the current year, ie, $ 14,013 mn. Out of which common stock issued under stock plan of $ 197 mn. So the net increase in retained earnings is $ 13,816 mn.

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List (write-in) each financial statement element as shown in your company’s balance sheet and its related dollar value. Double check the math to ensure that your $assets = $liabilities + $shareholders’ equity.

Assets $ in Million Liabilities $ in Million Stockholders’ Equity

Total Current Assets = 41,678

Total Current Liability= 20,722

Common Stock = 10,668

Long Term Marketable Securities = 25,391

Deferred Revenue Non Current= 1,139

Retained Earnings = 37,169

PPE = 4,768 Other Non Current liabilities = 5531

Accumulated Other Comprehensive Loss= (46)

Goodwill = 741 Total Liabilities= 27, 392 Total Share Holders Equity= 47, 791

Acquired Intangible asset= 342

Other Asset = 2263

Total Assets = 75,183


From the asset and liability sections of the balance sheet, identify the three major accounts that changed the most from the prior year (e.g., accounts receivable, accounts payable, inventory, etc.). What events might explain these changes?

Working to explain why these changes occurred contributes to a greater understanding about a company.

Account Explanation

Vendor Non Trade Receivables

The Company has non-trade receivables from certain of its manufacturing vendors resulting from the sale of components to these manufacturing vendors who manufacture sub-assemblies or assemble final products for the Company. The Company purchases these components directly from suppliers. Vendor non-trade receivables from two of the Company’s vendors accounted for 57% and 24%, respectively, of non-trade receivables as of September 25, 2010 and two of the Company’s vendors accounted for 40% and 36%, respectively, of non-trade receivables as of September 26, 2009. The Company does not reflect the sale of

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these components in net sales and does not recognize any profits on these sales until the related products are sold by the Company, at which time any profit is recognized as a reduction of cost of sales.

Long Term Marketable Securities

The company invested more by $ 14,863 million in long term marketable securities.

Goodwill The Company’s gross carrying amount of goodwill was $741 million and $206 million as of September 25, 2010 and September 26, 2009, respectively. The Company did not have any goodwill impairment during 2010, 2009 or 2008. During 2010, the Company completed various business acquisitions for an aggregate cash consideration, net of cash acquired, of $638 million, of which $535 million was allocated to goodwill and $107 million to acquired

intangible assets.


Identify the combined carrying values (dollar amounts) of the following selected account groups taken from your company’s balance sheet. Note that you should include all the assets in one of the three asset categories and all of the liabilities into one of the two liability categories, and all of the equity accounts into one of the four equity categories.

Account Groups Current Year

Prior Year Increase or Decrease

(in dollars)

Current Assets 41678 31555 10123Net Fixed Assets 4768 2954 1814Intangible and Other Noncurrent Assets 28737 12992 15745 Total Assets 75183 47501 27682

Current Liabilities 20722 11506 9216Long-term Liabilities 6670 4355 2315

Common Stock 10668 8210 2458Additional Paid in Capital

Retained Earnings 37169 23353 13816

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Other Equity Components -46 77 -123 Total Liab. & Equity = Total Assets 75183 47501 27682


Prepare a common-sized balance sheet (expressed in percentages) using the following account groups.

Account Group Current Year

Prior Year Increase or Decrease

(current year percent minus prior

year percent)

Current Assets 55.44% 66.43% -10.99%Net Fixed Assets 6.34% 6.22% 0.12%Intangible and Other Noncurrent Assets 38.22% 27.35% 10.87%Total Assets 100% 100%

Current Liabilities 27.56% 24.22% 3.34%Long-term Liabilities 8.87% 9.17% -0.30%Common Stock 14.19% 17.28% -3.09%Additional Paid in Capital

Retained Earnings 49.44% 49.16% 0.27%Other Equity Components -0.06% 0.16% -0.22%Total Liabilities and Stockholders’ Equity

100% 100%



Identify the three balance sheet groups from question 13 above that changed most significantly. Within each of these groups, identify the primary balance sheet element that drove this change. What events might explain these changes?

Group Name: Explanation:

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Judging by the current ratio, did your company become more or less liquid when comparing this year to last year?

Current Ratio for current year (show the amounts):

2.01

Current Ratio for prior year (show the amounts):

2.74

Explain why your company is more or less liquid.

The company’s current ratio was 2.74 in September 2009 which reduced to 2.01 in September 2010. The company’s liquidity reduced.


Did your company increase or decrease its financial leverage when comparing total long-term debt to total assets from this year to last? Show the amounts you use to compute the total long-term debt to equity ratios.

Current Year (show the amounts):

Total long-term debt Total assets

=

Prior Year (show the amounts):

Total long-term debt Total assets

=

Explain why leverage has increased or decreased:

There is no long term debt in the company.

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The Income Statement or Statement of Earnings

Chapter 3: Income Statement—Question 1

Review the heading of your company’s income statement. Does the company’s income statement provide two or three years of comparative information? (Insert number to the right.)

3yrs.

Why do you think the SEC requires that balance sheets provide two years of comparative financial information and income statements provide three years of comparative financial information?

The SEC requires three years comparative financial information of Income Statement to compare the growth in the business, company’s performance etc.


Review the middle section of your company’s income statement. Did operating income (loss) increase or decrease from the prior year and by how much? You may have to compute operating income (loss).

Increased by $ ______6645 mn___ Decreased by $ ______________


Does the middle section of your company’s income statement show a nonoperating income (loss) increase or decrease from the prior year and by how much? You may have to compute nonoperating income (loss).

Increased by $ ______________ Decreased by $ _____177 mn__


Why is it important to know the different sources of income—operating or nonoperating?

It is important to know the different source of income- Operating and non operating to judge r the company’s specified business performance and to bifurcate the non operating profit to know the exact operational profit.

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If any of the irregular events are shown on your company’s income statement, describe the nature and the amount. Select the most current year affected by the event if multiple years are affected.

Irregular Event Amount Nature of the Change

Restructuring charge? NIL NA

Discontinued operation? NIL NA

Extraordinary event? NIL NA

Importance of the Income Statement

Creditors, employees, suppliers, investors, and others use the income statement. The report serves as a measuring stick of how a company has performed, where it appears to be heading, and what future cash flows are likely to be. The first question most users want answered is what is net income? Next, they want to know how that figure compares to the prior years.


Review the lower section of your selected company’s income statement. Did net income (loss) increase or decrease from the prior year and by how much?

Increased by $ _____5778_________ Decreased by $ ______________

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Prepare a common-sized income statement for the categories below. You must include all the income statement items in one of the Account/Category groups so that the percentages add correctly. Your percentages should add down like the Example column.

Account/Category ExampleCurrent

YearPrior Year

Increase or Decrease

Net Sales (revenues) 100% 100% 100%− Cost of Goods/Services (if applicable) (40%) 61% 60% 1%

= Gross Profit 60% 39% 40% -1%

− Operating Expenses (15%) 11% 13% -2%= Operating Income (Loss) 45% 28% 27% 1%

± Non-operating Income (Loss) 3%0% 1% -1%

= Income before taxes 48%28% 28% 0%

− Income Tax Expense (18%)7% 9% -2%

= Net Income 30% 21% 19% 2%


Identify the three income statement accounts/categories that changed the most in Question 7 (sales, cost of goods sold, operating expenses, non-operating income, income tax expense). What events might explain these changes?

Account or Category:

Explanation:

(Hint – the MD&A section will provide good information to answer this question.)

Operating Expenses

The Operating Expenses reduced by 2% in current year. R&D expense increased 34% or $449 million to $1.8 billion in 2010 compared to 2009. This increase was due primarily to an increase in headcount and related expenses in the current year to support expanded R&D activities. Also contributing to this increase in R&D expense in 2010 was the capitalization in 2009 of software development costs of $71 million. SG&A expense increased $1.4 billion or 33% to $5.5 billion in 2010 compared to 2009. This increase was due primarily to the Company’s continued expansion of its Retail segment, higher spending on marketing and advertising programs, increased stock-based compensation expenses and variable costs associated with

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the overall growth of the Company’s net sales.

Gross Margin The gross margin percentage in 2010 was 39.4% compared to 40.1% in 2009. This decline in gross margin is primarily attributable to new products that have higher cost structures, including iPad, partially offset by a more favorable sales mix of iPhone, which has a higher gross margin than the Company average.

Income Tax The Company’s effective tax rates were 24%, 32% and 32% for 2010, 2009 and 2008, respectively. The company’s effective rates for these periods differ from the statutory federal income tax rate of 35% due primarily to certain undistributed foreign earnings for which no U.S. taxes are provided because such earnings are intended to be indefinitely reinvested outside the U.S. The lower effective tax rate in 2010 as compared to 2009.

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Identify your company’s Basic and Diluted EPS amounts. Place a N/A in Diluted EPS if not reported.

Basic EPS Diluted EPS

Current year 15.41 15.15

Preceding year 1 9.22 9.08

Preceding year 2 6.94 6.78

Why is diluted EPS always equal to or less than basic EPS?

Because for calculation of diluted EPS number of shares are either equal or more than basic EPS.

Statement of Cash Flows (SCF)

Chapter 3: SCF—Question 1

Is the SCF dated in the title for a period of time similar to the income statement or for a point in time similar to the balance sheet? Why?

The date of Statement of cash flow is same with balance sheet and operating statement as cash flow is derived on balances of balance sheet and operating statement both.


Identify the following sections of the SCF and record the amounts. Check the math by summing to the cash balance at end of year. Verify that the ending cash balance reported on the SCF is the same as reported on the balance sheet.

Section Current Year

Prior Year Second Prior Year

Net operating cash flows 18595 10159 9596Net investing cash flows -13854 -17434 -8189Net financing cash flows 1257 663 1116Effects of exchange rate fluctuations 0 0 0

Net increase (decrease) in cash flows 5998 -6612 2523Cash balance at beginning of year 5263 11875 9352

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Cash balance at end of year 11261 5263 11875Does the total match balance sheet cash? yes Yes Yes


Record net sales, net income and net operating cash flows below. All three should be trending in approximately the same direction. If so, this is a sign of a well-run business. If one or more are going in a different direction, or random, then you must keep an eye open for an explanation why.

Item Current Year Prior Year Second Prior Year

Net Sales 65225 42905 37491Net Income 14013 8235 6119Net Operating Cash Flows 18595 10159 9596Explain why net sales, net income and net operating cash flows are trending together or differently. (Hint: Look at depreciation expense and substantial changes in inventory, accounts receivable and accounts payable balances. Explaining why is a key learning point.)

All are trending towards the same direction.


Identify the primary cash outflows and inflows from investing activities.

Description of Activity Amount

Cash outflow: Purchase of marketable Securities $-57793 mn

Cash inflow: Sale of Marketable Secutities $24930 mn

Consider three key issues at this point: 1) Is the company increasing the amount of plant and equipment? 2) Is the company simply replacing plant and equipment? Is the company reducing plant and equipment? This is an indicator of the company’s overall strategy. For example, a company that is increasing its assets is a growing company. What is your company doing in this regard?

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There is no much changes in Plant and equipments.


Identify the primary cash inflow and outflow from financing activities.

Description of Activity Amount

Cash inflow: Proceed from issuance of common stock $912 mn

Cash outflow: Excess Tax Benefit from Stock Based Compensation

$ 751 Mn

Consider two key issues at this point. How is the company being financed, through debt or equity? Can you determine which is growing faster and why? A sound corporate strategy is to finance a company with debt during stable times (when it’s easier to make regular payment of principal and interest) and to finance a company with equity during unstable times (because the company is not required to pay dividends).

The company is being financed through equity.

The Statement of Stockholders’ Equity (SSE)

Chapter 3: SSE—Question 1

Identify the elements that comprise the statement of stockholders’ equity section of your company.

Common StockRetained EarningAccumulated other comprehensive Loss/Income

Chapter 3: SSE—Question 2

Identify the cash dividends per share. No Cash dividend declared or paid in

2010 and 2009.

Determine the dividend payout percentage. NIL

Compute dividend yield. NIL

Is your company’s dividend yield a reasonable return given current market conditions?

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NA

Notes to the Financial Statements

Chapter 3: Notes to the Financial Statements—Question 1

How does your company define “cash and cash equivalents”?

All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents.


How does your company value its “inventories”? Explain the meaning of the inventory valuation method. Are domestic and international inventories valued the same? Service companies will typically not have inventory.

Inventories are stated at the lower of cost, computed using the first-in, first-out method, or market. If the cost of the inventories exceeds their market value, provisions are made currently for the difference between the cost and the market value. The Company’s inventories consist primarily of components and finished goods for all periods presented.


Does your company report any investments in marketable securities? Identify the respective amount(s) invested.

Category Current Year Amount

Trading Securities 14359

Available-for-Sale Securities

Held-to-Maturity Debt Securities 25391


You should be able to find this information among the following places: Note 1 on significant accounting policies, the income tax footnote, a separate note on supplemental cash flow information, and/or the bottom of the cash flow statement.

What was your company’s income tax (The income tax expense for the year is $

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expense for the current year? 4527 mn.

What is this year’s effective tax rate for your company? (If not disclosed directly, the effective tax rate can be computed as income tax expense ÷ income before tax.) It is useful to know the effective tax rate of a company in comparison to the 35% statutory tax rate.

Effective Tax Rate:24%

How much cash was paid for income taxes in the current year? (Hint: Look in the SCF or the notes for supplemental cash flow disclosures, or in the income tax footnote.

$2697 mn


Reviewing note #1, any related supporting notes, and/or the 10-K, identify the fixed asset group(s), depreciation methods used, and the estimated useful lives of these fixed assets.

Fixed Asset Group Depreciation Method Estimated Lives (range)

Building Straight Line Method Lesser than 30 years or remaining Life

Equipment Straight Line Method Five years

Leasehold Improvements Straight Line Method Shorter of ten years or lease period


Review the balance sheet, note #1, and any notes on intangible assets, and identify the amount of goodwill reported in the current year.

Amount reported in current year. $ _741 mn__________

Identify the amount of any significant write-down of goodwill that occurred during the current year.

NIL

How does management describe how it accounts for goodwill as disclosed in the note(s) to the financial statements?

The Company did not have any goodwill impairment during 2010, 2009 or 2008. The Company’s goodwill is allocated primarily to the America’s reportable operating segment.

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If a significant amount of operating lease is not disclosed that is serious


Review your company’s lease footnote and/or the 10-K schedule of contractual obligations, then identify the following amounts:

Future minimum lease payments (total) under operating leases

As of September 25, 2010, the Company’s total future minimum lease payments under noncancelable operating leases were $2.1 billion, of which $1.7 billion related to leases for retail space

Future minimum lease payments (total) under capital leases

NIL

As a user of reported financial information, would you be concerned about a significant amount of operating leases that are not reported in the balance sheet? Explain.

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matter of concern.


Review your company’s long-term debt note and identify the following (consider the three most significant liabilities only): NIL

Instrument Maturity Date Rate Amount Due

How much interest expense was recognized in the current year?

(Identify the financial statement or the footnote or other location where you found

this information)

How much cash was paid for interest in the current year? (Hint: Look in the SCF or the notes for supplemental cash flow disclosures, or in the long-term debt footnote.)

(Identify the financial statement or the footnote or other location where you found

this information)


You may skip this question


Based on your review of the contingencies note, briefly identify specific events that have led to the accrual of contingent liabilities in your selected company’s the balance sheet.

The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and have not been fully adjudicated, which are discussed in Part I, Item 3 of this Form 10-K under the heading “Legal roceedings.”


Based on your review of the segment-reporting note to the financials, identify the reported operating segments, their related revenues, and operating income. Identify the largest three if more than three are disclosed.

Reportable Operating Segments

Net Sales Revenue Net Operating Income

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America $ 24 498mn $ 7590 mn

Europe $ 18692 mn $ 7524 mn

Japan $ 3981 mn $ 1846 mn

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Based on your review of the segment-reporting note to the financials, identify the geographical segments and their related revenues. Identify the largest three if more than three are disclosed.

Country Net Sales Revenue

America $ 24 498mn

Europe $ 18692 mn

Japan $ 3981 mn


Based on your review of the notes to the financials or the statement of stockholders’ equity, identify the components (no more than four) that comprise Other Comprehensive Income for your company.

Component Amount

Foreign Currency Translation $-14 mn

Gain in sale of available for sale securities $123 mn

Unrealised gain in derivatives $ -253 mn

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CHAPTER 4 - FINANCIAL ANALYSIS

Summary Financial Analysis Report Profit Margin %

Answers how well the business performed.

Company Two Years

Prior

Company One Year

PriorCompany Industry S&P 500

Gross Margin

Gross Profit /Total Revenue

35% 40% 39% NA NA

Pre-Tax Margin

Operating Income / Total

Revenue

22% 27% 28% NA NA

Net Profit

Margin

Net Income /Total Revenue

16% 19% 21% NA NA

.Company Two Years

Prior

Company One Year


SalesFinancial Statement 37491 42905 65225

Not required

Not required

Operating

Income

Financial Statement

8327 11740 18385 Not required

Not required

Operating Cash Flows

Financial Statement

9596 10159 18595 Not required

Not required

Evaluate Profitability

The profitability of the company is in increasing trend.

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Financial Condition

Signals ability to take on additional debt and liquidity.

Company Two

Years Prior

Company One Year


Debt/ Equity Ratio

(Total Liabilities –

Current Liabilities)

/ Total equity

0.14 0.14 NA NA

Current Ratio

Current assets /Current

liabilities

2.74 2.01 NA NA

Quick Ratio

(Cash+cash equivalents +

Short term investments +

Total receivables,

net)/

Current Liabilities

1.87 0.96 NA NA

Interest Coverag

e

EBIT/Interest expense

NA NA NA NA

Evaluate Financial Condition (

The financial position of the company is good as its Debt Equity ratio is quite low and current ratio is also at a comfortable position.

Investment Return %

Signals performance for managers and owners.

Company Two Years

Prior

Company One Year Prior

Company Industry S&P 500

Return On

Equity

Net Income /Total Equity

26% 29%

Return On

Net Income /Total Assets

17% 19%

36

AssetsReturn

On Equity

(5-Year Avg.)

Not required

Not required

Return On

Assets (5-Year

Avg.)

Not

required

Not

required

37

Evaluate Investment Return

The investment in the company is showing a healthy return.

Management Efficiency

Signals how well the company was run by

management.

Company Two Years

Prior

Company One Year Prior

Company Industry S&P 500

Income/Employee

Not required

Not required

0.30

Revenue/Employee

Not required

Not required

1.39

Receivable Turnover

Total Revenue /Average Accounts Receivable - Trade, Net

(Show work)

1.99 3.28

Average is defined: (end of last year + end of this year) / 2

Inventory Turnover

Cost of Revenue, Total / Average

Total Inventory

(Show work)

1.19 1.99

Asset Turnover

Total Revenue / Average

Total Assets

(Show work)

0.90 0.87

38

Evaluate Management Efficiency

The management is running the business efficiently.

39

CHAPTER 5 - DECISION-MAKING PROCESS

N ow you must make two decisions.

Chapter 5: Decision-making Process—Question 1

Based upon your review, do the numbers support the company’s explicit strategic focus: a growth, stability or retrenchment focus? Why or why not?

Chapter 5: Decision-making Process—Question 2

Return to the first question in this project.

Chapter 1: Identify Why You Selected This Company—Question 1

A) What is/are your motivation(s) or interest(s) in selecting this company?

B) What question(s) are you seeking to answer?

Prepare a thorough, yet concise answer to your original questions A and B above. Begin your answer by reiterating what your initial interest and questions were. Support your response with the information gathered throughout your annual report study.

40

1 annual report project template fq 2010[1]

Documents

o company

company employees

primary company strategy

companys annual report

noncompany directors

wrapup chapter

introduction chapter

business environment