Business Annual Report Analysis

PURPOSE:  Analyze the financial condition and performance of a corporation using several financial analysis techniques. This project will enable you to make a judgement about the liquidity, profitability, solvency and investment worthiness of The Boeing Company.    TASKS:   STEP #1:    Print out the “Consolidated Statements of Financial Position”, the “Consolidated Statements of Operations” and the “Consolidated Statements of Cash Flows” of The Boeing Company for the years of 2018 and 2019. The annual reports that contain these financial statements can be found at this website. The financial statements for the years 2018 and 2019 can be found on pgs. 51-54 of the 2019 annual report.  STEP #2: (15 pts.)   Complete a “Horizontal Analysis” of The Boeing Company’s. Consolidated Statements of Financial Positon and Consolidated Statements of Operations. Use 2019 as the “Analysis Period” and 2018 as the “Base Period”. Use Word or Excel to complete this horizontal analysis.  Provide an analysis of what your horizontal analysis reveals about The Boeing Company’s financial position and profitability.       EXAMPLE  (See pg. 500 of your textbook)      “POOR/FAIR” ANALYSIS EXAMPLE   Cash decreased by $195 from 2018 to 2019. Total Assets were 16.7% higher in 2019 than 2018. Liabilities increased by 24.7% from 2018 to 2019. Net income increased by 5.8% from 2018 to 2019.       “GOOD/EXCELLENT” ANALYSIS EXAMPLE   Cash decreased by $195 from 2018 to 2019 due to the company’s increased investment in short-term marketable securities and their buildup of inventory. The buildup of inventory seemed necessary as Net Sales increased by 6.3%. Operating Income increased by only 2.2% as the company seemed to have trouble controlling its operating expenses which increased by 10.7%. Further expansion may not be advisable until the operating expenses can be controlled. Long-term Debt increased by 28.9% and Long-Term Marketable Securities increased by 14.2%. A favorable stock market and low interest rates on long-term debt may have the company adopting the strategy of borrowing capital and then investing that capital in stock.       STEP #3: (15 pts.)   Complete a “Vertical Analysis” of The Boeing Company’s Consolidated Statements of Financial Position and Consolidated Statements of Operations for both 2018 and 2019. Provide an analysis of what your vertical analysis reveals about The Boeing Company’s  financial position and profitability. EXAMPLE (See pgs. 503 – 504 in your textbook)     STEP #4: (10 pts.)   Calculate the following Liquidity and Efficiency ratios for The Boeing Company for both 2018 and 2019. Provide an analysis of what these ratios reveal about The Boeing Company’s liquidity and efficiency. (See pgs. 506 – 508 of your textbook)   Current Ratio Acid-Test Ratio Accounts Receivable Turnover Inventory Turnover Days’ Sales Uncollected Total Asset Turnover     “POOR/FAIR” ANALYSIS EXAMPLE   The current ratio was higher in 2019 than 2018. The Accounts Receivable Turnover was lower in 2019 than 2018. The company sold its inventory at a faster pace in 2019 than 2018.     “GOOD/EXCELLENT” ANALYSIS EXAMPLE   The current ratio was higher in 2019 than 2018 due to increases in cash and accounts receivable. These increases were directly related to the increased net income generated by the company. The “cash flow from operations” on the Statement of Cash Flows increased from 2018 to 2019 accounting for the increase in the cash account. The increase in accounts receivable is directly related to the increase in revenues on the Income Statement. Revenues increased by 10% with the Accounts Receivable account increasing by 8% from 2018 to 2019.  This increase in liquidity enabled the company to pay off a large portion of its long-term debt which is reflected in the Statement of Cash Flows in the Financing Section.   STEP #5: (10 pts.)   Calculate the following Solvency ratios for The Boeing Company for both 2018 and 2019. Provide an analysis of what these ratios reveal about The Boeing Company’s ability to meet its long-term obligations. (See pgs. 508 – 509 in your textbook).   Debt to Equity Ratio Times Interest Earned   STEP #6: (10 pts.)   Calculate the following Profitability ratios for The Boeing Company for both 2018 and 2019. Provide an analysis of what these ratios reveal about The Boeing Company’s ability to earn profit. (See pgs. 509 – 510 in your textbook)   Profit Margin Return on Total Assets Return on Common Stockholder’s Equity     Step #7: (10 pts.)   Calculate the following Market Prospect ratios for The Boeing Company for both 2018 and 2019. Provide an analysis of what these ratios reveal about The Boeing Company’s market performance. Comment on whether or not you would recommend that investors purchase Boeing stock. Why? Why not? (See pg. 510 of your textbook)   Price-Earnings Ratio     (You can find the current stock price here) Dividend Yield