Individual Assignment (8%) You are the head of marketing for a hedge fund that is researching a
new company to assess whether it represents a good potential for investment. You start your
research with an analysis of the firm’s financial statements, in order to understand how well its
operations are managed. Your fund has recently been blindsided by discovering that one of its
recommended investment targets has been accused of unethical practices in its accounting
processes and a failure to comply with regulations in its industry. Therefore, in addition to assessing
the firm’s financial and operational health, you want to be sensitive to any evidence that the firm
might be taking regulatory/legal and/or ethical “shortcuts.” Your assignment is to do the research
described below, plus any additional research you deem necessary to meet your objectives. You will
write a formal report to your management that describes what you found, how you evaluate the
firm’s financial and operational health, and whether there are any potential “red flags” that may
suggest potential for legal or ethical concerns. Supported by your analysis, make your
recommendation to management about investing in this firm. Your report should be approximately 8
– 10 pages, and your Excel file should contain the data that you use to support your analysis. To
guide your research, you should, at a minimum, answer all of the questions listed below as they
relate to the financial statements of any U.S. public company of your choice in its latest annual
report. These questions are guides to your research, and the data you gather are to be compiled into
a final report, appropriately organized to support your recommendations. Please use the Securities
and Exchange Commission web site as your primary source for financial statements. All publicly
traded US companies have their annual reports called the 10-K available through the Securities and
Exchange Commission web site Instructions for use of the site: About half way
down the home page is a box titled Search EDGAR, free access to over 21 million filings. Enter the
company name or ticker symbol. That brings up a page called EDGAR Search Results. In the line
"filter results" enter "10-K" in filing type and hit search. That will bring up recent company annual
reports. Note: You have a choice of "Documents" or "Interactive Data." Both contain all the
information. "Interactive Data" uses Excel and provides the best access to information for questions
1, 2, and 3. "Documents" provides information that is easy to read for questions 4 through 8. After
you click on Documents, click on the red letters and numbers to the right of the "10-K" heading. Also
you can find the financial statements of any U.S. public company by visiting Morningstar, Yahoo
Finance or MSN Money, and using the stock market symbol for your chosen company (which can be
looked up on Morningstar, Yahoo Finance or MSN Money). Please be aware that sometimes these
services omit some numbers in order to fit their preferred formats. Many companies have links to the
Annual Report as filed with the SEC. It can be found on the Investor relations page of the company
web site. If you work for a U.S. public company, you may want to use the financial statements of
your company – but the choice is up to you. Questions 1. What 3 items of important information does
the income statement reveal about the financial performance of the company over the last three
years? 2. What 3 items of important information does the balance sheet reveal about the financial
position of the company over the last two years? 3. Can you identify the major sources of funding
used by the company from the information presented in the company's annual report? Please look at
the Statement of Cash Flows, formerly called the Source and Uses of Funds Statement. 4. Who is
responsible for: a) the issuance, and b) the content of the company financial statements? (Note: this
information may be difficult to find. Look for statements by management and the independent
auditing firm.) 5. What assurance, if any, is there that the financial statements are in compliance with
GAAP, and are free of material misstatements? 6. Of what use, if any, are the notes to the financial
statements? Give an example of something learned from the footnotes of your company. 7. What
can you learn from the Business Section of the 10-K? Give two facts learned from reading this
section. 8. What can you learn from the Management Discussion and Analysis of Financial Condition
and Results of Operations (MD&A)? Give two facts learned from reading this section. 9. Where
might you identify any areas of potential ethical concerns? Give at least two examples of the kinds of
ethical concerns that might arise from analysis of the company’s financial statements. Once you
have completed your research, including addressing the above questions, you will write a formal
report to your management that details your research and supports your recommendations.
Formatting requirements for the written report: Cover page Meaningful report title Short Executive
summary of no more than one page Introduction with report purpose Section headings helpful to the
reader (ensuring that all 9 items of this assignment are addressed) Conclusion with key "take-away"
points repeated from report body Reference list in APA format Page numbers on all pages Post your
written Word report and supporting Excel file in your individual assignment folder by the due date.