Guidance for Performing Financial Analysis
Part 3. Overview of the annual reports (no more than 5 to 7 minutes):
a. Your diagnostic report should include an analysis of your company’s accounting practices and financial highlights. You should also discuss any problems involving the acquisition of materials and other inventories, the seasonality of business, or impairment of assets. You should also examine your company’s financial statements in order to determine the degree to which the firms’ accounting captures their underlying business reality.
b. You will want to evaluate key accounting policies and the quality of the disclosures. You should also look for any potential red flags or indications future problems. You should briefly explain the policies for:
 | Inventories (if any) |
| Deprecation |
| Income taxes, including the effective tax rate |
| Employee benefit plans |
| Contingencies |
| Dividends (if any) |
c. Your company’s Financial Highlights are a part of the annual report to shareholders and the SEC form 10-0K. You should track changes in the following items over the prior three to five years:
| Total assets and total liabilities |
| Short-term debt and long-term debt |
| Revenues, expenses, and net income |
| Dividends per share |
| Basic and diluted earnings per share |
| Other comprehensive income items |
d. If a new financial accounting standard affect the financial statements during the current year, you should briefly explain the potential affects on the company's financial statements.
e. You might want to discuss risk management from the Management’s Discussion and Analysis section of the annual report.
f. You may want to present a selection of financial rations (listed under part 4 below) within this section.