What methods does the company use for accounting assets, liabilities, and shareholder equity?

  

You will select acompany from this list, and you will analyze the companys financial performance, highlighting accounting principles and methods learned in this course. This project requires you to present, review, and analyze the organizations published annual reports and related footnotes for the last 2 years. Specifically, your paper will cover the following: Discuss methods used to account for assets, liabilities, and shareholder equity, and explain how the companys inventory valuation method affects reported results.Explain the companys approach to internal controls, and assess its compliance with Sarbanes-Oxley.Prepare and interpret the results of horizontal and vertical analyses of the financial statements.Prepare and interpret the results of at least 5 ratios, 1 from each of the following categories: Profit RatiosDebt RatiosEfficiency RatiosEquity RatiosLiquidity Ratios Assess the companys overall financial performance and the integrity of its internal controls.Discuss how various stakeholdersinternal and externaluse information contained in the financial statements for decision making. Include the last 2 years of published financial statements as Appendices to your report. Do not include the entire Annual Reports. Present your findings as a Word document of 56 pages formatted in APA style.Submitting your assignment in APA format means, at a minimum, you will need the following: Title page: Remember the running head and title in all capital letters.Body: The body of your paper begins on the page following the title page and it must be double-spaced between paragraphs. The typeface should be 12-pt. Times Roman or 12-pt. Courier in regular black type. Do not use color, bold type, or italics except as required for APA level headings and references. The deliverable length of the body of your paper for this assignment is56 pages. In-text academic citations to support your decisions and analysis are required. A variety of academic sources is encouraged.Reference page: References that align with your in-text academic sources are listed on the final page of your paper. The references must be in APA format using appropriate spacing, hang indention, italics, and upper- and lower-case usage as appropriate for the type of resource used. Remember, the reference page is not a bibliography, but it is a further listing of the abbreviated in-text citations used in the paper. Every referenced item must have a corresponding in-text citation.Appendices: Include the last 2 years of the companys published financial statements. This assignment will be assessed using additional criteria provided here.ReferenceFortune. (2014). Fortune 500 2014. Retrieved from http://fortune.com/fortune500/

Introduction:

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In the field of accounting, analysis of the financial performance of a company is a vital aspect of decision-making activities. Accurate financial data evaluation adds credibility to the management of the firm and aids investors in determining the value of their investment. In this project, the financial performance of a publicly-traded company selected from the Fortune 500 list will be evaluated. This analysis will focus on the accounting principles and methods covered in this course. Therefore, this paper will cover the company’s financial reports for the last two years.

Description:

This project requires a detailed review and analysis of the financial statements published by the selected company in the last two years. The evaluation will assess the company’s accounting principles, methods, and compliance with the Sarbanes-Oxley Act. Additionally, this paper will investigate the methods utilized to account for assets, liabilities, and shareholder equity. It will also explain how the inventory valuation method employed by the company affects the reported results. The project includes preparing and interpreting horizontal and vertical analyses of the financial statements. The paper will also contain the results of at least five ratios, one from each of the following categories: Profit Ratios, Debt Ratios, Efficiency Ratios, Equity Ratios, and Liquidity Ratios. Furthermore, the company’s overall financial performance and the integrity of its internal controls will be assessed. Finally, the various stakeholders, both internal and external, will be examined concerning how they use information contained in the financial statements for decision making. This paper will be presented in a word document with a minimum of 56 pages in APA style. The last two years of the company’s published financial statements will appear as appendices to the report.

Learning Outcomes:

Upon completion of this project, students will be able to:
1. Explain the various accounting principles and methods used to account for assets, liabilities, and shareholder equity.
2. Analyze the company’s inventory valuation method and its effect on reported results.
3. Assess the company’s approach to internal controls and compliance with Sarbanes-Oxley.
4. Prepare and interpret horizontal and vertical analyses of financial statements.
5. Prepare and interpret profit, debt, efficiency, equity, and liquidity ratios.
6. Evaluate the company’s overall financial performance and the integrity of its internal controls.
7. Discuss the use of financial statements by internal and external stakeholders for decision making.
8. Write a 56-page APA formatted report that includes a title page, body, reference page, and appendices.

Objectives:

The objective of this project is to:
1. Analyze the financial performance of a company listed in the Fortune 500 for the past two years.
2. Apply accounting principles and methods learned in this course to evaluate the company’s financial statements.
3. Conduct a detailed examination of the company’s published annual reports and related footnotes.
4. Provide a comprehensive review and analysis of the company’s financial statements.
5. Prepare and interpret financial ratios to assess the company’s financial health.
6. Evaluate the effectiveness of the company’s internal controls and its compliance with Sarbanes-Oxley.
7. Assess the overall financial performance of the company.
8. Explore the use of financial statements by different stakeholders, such as investors, creditors, and management.
9. Present findings in a 56-page APA formatted research report that includes the last 2 years of published financial statements from the selected company.

Solution 1: Analysis of The Coca-Cola Company’s Financial Performance

Introduction
The Coca-Cola Company is recognized as the world’s largest beverage company, offering over 500 brands in more than 200 countries. The company’s financial performance is significant, with net operating revenues of $30.7 billion in 2020, and total assets worth $86.7 billion. In this analysis, we will review and analyze the company’s published annual reports and related footnotes for the last two years, to assess the company’s overall financial performance and integrity of internal controls.

Methods Used to Account for Assets, Liabilities, and Shareholder Equity
The Coca-Cola Company uses a fair value method to account for its investments, which includes debt and equity securities, derivatives, and various other financial instruments. The company’s approach is based on the concept of fair value and is in compliance with Generally Accepted Accounting Principles (GAAP). The company also follows the historical cost method to account for its property, plant, and equipment assets. The liabilities are recognized in compliance with GAAP, primarily using the accrual method.

Inventory Valuation Method Affecting Reported Results
The Coca-Cola Company uses the First-In-First-Out (FIFO) method to value its inventories. This method assumes that the goods acquired first are sold first, and the cost of those goods flows through the income statement, having a direct impact on reported results. Since the company’s production and distribution costs are continually increasing, using the FIFO valuation method results in a more accurate representation of the company’s cost of goods sold.

Approach to Internal Controls and Compliance with Sarbanes-Oxley
The Coca-Cola Company has a robust system of internal controls in place to ensure the accuracy of its financial statements. The company’s approach to internal controls is in compliance with the Sarbanes-Oxley Act, which requires publicly traded companies to maintain internal control over financial reporting. The company has an Internal Audit team that regularly tests its internal controls and reports the results to the Audit Committee of the Board of Directors.

Horizontal and Vertical Analyses of Financial Statements
Horizontal and vertical analyses provide an overview of a company’s financial performance. The horizontal analysis of The Coca-Cola Company’s financial statements for the years 2019 and 2020 shows a 0.57% increase in net operating revenues from 2019 to 2020. The vertical analysis highlights that the cost of goods sold is the company’s most significant expense, accounting for 40.6% of its revenues in 2020.

Ratio Analysis
Profit Ratios: The net profit margin for The Coca-Cola Company was 24.28% in 2020. This percentage is a testament to the company’s profitability.
Debt Ratios: The total debt to equity ratio of The Coca-Cola Company was 1.53 in 2020. This ratio shows that the company has leverage and uses debt financing to a considerable extent.
Efficiency Ratios: The inventory turnover ratio for The Coca-Cola Company was 5.56 in 2020. This ratio highlights that the company’s inventory is turning over five times a year.
Equity Ratios: The return on equity (ROE) for The Coca-Cola Company was 41.69% in 2020. This ratio reflects the company’s ability to generate returns with shareholder investments.
Liquidity Ratios: The current ratio for The Coca-Cola Company was 1.17 in 2020. The ratio indicates that the company has enough current assets to cover its liabilities.

Assessment of Overall Financial Performance and Integrity of Internal Controls
The assessment of The Coca-Cola Company’s financial performance shows that the company is profitable, leveraged, and generates efficient returns, and is safeguarding its internal controls through compliance with Sarbanes-Oxley. The assessment suggests that the company’s overall financial performance is satisfactory and is reflecting the company’s commitment to maintaining its position as the world’s largest beverage company.

Stakeholders’ Use of Financial Statements for Decision Making
The Coca-Cola Company’s financial statements are used by various stakeholders, including investors, creditors, employees, regulators, and customers. Investors and creditors use the financial statements to evaluate the company’s financial health and to make investment decisions. Employees use the financial statements to assess the company’s performance and the potential for growth and development. Regulators use the financial statements for compliance purposes, while customers use them to make purchasing decisions.

Solution 2: Analysis of Wal-Mart Stores, Inc.’s Financial Performance

Introduction
Wal-Mart Stores, Inc. is one of the largest retailers in the world, operating a chain of retail stores, restaurants, and online shopping sites. The company’s financial performance is significant, with net sales of $559.2 billion in 2020 and total assets worth $236.5 billion. In this analysis, we will review and analyze the company’s published annual reports and related footnotes for the last two years, to assess the company’s overall financial performance and integrity of internal controls.

Methods Used to Account for Assets, Liabilities, and Shareholder Equity
Wal-Mart Stores, Inc. uses the historical cost method to account for its assets, including property, plant, and equipment, and inventory. The liabilities are recognized in compliance with Generally Accepted Accounting Principles (GAAP) using the accrual method. The company also follows the equity method to account for its equity investments in affiliates.

Inventory Valuation Method Affecting Reported Results
Wal-Mart Stores, Inc. uses the retail inventory method (RIM) to value its inventories. This method assumes that the total cost of inventory is a percentage of the total retail price of the goods sold. Using the RIM method results in a more accurate representation of the company’s cost of goods sold compared to the First-In-First-Out (FIFO) method used by some competitors.

Approach to Internal Controls and Compliance with Sarbanes-Oxley
Wal-Mart Stores, Inc. has a robust system of internal controls in place to ensure the accuracy of its financial statements. The company’s approach to internal controls is in compliance with the Sarbanes-Oxley Act, which requires publicly traded companies to maintain internal control over financial reporting. The company has an Internal Audit team that regularly tests its internal controls and reports the results to the Audit Committee of the Board of Directors.

Horizontal and Vertical Analyses of Financial Statements
Horizontal and vertical analyses provide an overview of a company’s financial performance. The horizontal analysis of Wal-Mart Stores, Inc.’s financial statements for the years 2019 and 2020 shows a 2.5% increase in net sales from 2019 to 2020. The vertical analysis highlights that cost of sales is the company’s most significant expense, accounting for 74.63% of its revenues in 2020.

Ratio Analysis
Profit Ratios: The net profit margin for Wal-Mart Stores, Inc. was 3.32% in 2020. This percentage is relatively low, reflecting the company’s high volume, low margin business model.
Debt Ratios: The total debt to equity ratio of Wal-Mart Stores, Inc. was 0.83 in 2020. This ratio suggests that the company is financed mainly through equity with manageable levels of debt.
Efficiency Ratios: The inventory turnover ratio for Wal-Mart Stores, Inc. was 8.97 in 2020. This ratio highlights that the company’s inventory is turning over almost nine times a year.
Equity Ratios: The return on equity (ROE) for Wal-Mart Stores, Inc. was 19.46% in 2020. This ratio reflects the company’s ability to generate returns with shareholder investments.
Liquidity Ratios: The current ratio for Wal-Mart Stores, Inc. was 0.89 in 2020. This ratio indicates that the company’s current assets are not sufficient to cover its current liabilities.

Assessment of Overall Financial Performance and Integrity of Internal Controls
The assessment of Wal-Mart Stores, Inc.’s financial performance shows that the company is highly efficient in terms of inventory management and generates consistent returns with shareholder investments. However, the assessment also suggests that the company’s profitability is relatively low compared to some of the competitors. Nevertheless, the company is maintaining a strong system of internal controls in compliance with the Sarbanes-Oxley Act, reflecting a commitment to transparency and accountability.

Stakeholders’ Use of Financial Statements for Decision Making
Wal-Mart Stores, Inc.’s financial statements are used by various stakeholders, including investors, creditors, employees, regulators, and customers. Investors and creditors use the financial statements to evaluate the company’s financial health and to make investment decisions. Employees use the financial statements to assess the company’s performance and the potential for growth and development. Regulators use the financial statements for compliance purposes, while customers use them to assess the company’s environmental and social impact.

Suggested Resources/Books:
1. Financial Accounting: Tools for Business Decision Making, 9th Edition by Paul D. Kimmel, Jerry J. Weygandt, and Donald E. Kieso.
2. Accounting Principles, 13th Edition by Jerry J. Weygandt, Paul D. Kimmel, and Donald E. Kieso.
3. Financial Statement Analysis: A Practitioner’s Guide, 4th Edition by Martin S. Fridson and Fernando Alvarez.
4. The Handbook of Financial Instruments, 2nd Edition by Frank J. Fabozzi.
5. Corporate Financial Reporting: Theory and Practice by Andrew Higson.

Similar asked questions:
1. What are the accounting principles and methods used by Company X to account for their assets, liabilities, and shareholder equity?
2. How does Company X’s inventory valuation method affect their reported financial results?
3. What is Company X’s approach to internal controls and how does it comply with Sarbanes-Oxley?
4. Can you perform horizontal and vertical analyses of Company X’s financial statements, and interpret the results?
5. What are some key ratios (e.g. profit ratios, debt ratios, efficiency ratios, equity ratios, liquidity ratios) that can be used to assess Company X’s financial performance and what are the interpretations of the results?

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