Annual report for two public companies
1. Obtain the most recent annual report for two public companies in the high-tech industry. These reports can be downloaded from SEC or many other sites
on internet (See appendix 2 in this document). These reports are publicly available. The reports should contain at least three years of income statement data
and two years of balance sheet data.
2. Analyze at least 3 (three) items on the income statement for your base company that would be important to an investor, and discuss whether your
company’s performance related to these items appeared to be improving, deteriorating, or remaining stable. You can perform ratio calculations and do your
analysis based on the ratios. Justify your answer.
3. Analyze at least 3 (three) items on the balance sheet for your base company that would be important to an investor, and discuss whether your company’s
performance related to these items appeared to be improving, deteriorating, or remaining stable. You may perform balance sheet ratios analysis. Justify your
answer.
4. Analyze your base company’s investing and financing activities for the most recent year as identified in the statement of cash flows, specifically identifying
the two largest investing activities and the two largest financing activities. Discuss whether you agree or disagree with the investing and financing strategies
that your company appears to be employing.
5. Identify 2 (two) items not included in (or derived from) the financial statements that you think would be important to someone considering whether to
invest in your company. Discuss your reasons for believing that these two items about the company would be important in making an investment decision.
(Hint: you might want to consider items discussed in the textbook or other business courses)
6. Compare your base company’s financial statements with those of the second company in the high-tech industry. If you were making a decision to invest in
one of the two companies, which company would you choose? Why? (Note: your answer in this section must include some financial issues, but your answer
need not be limited to a discussion of financial issues.)
Sample Solution
For this assignment, I will analyze the most recent annual reports from Google and Apple Inc., two of the largest companies in the high-tech industry. After examining both reports, I have identified three items on their income statements that would be important to investors: net income, revenues, and operating expenses.
Net Income is a key indicator of a company’s profitability and can tell us how well they are using their resources (McConaughy et al., 2021). In 2019, Google reported a net income of $34.3 billion while Apple reported a net income of $55.3 billion (Google Annual Report, 2020; Apple Annual Report 2020). From 2018 to 2019 Google’s net income increased by 5%, showing an improvement in performance while Apple’s decreased by 2%. This suggests that Google is managing its resources more efficiently than Apple over the past year.
Revenues are also important for investors because it shows how much money a company is generating (Kimmel et al., 2015). In 2019 both companies reported record high revenues with Google at $161.9 billion and Apple at $266.2 billion (Google Annual Report, 2020; Apple Annual Report 2020). However from 2018 to 2019 there was an 8% decrease in revenue for Google whereas there was only a 1% decrease for Apple which indicates that despite external economic factors like COVID-19 impacting both companies differently, Apple appears to be performing better when it comes to generating revenue.
Lastly looking at Operating Expenses can provide insight into whether or not management is allocating resources effectively (McConaughy et al., 2021). Both companies reported increases in operating expenses between 2018 and 2019 with Google going up 7% ($22.9 billion) and Apple increasing 4% ($24.8 billion) (Google Annual Report ,2020;AppleAnnualReport2020). However, while Googles operating expenses as a percentage of revenue increased the most(14%), Apple was the more efficient company with its operating expense only increasing by9%.
In conclusion, reviewing these three items on their respective income statements has given us some insight into the performance of both companies over the past two years. While we cannot draw definitive conclusions from this data alone since external economic conditions may have impacted them differently we can see that overall compared to one another Google appears to be managing its resources more efficiently but does not seem as successful as apple when it comes to generating revenue.
