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ACCT202 –Financial Accounting
Capstone Project – An Overview
At North, all of our ACCT202 –Financial Accounting II courses are encouraged to have some type of capstone project incorporated into the course. Your course has adapted with some modification the continuing analysis problem found in your textbook as the capstone project that meets our needs.
Before starting this project I want to emphasize how important this project is to North’s accounting department and its ability to design, deliver and update courses that meet student needs while having some sort of overarching evidence that students are learning. This important project also provides accounting students with an opportunity to demonstrate that they can “pull everything together” in a professional and learned way in regards to their experiences in ACCT201 & ACCT202. If we accept that accounting, as defined, is a system of identifying, recording, and communicating economic events of the firm so that interested users can make decisions, then it should be clear that this project focuses on
using all you have learned about identifying transactions, recording those transactions and preparing financial statements so that you can now use that knowledge for the end game– analyze financial statements in order to make sound business decisions regarding the firm.
Therefore, this project requires you to step up your level of professionalism, written communication, research and analysis. In this project we’re looking for the ability to analyze accounting information and prepare a professional written report. We’re looking for the writing process and communications necessary to be successful in the business community. In the business community it’s important that we avoid giving one line answer that fail to allow a reader or customer to grasp the impact and importance of what we are communicating. Likewise, in this project, brief incomplete concepts and statements, unsupported conclusions and less than professional written communication will not be acceptable.
In preparing your written response in this project – I want you to remember at all times that you’re either taking the role of a Wall Street analyst who has tens of people listening to your advice, and depending on what you say, these people might invest tens of millions of dollars based on your analysis and recommendations. Or, you might want to think of yourself as a highly compensated vice president of a commercial bank making decisions to loan millions of dollars to a company based on your analysis of the company future ability to sustain itself, grow and ultimately repay the loan. Either way, your analysis must to be thorough and your concluding statements and recommendations have to be clear; supported by verifiable source data or calculations.
In all aspects of this project you are required to show your own work. Simply Googling the ratios, using some other investment web site or printed research report issued by a brokerage firm or bank and turning it in as your own, will not work. In fact the use of such tactics and submitted response will be considered a form of plagiarizing and could result in you receiving a failing grade or other sanctions imposed by the college. In the written/analysis portion, keep in mind the importance of the writing process and communication necessary in the business community – and take a professional approach to this answer. Please visit the LOFT on campus if you need assistance in writing professional level papers. You can also visit the business librarian if you need assistance doing college level research. These resources are both available to online students who cannot come to campus via links in Canvas to the Loft Writing Center Plus and to the NSCC Library Resources.
1) Compute the ratios in the exhibit on page 3 for Target and Walmart for 2010. The financial statements can be found in the annual report – visit each company’s website, then go to investor relations to access the online report. For both companies, assume that all sales are
credit sales. Compare the ratios of Target and Walmart. Which company do you think is doing a better job in managing the following? Explain your answers.
2) Compute Target’s ROE for the year ending January 29, 2011, including the elements of net income/sales, sales/average total assets, and average total assets/average stockholders’ equity. What does this analysis tell you about how Target generates its ROE?
3) What are Target’s dividends per share and dividend payout ratio for the last two years? Why do you think Target pays a dividend? How do you think Target determines the amount of dividend they will pay?
4) Given Target’s stock price was $50 per share at the end of January 2011, what was Target’s PE ratio as of that date? If the average PE for companies is 15, what does this tell you the market is saying about Target’s future?
5) Research Target for any important issues including ethical issues which it may have had to deal with in the last three years – evaluate the company’s response to these issues.
6) Looking back over your answers to questions 1 – 5, how do you think Target is performing?
What is the short term (one year) and long run (five+ year) financial outlook Target? Would
you buy the stock of Target? If so, why? If not, why not? On the other hand, if you were a commercial banker, would you lend money to this company? Support your conclusions with a summary of your research and analysis.
7) Do you have any ideas of how to improve Target’s performance and its value?
Five Key Questions Ratios used to analyze and make the decision
Is the business
a going concern?
Use liquidity ratios to determine the following:
Net Working Capital = Current Assets – Current Liabilities
o Current Assets
Current Ratio = Cu rrent
ra I ities
Q 0 k R to _Quick Assets (Cash + Net Current Receivables + Short-Term Investments)
UIC a 10 – Cu rrent
Cash Conversion Cycle = (Days-Sales-In-Inventory) + (Receivable Collection Period)
– (Accounts Payable Payment Period)
Days-Sales-In-Inventory = (Cost of Goods Sold/365 Days)
R 0 bl C II to Period _ Average Net Accounts Receivable eceiva e 0 ec Ion eno – (Net Credit Sales/365 Days)
o Average Accounts Payable
Accounts Payable Payment Period = (Cost of Goods Sold/365 Days)
How is the business earning a net
Use profitability ratios to determine the following:
income or loss?
= N S I
et a es
Net Income Percentage = N S I
Where is the business getting its money and can it pay its debt
Use solvency ratios to determine the following:
Debt Rato loT=ota-l
o EBIT Interest Coverage Ratio = I E
How is the business
investing its money
Use asset management ratios to determine the following:
and is it using its
Ratio = A
Net Credit Sales
N A R 0 bl
verage et ccounts eceiva e
o Cost of Goods Sold
Inventory Turnover Ratio = A I
Fixed Asset Turnover Ratio = A sF~leA~
verage rxe ssets
Total Asset Turnover Ratio = Average
T I A
Return on Assets = A ~ I A
verage ota ssets
Is the busi ness generating enough net
income to reward the
Use market analysis ratios to determine the following:
Earnings per Share (EPS)
stockholders for the use of their money?
Average Number of Common Shares Outstanding
o 0 Dividends
DIvidends per Share (DPS) = 0
Dividend Payout Ratio =
lt (ROE) Net Income
Prepare attractive and
professionally written reports in word or pdf
Very well formed paragraphs.
Good use of charts, tables, or graphics – inserted and referenced correctly into document. Required elements: cover page, executive summary, illustrations, and table of contents, are all provided
Well-formed paragraphs. Good
use of charts, tables, or graphics – inserted correctly, sometimes not referenced properly. Missing either cover page, executive summary, illustrations, or table of contents.
Some ill-formed phrases and
awkward paragraphs. Some
use of graphics, missing two or more required elements.
Poorly written, lacking
integration of graphics, or missing required elements.
Make professional and effective
introduction of report and presentation
Presents a concise lead-in to
the report and presentation
Presents a reasonably good
introduction, but lacks information needed to focus the report and presentation.
Gives too much information–
more like a summary.
Does not give any
information about what to expect in the report and presentation.
Effectively address problems
and issues presented
Answers or addresses all
questions and includes many
other interesting facts.
questions and tasks and includes a few other interesting facts.
questions and tasks and includes no other interesting facts.
Answers or addresses a few
questions and tasks suggested in the assignment
Use data & excel spread sheet to
aid corporate research and analysis
All Data table, spread sheets
and graphs neatly completed and totally accurate.
One or two inaccuracies and
Two or more are incomplete,
minor inaccuracies and/or illegible characters.
Data, table, spread sheets
and/or graph missing information and/or inaccurate.
Use of Ratios and their
appropriateness in corporate research and analysis
Selects and uses ratios which
are logical and adequately detailed -with supporting calculations.
Most of the ratios used are
understandable, but some lack adequacy.
Some of the ratios used are
understandable; most are confusing and/or lack detail.
Ratios are presented with
little thought of their relevancy, some key ratios could be missing and/or confusing.
Use a variety of resources to do
Uses a variety of (4 or more)
primary resources as basis of research and to support answering questions and addressing issues
Uses 2-3 primary resources as
basis of research and to support answering questions and addressing issues.
Uses 1-2 primary resources as
Uses 1 or less primary
resources as basis of research and for support when responding to questions and addressing issues.
Formulate and express
conclusions, opinions and recommendations based on research and analysis
Presents a logical explanation
for findings and addresses all of the questions and tasks in the assignment.
for findings and addresses
some of the questions and tasks in the assignment.
Presents an illogical
explanation for findings and addresses few questions and tasks in the assignment.
explanation for findings
and does not address any of the questions and tasks suggested in the
Use appropriate grammar &
spelling when generating reports
Paper follows the conventions
of English grammar, spelling, and usage.
of English grammar, spelling, and usage with almost no errors.
of English grammar, spelling, and usage with several errors.
Paper does not follow the
conventions of English grammar, spelling, and usage.
Rubric for Accounting Capstone Project