Assignment 1: Annual Report Analysis

A critical financial accounting skill is the ability to read, analyze, and make actionable decisions from any financial statement. Business leaders gain valuable information from the annual reports of direct competitors, companies that operate in similar fields, and companies in which they are considering an investment or partnership.

You are the CFO of a leading luxury jewelry store, Welch & Co., that plans to expand into national sales of precious metals. The General Manager (GM) of the new precious metals division wants to establish a long-term advertising relationship with a nationally recognized publisher. The GM has narrowed the field down to two firms, and the CEO, your boss, has requested your analysis and guidance. He has asked you to do a financial review of recent results from The New York Times Company (NYSE: NYT) and Gannett Co., Inc. (NYSE: GCI). You have decided to organize your work into TWO components:

Part A: Financial Analysis Snapshot of key data from the annual reports
Part B: Executive Memo and brief Video Presentation of your analysis

Part A: Financial Analysis Snapshot

  1. All work is to be completed and submitted in the attached Excel template.
  2. Go to the Investor Relations section of each company’s website and download their annual reports. You may need to download more than one report to get all the required historical data.
  3. Use the Annual Reports/10K to populate the Excel template for the two most recent years, 2021 and 2020.
    o Some entries simply require finding the respective line-item amounts, while others will require calculations (these are indicated in the template).
    o Note that two years of historical data and ratios have already been provided in the template from prior year’s annual reports; do not change the data and ratios provided.

Part B: Executive Memo and Video Presentation
Present a synopsis of your analysis in an executive memo you would feel comfortable turning in to your CEO. You may organize the memo as you see fit, but it must follow the principles of good business communication. Be sure to include your recommendation to the CEO in your memo, preferably in the opening paragraph and the summary. To support your executive memo, prepare 5 slides and record a brief video presentation highlighting the key points of your findings.

For your executive memo, answer the 11 following questions organized under four key topics:

  1. Profitability/Net Income Margins
    • What are the after-tax net income margins (i.e., net profit margins) for both companies?
    • How do the two companies compare?
    • Which company achieves the higher net income margin? Why?
    Tip: Analyze the major cost structure line items in the income statement (COGS, SG&A, restructuring costs, depreciation and amortization, impairment, interest expense (income), etc.) as percentages of net sales so that you can identify reasons for better net income margins. Identify and comment on the differences. You may not know why a particular cost item like COGS is higher or lower, and that’s okay. Your CEO only wants to know which coststructure items are higher or lower for each company
  1. Debt Management
    • Which company does a better job managing its long-term debt?
    • What are their respective 3-year trends for long-term debt to equity? Total debt to equity?
    • How can each company improve its use of long-term debt and equity capital?
  1. Debt Management
    • Which company does a better job managing its long-term debt?
    • What are their respective 3-year trends for long-term debt to equity? Total debt to equity?
    • How can each company improve its use of long-term debt and equity capital?
  1. Liquidity
    • How do the companies compare in terms of the current ratio, and what are their
    respective 3-year trends?
    • Do their current ratios indicate that either of these companies could go bankrupt soon?

For your slides and video presentation, complete the following tasks:

  1. Create a PowerPoint deck in support of your financial presentation
    • Highlight your key findings from your Executive Memo and Financial Analysis Snapshot.
    Focus on the most important insights that would be helpful for the leadership team.
    • Your PowerPoint should complement your Executive Memo and your Financial Analysis Snapshot.
    i. Assume your CEO will have access to the documents, so just hit the high points.
    ii. Keep your slides legible. Avoid small fonts, too much text, or distracting graphics.
    iii. Keep it brief, using a maximum of 5 slides (for the 4 key topics on Page 2 and a summary with your recommendation)
  1. Record your financial presentation using ZOOM
    • Record both the PowerPoint deck and your webcam feed simultaneously.
    • Practice your presentation. You may record as many times as you wish before submitting.
    • Maintain eye contact, speak conversationally and professionally, use an engaging tone, and dress appropriately.
    • Your video must be no longer than 5 minutes.

Submission Requirements
There are 4 submission files for this assignment.

  1. Your completed Excel template must be submitted as an Excel file, not as a PDF file.
  2. Your executive memo should be no more than 2 pages, single-spaced, using 10- or 12-point font. You may also include an appendix with additional references, graphs, charts, and tables for additional support if needed.
  3. Your video recording should not exceed 5 minutes in length.
  4. Your PowerPoint deck must not exceed 5 slides (not including the cover page or references, if desired).

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