ACC112 – Accounting Principles II – ACC 112

Annual Report Analysis Project

Name:

To successfully operate in the world of business, the ability to comprehend a company’s annual report and analyze the financial condition of a company is extremely important. This assignment will help you gain some experience interacting with an annual report, and it will allow you to apply some of what you have learned so far in accounting to a “real world” company.

For this assignment, you are to examine the 2018 financial statements of Sprouts Farmers Market, Inc., and use that report to answer the questions that follow. Each answer should be numbered, and each question should be answered in complete sentences. For full credit, show all calculations.

1. (6 points) As of 12/30/2018, How many shares of common stock are:

a. Authorized?

b. Issued?

c. Outstanding?

2. (2 point) What is the par value of the common stock?

3. (2 point) Did the company pay a cash dividend in the most recent year? If so, how much?

4. (2 point) If a company does not pay dividends, what might the reason be?

5. (2 point) Why would people invest in a company that did not pay dividends?

6. (4 points) Did the company repurchase treasury stock during the most recent year? If so, how many shares?

7. (20 points) Prepare a horizontal analysis of the Income Statement for the most current year. (See page 18-11 for the proper format).

Note you MUST USE EXCEL to create the horizontal analysis. An excel file MUST BE TURNED IN with the project to earn points for this question.

8. (4 points) What is the company’s current, Basic EPS? Did EPS vary more than 10% from prior year?

9. (18 points) Calculate the following liquidity ratios for the current year and give a one sentence description of each result. (Assume that all sales are on credit.)

For example: Current Ratio $1,020,000 current assets

344,500 current liabilities

= 2.96 : 1

For every dollar in current liabilities, the company owns $2.96 in current assets to pay for them.

Current Ratio

Receivables Turnover Ratio

Inventory Turnover

10. (18 points) Calculate the following profitability ratios for the current year and give a one sentence description of each result.

a. Profit Margin on Sales Ratio

b. Rate of return on Assets

c. Rate of Return on Common Stockholders’ Equity (ROE)

11. (12 points) Calculate the following solvency ratios for the current year and give a one sentence description of each result.

a. Debt to assets ratio

b. Times Interest Earned Ratio

12. (4 points) Calculate the free cash flow of the company for the most current year (Hint: use the formula given in the book on page 17-17)

FOR QUESTIONS 13 – 15: LOOK AT THE NOTES TO THE FINANCIAL STATEMENTS (beginning on page 6)

13. (2 Point) In what state did Sprouts Farmers Market, Inc. incorporate?

14. (2 Point) For 2018, what percentage of the company’s sales were from “Perishables”?

15. (2 Point) What does the company estimate for the useful life of its buildings for depreciation purposes?