Gulf University for Science and Technology
ACCT 500- Financial and Managerial Accounting
groups of fives)- Deadline for
submission 10 December 2013
Select one company listed on the Kuwait Stock Exchange (exclude banks, insurance, real estate,
financial services and investment instrument sectors) and obtain the most recent English copy if itâ€™s annual report
(2012 Annual report containing 2011 comparative figures) to
shareholders (you should find the annual report under Investor Relations on the
You are required to work ingroups
of 5.Please email me names of group members and
your selected company before29 October 2013.
Letter to Stockholders
Your annual report should contain a letter (or
two) to the shareholders from one (or two) key officers of the company. Read it
(them), and answer the following questions (for each one).
1. Who wrote the letter? What is that
personâ€™s position in the company?
2. In one hundred words or less, explain
the basic message in the letter.
3. What is the basic pattern for letters
of this type? How well does the letter fit the mold?
Your annual report most likely contains
several pages of material between the Stockholders Letter and the financial
sections, or possibly even before the Stockholders Letter.
4. Provide a description (one hundred
fifty words or less) of this material and the message it communicates. Does it
5. Does the company present any
financial highlights in the annual report to shareholders?
6. If so, what items is the company
highlighting this year?
7. Do the highlighted items show the
company in a positive, mixed or negative light? Explain.
8. What items are not included in the
financial highlights that you think should have been included in the companyâ€™s
list of highlighted items?
Explain your answer. [Hint: answer this
question after you have completed the rest of the project.]
9. The fiscal year for the company
extends from when to when? Where did you locate this information?
10. Explain why the company has chosen
this particular time period for its fiscal year.
11. For which dates/years does the
company report a balance sheet?
12. Using totals for each category
(total assets, total liabilities, total Share Holdersâ€™ Equity), what is the
balance sheet equation for the most recent year?
13. What three assets are largest in
amount on the most recent balance sheet?
14. Does the make-up of the assets seem
consistent with what you expected to see for this type of company? Explain.
15. What three liabilities are largest
in amount on the most recent balance sheet?
16. Which is larger in amount for the
most recent year, contributed capital or retained earnings?
17. Convert the balance sheet for each
year into common size format (vertical analysis) and present neatly in columns.
18. What is the percentage of current
assets to total assets for each year?
19. What is the percentage of current
assets to current liabilities for each year? What does this ratio tell you?
Compute the net working capital?
20. What is the percentage of total debt
(liabilities) to total assets for each year (this is called the debt
21. Did the debt percentage increase
(ratio of total debt to total asset), decrease or stay the same from the prior
year to the current year? What do these numbers say about the company?
22. What is the percentage of
stockholders equity to total assets for each year? Explain
23. Does the companyâ€™s ratio of
stockholders equity to total assets seem consistent with the business risk of
the company? Explain.
24 Compute the quick ratio and explain
it. What do these numbers say about the company?
25. What was the percentage change in
total assets from the prior year to the current year? Be sure to mark your
answer as an increase or decrease.
26. Does the company’s common stock have
a par value? If so, how much was the reported par value per share? What was the
market value per share at year end?
27. How many shares of common stock were
issued at the end of each fiscal year?
28. For which dates (or periods of time)
does the company report income statements?
29. Using totals for each category (total
revenue, total expense), what is the income statement equation for the most
30. What amount of net sales is reported
for each year?
31. What is the percentage change in
sales for each year? Describe the trend in revenues.
32. What amount of net income is
reported for each fiscal year? Compute
the earnings per share and explain it? Compute the return on assets and return
on equity? Explain all ratios.
33. What is the percentage change in net
income for each year? Which is changing faster, sales or net income?
34. What three expenses are largest in
amount on the most recent income statement?
35. Convert the income statement for
each year into common size format and present neatly in columns.
36. Identify significant trends from the
common size income statements.
37. If the company sells products,
compute the gross margin and the gross profit margin percentage for each fiscal
38. What was the amount of operating
income for each year? What is the operating profit margin for each year? Describe
the trend in operating income. What was the net profit margin for each fiscal
year? What is the trend in the ratio?
three turnover ratios and explain them
Statement of Cash Flows
40. Using totals for each category, what
is the cash flows equation for the most recent year?
41. Does the company report cash flows
from operating activities using the direct or the indirect method? Describe how
you can tell. Compute the operating cash
flow ratio and explain it? Compute and explain the cash return on assets?
42. Does the ending balance of cash and
cash equivalents agree with the amount reported on the balance sheet?
43. On what statement(s) would you
expect to find information regarding the declaration and payment of dividends?
Did the company declare or pay dividends in any year? If yes, compute the
dividend per share ?
44. Compute the cash flow interest coverage ratio and the interest coverage ratio? Which
one, in your opinion, is better, and why?
45. Describe the trend in cash flows
from financing activities?
Statement of Changes in Stockholders
46. Using amounts from the statement of
changes in stockholders equity, what is the equation for changes in retained
earnings for the most recent year?
Notes to the Financial Statements
47. How many notes to the financial
statements are presented for the most recent year?
48. The first note to the financial
statements lists and describes significant accounting policies.
Identify and summarize two accounting
49. Choose two of the notes and briefly
Report of Independent Public Accountants
50. What accounting firm audited the
companyâ€™s financial statements?
51. What is the auditor firmâ€™s
responsibility with respect to auditing them?
52. What type of opinion did the
independent auditors issue on the financial statements? What does it mean?
53. The auditor firm should have
investigated the internal control system of the company. Please describe what
is communicated in the letter reporting on this investigation. What was the
auditorâ€™s opinion on the internal control system?
What is meant by â€œInternal control
systemsâ€ What are the components of internal control systems?
Management’s Discussion and Analysis
54. Provide a description (200-300
words) of the MD&A.
Corporate Governance and Corporate
55- What is corporate governance? What
are the basic elements of corporate governance? In one page, comment on the
corporate governance practices in your company.
56- What does corporate social
responsibility mean? Does your company have a CSR section in their report? Provide
a description (350-500 words) of this material and the message it communicates.
Does it impress you?