1. Horizontal analysis of the prior 5 years income statement and balance sheet.
2. Vertical analysis of the prior 5 years income statement and balance sheet.
3. Calculation of at least 5 significant liquidity ratios for each of the 5 years analyzed.
4. Calculation of at least 5 significant solvency ratios for each of the 5 years analyzed.
5. Calculation of at least 5 significant profitability ratios for each of the 5 years analyzed.
6. Create a paper of 10-15 pages analyzing the financial strengths and weaknesses of the company examined. The analysis should reference significant items found in the income statement, balance sheet, statement of cash flows, horizontal analysis, vertical analysis, and ratio analysis of the company examined. Competitor analysis and comparison to industry averages should be presented. A summary identifying whether the company would be attractive to investors and/or creditors must be included.
Report MUST be done in APA format.
This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.Pragmatic approach to research involves both; quantitative and qualitative research. Financial Statement analysis comprises of quantitative methods which include ratio, horizontal, and vertical analyses which is conducted as under;
1. Ratio analysis
It is a tool used in assessing and evaluating the financial performance of Deere & Company. It is used to conduct a quantitative analysis of information in financial statements (Investopedia, 2013).
The following ratios have been calculated to assess the financial performance of Deere & Company:
• Liquidity ratios
• Solvency ratios
• Profitability ratios
• Investor return ratios
Ratios of 2009 are considered as base year and are compared with next four years i.e. 2010 to 2013.
2. Horizontal / Trend analysis
This method of financial statement analysis is used to show changes in the balances of relevant financial statement items over a period of time. It is a helpful in evaluating the trend situations throughout years. The earliest year is used as the base period and the items on the statements for other periods are compared with items on the statements of the base period (Horizontal Analysis, 2013)
Horizontal analysis has been used to show changes in the balances of financial statement of Deere & Company over a period of five years’ time (2009 to 2013). Year 2009 is used as the base period and the items on the statements for other four periods (2010 and 2013) are compared with items on the statements of the base period (2009). The changes are shown both in US Dollars and percentage.
3. Vertical / Common-Size analysis
In this method of financial statement analysis, the total of assets and the total of liabilities and stockholders’ equity are generally used as base figures. All assets are shown as a percentage of total assets. The current liabilities, long term debts and equities are shown as a percentage of the total liabilities and stockholders’ equity respectively.
To conduct a vertical analysis of income statement, sales figure is generally used as the base and all other components of income statement like cost of sales, gross profit, operating expenses, income tax, and net income etc. are shown as a percentage of sales (Vertical Analysis, 2013).