Utilize the outline below and complete an analysis for two companies.
Prepare an Excel spreadsheet for the items listed below for the two companies for 4 years.
Make sure you clearly indicate denominations when appropriate.
Income Statement Analysis Items used by Buffett:

1. Gross Profit Margin –

Income Statement
($ in millions)

Revenue                $XX
Cost of Goods Sold    $XX
Gross Profit                $XX

• Consistency
• Higher than other firms in the industry. Why?
• 5 year analysis
• > 40% - competitive advantage
• < 20% - no competitive advantage

2. Selling, General and Administrative Expenses - % of gross profit
• Consistency? Why?
• < 30% - fantastic
• 30 to 80% - possible competitive advantage

3. Research and Development Expenses - % of gross profit
• low or no R & D expense? Why?
• compare to industry? Why?

Balance Sheet Analysis Items used by Buffett:

1. Cash and Marketable Securities –

Balance Sheet/Assets
($ in millions)

Cash & Short-Term Investments    -    $XX
Total Inventory                                                    $XX
Total Receivables, Net                                        $XX
Prepaid Expenses                                                 $XX
Other Current Assets, Total                                  $XX
Total Current Assets                                           $XX

• large amounts generated by operations
• 4 year analysis

2. Inventory
• calculate % increase in inventory = ((current year-previous year)/previous year)
• calculate % increase in net earnings = ((current year-previous year)/previous year)
• is there a corresponding rise in net earnings? Why?
• long-term consistency? Why?

3. Net Receivable - % of gross sales

Balance Sheet/Assets
($ in millions)

Cash & Short-Term Investments    -    $XX
Total Inventory                                                    $XX
Total Receivables, Net                                        $XX
Prepaid Expenses                                                 $XX
Other Current Assets, Total                                  $XX
Total Current Assets                                           $XX

• consistent? Why?
• lower than competitors? Why?

Utilize the outline below and complete an analysis for two companie...