Health Care Research Project
By:
Dr. Joseph Foy, CPA
Dr. Frimette Kass, CPA
Overview
This project is designed to have many learning outcomes. Some of the learning outcomes include:
· team building skills
· leadership skills
· accounting and auditing research
· identifying and correcting weak/non-existent controls
· perform financial statement analysis
· improve/develop report writing skills
To accomplish this project you will be divided into teams of four or five. Each team will choose a publicly traded hospital corporation. You will then perform certain audit techniques on the team’s chosen corporation and write short papers about what you have discovered.
Step by Step Description of the Project
This project is broken into various steps. Each step will have its own due date. By dividing the project into steps it will be easier for you to accomplish the project over the course of a semester.
Step One: Selection of Teams and Corporations
On, or about, second week of semester (the last day to add a course) you will be randomly assigned to teams of three to five. You will be able to determine your team by searching in BB under the ‘Groups’ tab.
Each team will then do research to find a publicly traded hospital corporation. The benefit of using publicly traded corporations is that their financial statements are publicly available online. Each team must choose a different corporation. Do some internet research. When you find a company post it on the discussion board area that is set up in BB for this purpose. The corporations will be assigned on a first come, first serve basis.
For each Deliverable (assignment to be submitted via Blackboard), teams will choose a different leader from among the group. The team leader will have the title of Manager.
The job of the Manager is to breakdown the work for that deliverable, assign the work to the Seniors and Juniors, organize peer review of the assignment, review the submission for accuracy and English issues, and upload the assignment in a timely fashion.
Deliverable One: Create Excel Spreadsheet, Financial Analysis
In this first deliverable, you are going to work with excel spreadsheets to become familiar with the financial information published by your corporation.
Deliverable One Objectives:
1. Demonstrate an understanding how to use various features of excel.
2. Understand financial analytical tools to help make business decisions.
3. Demonstrate an understanding of various types of accounts public companies utilize.
4. Demonstrate how to organize data.
Deliverable One Requirements:
1. Collaborate with other students in groups.
2. Excel spreadsheet data set up.
3. Horizontal and vertical analysis.
4. Financial ratio analysis.
5. Chart results.
6. Upload the document via Blackboard.
Requirement #1: Collaborate with Group
Students will continue to collaborate within their assigned groups to complete this deliverable, but the work product will be graded individually. You are to elect a new group leader to centralize group communications and reviews.
Requirement #2:
Excel Spreadsheet Data Set Up
You need to gather the Income Statement, Balance Sheet and Cash Flow Statements for the past three years, which are contained in your company’s Form 10-K filings. A Form 10-K is an annual report that is filed with the
Security and Exchange Commission
(SEC). You can find the 10-Ks for your company in two ways. (You may analyze up to six years of statements.)
A. To locate these filings, logon to the
about:blank
homepage for your company. Somewhere on the home page you will see a link to “
Investor Relations
”. That link will direct you to the Investor Relations page. In the menu across the top of the page, you will see a link labeled “Financial Data”. When you hoover the mouse over it, a Financial Data pop-up will appear. Select “
Annual Reports
”. Right hand corner, you will see the latest year annual report. When you click on this link, you will see the filings for your company. The Table of Contents contains Parts I-IV. Concerning our project, we focus on Parts I and II.
B. You can also find the filings on the SEC’s website. Go to SEC.gov, find a button marked EDGAR. Under Edgar you can find the financial filings for your corporation.
What to do once you have accessed the financial statements…
You are to create a master spreadsheet in Excel which will display at least three years of data (or whatever your instructor requires) for the Income Statement (IS), Balance Sheet (BS) and Statement of Cash Flows (CF). To accomplish this task, create three worksheets (in the same file) and label them IS, BS, and CF (income statement, balance sheet and cash flow statement). In column A for each worksheet, transfer the account names and figures exactly as you find them in the financial statements. That means you must physically rewrite the information, not simply copying and pasting. The purpose of transferring information is to allow you to become much more familiar with the account names and corresponding figures. If you encounter account names in one year and not the next, write all of them in column A. Note that financial information is presented from the latest to earlier years. For analysis purposes, present the information from the earliest year to the later years. In the header row, label column B: The latest year available, column C: the previous year, column D: the year before that. Make it look professional. Color coding and contrasting headers with bold lettering are acceptable and encouraged.
This Excel exercise is designed to help you create a structure to analyze complex data. Your immediate goal in this first step is to get the formatting down and set up the spreadsheets as best as you can.
Requirement #3: Horizontal and Vertical Analysis
Horizontal and vertical analysis will allow you to begin analyzing the data in each financial statement. These techniques are part of analytical procedures. If you have never performed a horizontal or vertical analysis of financial statements, the textbook provides an example. I also created a video that is uploaded into the Term Research Paper webpage that walks you through the process.
Video examples of Horizontal and Vertical Analyses in excel:
The following are links to several good videos that walk you through the horizontal and vertical analysis process.
Requirement #4: Financial Ratios
Using the data in the Income Statement, Balance Sheet and Cash Flow Statement you developed, you are to independently calculate all the ratios on the following table labeled
Required Common Ratios to Calculate,
for each year, over at least a two to three year period (depending on the ratio). These common ratios are found in most accounting textbooks. Ratio analysis looks at the relationships of the different parts of financial statements. Combining horizontal and vertical analyses with ratio analysis provides powerful analytical tools to expose areas of risk for decision makers. The reason that you should calculate these ratios over at least two to three years is two-fold. First, you will begin to see more meaningful patterns beyond horizontal and vertical analyses. Second, you will use the data to create charts to visualize the patterns side by side with other ratios
Page 2 of 2
Required Common Ratios to Calculate
Formula
YouTube video
Three Liquidity Ratios:
Current ratio
Inventory turnover
Receivables turnover
Two Solvency Ratios
Debt to total assets
Debt service coverage ratio
Four profitability ratios
Gross profit margin
https://www.youtube.com/watch?v=e2DI6B7BWzs.youtube.com/watch?v=e2DI6B7BWzs
Profit margin ratio
Return on assets ratio
Asset turnover ratio
You are encouraged to use any other ratios that you deem may be useful to your analysis. There are ratios available that are particular to certain industries that we have not listed. If a particular ratio does not make sense for your corporation do not use it. We uploaded a video into the Term Research Paper webpage walks you through the ratio analysis requirement.
Requirement #5: Charting Results
You are required to chart the results of your vertical, horizontal and financial ratios. To create as few charts as possible, while still retaining the ability to analyze them, this exercise is simplified. Charting every line item in the income statement, balance sheet and cash flow statement in separate charts is a lot of unnecessary work. The volume of charts that you would be producing would make it very difficult to analyze data.
For horizontal analysis, create a two-dimensional line chart over three years and for the vertical analysis, create one bar chart over three years for each of the following balance sheet categories: current assets, long-term assets, current liabilities, long-term liabilities, and cash flows from/used by operating, investing and financing activities. For income statement items, group the different streams of revenue, and group the different categories of operating expenses. For cash flow items, separate cash flows from operating, investing and financing activities. Do not try to chart each line item within the operating, investing and financing activities (that level of analysis is outside the scope of this exercise).
The following charts are samples of vertical analysis:
The following charts are samples of horizontal analysis:
For ratio analysis, group ratios by liquidity, solvency and profitability ratios and create two-dimensional line charts over two or three years for each category, depending on whether the ratio you created covers a two or three year period. Whatever you present, it has to be readable and clear to other users of the information that you produce. Placing more than three or four ratios on one chart over at least three years starts to look a little busy. Make sure you space them adequately for easy reading. If your ratios are too busy looking, your group mates should let you know so you can redo them before submission.
Visually, there is a difference between the charts you create for vertical, horizontal and ratio analysis. The vertical analysis will produce a chart for each year for each group of items analyzed, as opposed to the horizontal and ratio analysis which will produce one chart for all the years for each group of items analyzed.
Make sure that your all graphs have meaningful labels, which will include years and appropriately spaced number increments on the y-axis to avoid bunching of lines. Below are some samples of visual representations of how your bar charts and two dimensional charts should appear over the three years:
This is a sample of a two-dimensional chart that has line bunched together (the bottom two lines sit on top of each other too much), something you want to avoid.
This is a sample of a two-dimensional chart that has lines separated nicely, something you want to present.
Required Charts to Create
Financial Statement
Horizontal Analysis: Two-Dimensional Line Charts
Vertical Analysis:
Bar Charts
Ratio Analysis:
Two-Dimensional Line Charts
Balance Sheet
1. Current assets.
2. Long-term assets.
3. Current liabilities.
4. Long-term liabilities.
1. Current assets.
2. Long-term assets.
3. Current liabilities.
4. Long-term liabilities.
1. Liquidity
2. Solvency
3. Profitability
Income Statement
1. Group the different streams of revenue.
2. Group the different categories of operating expenses.
1. Group the different streams of revenue.
2. Group the different categories of operating expenses.
Cash Flow Statement
1. Cash flows from/used by operating, investing and financing activities (separate cash flows from operating, investing and financing activities).
1. Cash flows from/used by operating, investing and financing activities (separate cash flows from operating, investing and financing activities).
If you do not know how to work with charts in excel, go through excel tutorials found on You Tube to create and edit charts. There are dozens of videos that have been created.
Video examples of charting in excel:
https://www.youtube.com/watch?v=J-PaQymHkhg
Remember, the purpose of a chart is to make the information more visually appealing and user friendly. If your chart is cluttered or not properly labeled it makes it harder to understand the information.
Requirement #5: Upload Document
Once you have completed the charting task, you will upload your excel file into Blackboard. Do not upload a pdf file.
Only Excel files will be accepted i.e. .xls format. Do not upload spreadsheets from other software or links to google docs. Please refer to the deadlines for the date this due. Late submissions lose 50% credit if submitted within one week after the due date. After one week past the due date, no credit will be given. Note that this deliverable still has to be completed to advance to the next deliverable. If it is not completed, no credit will be given for the term project.
See Appendix A, Grading Rubric for Deliverable One.
If you have further questions about deliverable one, check out the
FAQ page
under
Additional
Questions Concerning Deliverable One: Spreadsheets and Data.
Step Three – Deliverable Two: Connecting Theory to Practice – Firm Level Risk Analysis
Deliverable two will help you begin the process of bridging abstract theoretical accounting information learned in the textbook to real life concrete practical events.
Deliverable Two Objectives:
1. Examine the risk factors that management discloses in its Form 10-K and from an accounting perspective (as opposed to Marketing or Management). Choose one and explain its adverse affect on the financial statements using vertical, horizontal, ratio, and chart analysis developed in deliverable one.
2. Gain a more comprehensive understanding of a public company to make better business decisions by reading key parts of a Form 10-K, including Business, Risk Factors, Properties, Legal Proceedings, Management’s Discussion and Analyses, and Index to the Notes to the Consolidated Financial Statements.
3. Understand the impacts on financial statements should a risk come to fruition using a “what-if” analysis applied to vertical, horizontal, ratio, and chart analysis on excel spreadsheets developed in deliverable one.
4. Identify and analyze the effects of depreciation on the financial statements at least one piece of equipment used in Starbucks.
5. Identify and recommend changes in revenue/cost structures and how it would impact any ratio developed in deliverable one.
6. Demonstrate good grammar, formatting, and organization.
Deliverable Two Requirements:
1. Students will collaborate within their assigned groups to complete deliverable two.
2. Read and analyze the following selected parts of the10-Ks covering all years conforming with your spreadsheets and identify a risk factor that you find of interest that could come true.
3. Conduct a “what-if” analysis to determine the affect the risk may have on the financials.
4. Answer three short essay questions.
5. Individually upload the document via Blackboard.
Requirement #1: Collaborate with Group
Students will continue to collaborate within their assigned groups to complete this deliverable. You are to elect a new group leader to centralize group communications and reviews.
Requirement #2: Read and analyze the following selected parts of the 10-Ks.
The following areas of the 10-Ks should be your primary focus: Part 1, Items 1, 1A, 2, 3, and Part II, Items 7 and 8. Part I contains a discussion on the business model, risk factors, properties, and legal issues. Part II contains Management’s Discussion and Analyses, the financial statements and the notes to the financial statements. All these statements are referred to as
management assertions. Parts I and II contain discussions on many types of risk that the business may be exposed to. You should read through all these areas. Once you have read through Parts I and II, you are to answer a set of questions at the end of this section of deliverable two. The following narrative elaborates on each area you are to read.
Part 1, Item 1. Business
In this discussion, management discusses its business model, how it segments it financial information, and how it categorizes and earns revenue.
Part 1, Item 1A. Risk Factors
In this discussion, management discusses the risks that it has identified as material and has decided to share with the public. Companies have to disclose risks, and the SEC mandates a separate section to discuss risks. However, risks can be identified by reading other areas of the Annual Report and observations of the hospitals.
As an example, here is a short list of some material risks a major US corporation discloses:
1. Economic conditions in the U.S. and international markets could adversely affect our business and financial results.
2. Our success depends substantially on the value of our brands and failure to preserve their value, either through our actions or those of our business partners, could have a negative impact on our financial results.
3. Incidents involving food or beverage-borne illnesses, tampering, adulteration, contamination or mislabeling, whether or not accurate, as well as adverse public or medical opinions about the health effects of consuming our products, could harm our business.
4. The unauthorized access, use, theft or destruction of customer or employee personal, financial or other data or proprietary or confidential information that is stored in our information systems or by third parties on our behalf could impact our reputation and brand and expose us to potential liability and loss of revenues.
5. We rely heavily on information technology in our operations and growth initiatives, and any material failure, inadequacy, interruption or security failure of that technology could harm our ability to effectively operate and grow our business and could adversely affect our financial results.
6. We may not be successful in implementing important strategic initiatives or effectively managing growth, which may have an adverse impact on our business and financial results.
7. We face intense competition in each of our channels and markets, which could lead to reduced profitability.
Part 1. Properties
In this discussion, companies disclose select properties that it owns, providing locations, sizes and purposes. This information can help a reader understand what properties may be at risk and how your company’s operations could be affected if something were to happen to one or more properties.
Part 1. Legal Proceedings
Companies normally elaborate on their legal proceedings in Commitments and Contingencies.
Part II. Management’s Discussion and Analyses
This discussion is management’s interpretation of the results of its operations. An important point to be made is that this is
management’s interpretations, not by anyone else. Management of companies tend to highlight the positive and suppress the negative. They tend to guide the discussion they way they want. In this section, you may get a better idea what risks management may find important and those they may try to minimize. For your purposes, it is filled with good information that may help you further understand the trends in the horizontal, vertical, and ratio analysis that you performed.
Part II. Index to the Notes to the Consolidated Financial Statements
In this discussion, management further clarifies information contained in the income statement, balance sheet and statement of cash flows. Companies disclose varying amounts of notes. However, for purposes of this project we focus on the Summary of Significant Accounting Policies, which discusses the business, estimates, cash and cash equivalents, Receivables, net of Allowance for Doubtful Accounts, Property, Plant and Equipment, and Revenue Recognition. Notes that discuss inventories in detail that give you insight on where your company gets it inventory and how it categorizes it. Notes that contain Supplemental Balance Sheet Information, which discusses Property, Plant and Equipment, and Accrued Liabilities. Notes that discuss Debt (Liabilities). You may want to read it just to see how complex accounting for debt can be and the risks that your company takes to pay back financing agreements.
Notes that discuss Commitments and Contingencies: What is important in this section is the legal proceedings, which is a gold mine for identifying potential risks.
Requirement #3: Conduct a “what-if” analysis.
Essay questions one and two will require you to conduct a “what-if” analysis. There are various methods to conduct a “what-if” analysis in Excel and you are free to explore them. To conduct a “what-if” analysis for this deliverable, imagine the risk you identified comes true. Demonstrate through vertical, horizontal and ratio analysis how this risk could affect financial performance.
To begin this process, you need to understand what accounts could be affected if the risk you choose comes true. Let’s say that you identified a possible supply chain disruption of medicine because of new regulation in the country it is manufactured. What are medications at a hospital? It is inventory. On the income statement, sold inventory is reported as cost of sales. On the balance sheet, existing medications in your company’s possession is reported as inventory. Lack of supply can lead to increased inventory prices. To examine the potential overall effects on the financial statements, we must look at ratios that contain cost of sales or inventory in its numerator or denominator. When looking at vertical analysis, anything that affects cost of goods sold will cause a shift in the percentage of expenses to revenues; and anything that affects inventory will reallocate the percentage mix of assets to total assets. When looking at horizontal analysis, the percentage year over year increases for both cost of sales and inventory will be affected.
Let’s take an example of a ratio that contains cost of sales, which is the gross profit margin. The gross profit margin is the gross profit/net sales. Gross profit is Net Sales – Cost of Sales. If the supply chain is disrupted and medication prices rise, the cost of sales will rise when the medication is dispensed. Therefore, the gross profit will decrease. If your company’s net sales of medication remain the same, the gross profit margin will decrease. There are other ratios that would be affected. When you consider a supply chain disruption as your risk, find ratios in addition to the gross profit margin and explain the affect on them.
For vertical analysis, you can discuss how the cost of sales affects the income statement by the reallocation of cost of sales to revenues and what that situation may mean. For the balance sheet, the reallocation of percentages of short-term assets may. A vertical analysis allows a user of financial information to visually see how the mix of short-term assets are affected which may impact liquidity (measuring the ability of a business to pay its short term obligations as they become due). The more assets tied up in inventory may be problematic to companies in need of cash to pay bills.
Requirement #4: Short Essay Questions
After conducting a “what-if” analysis, you are to answer the following questions from an accounting perspective (not a marketing/management perspective) and submit an individual two to three page report via Blackboard:
1. companies required to disclose material risks.
a.
Of the risks that management discloses, which one do you think could most adversely affect the income statement, balance sheet, and cash flow statement and give an example of how it could adversely affect the financial statements?
b.
Which ratios could be adversely affected if increases in costs or supply chain disruptions occurred for materials including equipment, medications and other supplies? Explain why and provide an example with hypothetical figures of at least one ratio.
2. Compare your readings of management’s assertions and your findings of your vertical, horizontal, ratio and chart analysis. You may find that management’s discussion focuses on certain areas. They may be avoiding a discussion in other areas that you and others deem important to learn about. They may be transparent one year, and not as transparent the next year, and vice-versa. Your vertical, horizontal and/or ratio analyses may indicate one thing, but not what management is focusing on, causing what appears to be inconsistencies in how information is presented.
a.
How do you think management interprets and informs the public of one thing, but your analyses find information that is inconsistent, misleading, contradictory, or absent, leading you to believe the reported figures on the income statement, balance sheet, cash flow statement and related disclosures reveals a side of the financial story management in not focused on? Explain to the best of your ability and include a specific example.
To help you understand how to answer this question, Form 10-Ks normally follow specific patterns. It is important to read all three years to see how management modifies its discussion from year to year. The specific narrative in each section generally does not change too much unless new disclosure requirements or other laws/policies/procedures are enacted. This is often a company’s Achilles heel. If management is telling the public a similar narrative each year, the charts should show a consistent pattern. If not, something is may not be right. Management may not accurately report what is going on, be focused on what they want to focus on, or they are issuing the wrong figures on their financials. Either way, it is an issue that must be further explored to make good business decisions.
As an example of a potential issue, let’s look at a hypothetical scenario involving inventory turnover:
As you may remember, the inventory turnover ratio is a measure of how fast a company is getting rid of its inventory (through sales, obsolescence, theft, etc.). If you measure the inventory turnover ratio and it decreases slightly year over year, it generally indicates that inventories are moving slower. Imagine that you perform a ratio analysis and chart the inventory turnover ratio over six years. You notice that inventory is turning over slower. Then you compare the chart to what management asserts in its discussion and analysis. Management boasts about its improved and efficient inventory management systems and how year after year it is constantly improving. This may indicate an area of increased risk. Why? The inventory turnover data shows that inventory may be moving slower, but management claims it improved ways to control inventory. It now becomes an issue for a proactive business decision maker to delve into more deeply. The ratios are indicating one thing (through their reported figures), but management is telling everyone another (through their narrative). In this hypothetical situation, several things could be happening. Perhaps everything is fine with their inventory management system, but management is not doing a fine job of communicating the issue, or perhaps something could be drastically wrong such as production line breakdowns and management knows it but is not adequately disclosing it, or perhaps it could be that someone is stealing inventory but management does not realize it. There could be numerous reasons.
Requirement #5: Upload Document
You should target approximately one to two paragraphs for each required item. Grammar, Formatting and Organization is a skill which should be demonstrated by accountants for all work. Therefore, it is part of the grade.
Only Word files will be accepted i.e. ,doc format. Do not upload a pdf file or files created by other word processing software.
The team leader for this deliverable is responsible to make sure everyone gets a peer review of your work prior to submission. As discussed in the grading section for deliverable one, it is inevitable that you will share ideas and see other member’s work.
Late submissions lose 50% credit if submitted within one week after the due date. After one week past the due date, no credit will be given. Note that this deliverable still has to be completed to advance to the next deliverable. If it is not completed, no further credit will be given for the term project.
See Appendix A, Grading Rubric for Deliverable Two.
_Deliverable_Two_Process
If you have further questions about deliverable two, check out the
FAQ page under
Additional
Questions Concerning Deliverable Two: Company Level Risk and 10-K Analysis.
Deliverable Three: Connecting Theory to Practice – Contemporary Risk Analysis
The main goal of deliverable three is to apply abstract accounting theory accounting information learned in the textbook to practice in a real-world setting real life concrete events. Deliverable Three is an extension of Deliverable Two.
Deliverable Three Objectives:
1. Examine risk factors for your hospital corporation considering current events i.e., the COVID, Monkey Pox and other crises.
2. Research and identify sources of information regarding risks in the course of a pandemic or other emergency.
3. Compare the risk factors discussed in the financial statements to risk factors identified from your research.
4. Perform research to determine how your target company is dealing with these risks in the current atmosphere.
5. Perform research to determine if your target company is meeting industry standards in disaster preparedness.
6. Identify and recommend changes in revenue/cost structures and how it would impact any ratio developed in deliverable one.
7. Demonstrate good grammar, formatting, and organization.
Deliverable Three Requirements:
1. Students will collaborate within their assigned groups to complete deliverable two,.
2. Familiarize yourself with how your hospital identifies and deals with risks in light of your risk research.
3. Answer three short essay questions.
4. Individually upload the document via Blackboard.
Requirement #1: Collaborate with Group
Students will continue to collaborate within their assigned groups to complete this deliverable, but the work product will be graded individually. You are to elect a new group leader to centralize group communications and reviews.
Requirement #2: Familiarize yourself with risks to a hospital during a crisis
There are many resources on the internet that discuss emergency preparedness for hospitals in different types of emergencies, including pandemics. When Googling consider the terms ‘disaster preparedness’ or ‘emergency management’. These resources are in the three different forms. You must differentiate the type of site you are looking at. These are:
1. Requirements and mandates of government agencies such as: state departments of health, CDC etc.
2. Industry associations that provide accreditation such as JCoHA
3. Other agencies whose standards are advisory only yet still important.
Requirement #3: – Determine how your hospital corporation deals with their disaster plans
There are numerous bodies that set standards for preparedness for disasters as well for infectious control procedures in hospitals. These may include, but are not limited to the US Centers for Disease Control (CDC), the various state and local licensing boards and departments of health, The Joint Commission (JCoHA). Some of these agencies actually inspect hospitals and write reports as to how hospitals meet (or don’t meet) the standards.
There are also a number of websites that deal with disaster preparedness of hospitals and other health facilities. What are some of the significant issues in disaster preparedness for hospitals, not just pandemic related? Doses your target company talk at all, in their K-1 or on their website about how they are prepared?
You will then need to determine how your hospital corporation deals with these preparedness issues. Look at statements they make on their website, filings they may have to make with their state licensing agency or other agencies. Also look at websites that collect consumer information about the hospitals such as Healthgrades or Yelp. If your corporation has numerous hospitals look at the ratings for two or three hospitals, at least. As an example are there complaints that staff are not wearing masks, that screenings when entering a hospital are lax?
Find an actual report from a licensing or accreditation agency. How did a hospital in your system fare on their inspection? Did they respond as how they would remediate any problems? Discuss the issues. (Some states actually have hospital inspection reports on the web.)
Try to find items about your target company, or some of the hospitals they operate, in the news media or on social media, that discusses how the company, or some of their hospitals, fared during the height of the COVID crisis.
Requirement #4: Short Essay Questions
Please answer the following short essay questions:
1. Based on your research of disaster preparedness for hospitals what are the three or four types of disasters that you consider most probable and dangerous and why?
2. Based on your research about your target company how do their disaster plans meet the standards that you have learned about? Are they prepared for these disasters?
3. Based on your research about your target company, and their hospitals, how did they manage during COVID? Did they meet their expectations or standards that were set by the various agencies? Explain.
4. What can your target company do to adjust their policies and practices going forward? Why is disaster preparedness a risk issue?
5. Choose one hospital facility that is managed by your target company. Were there comments, good or bad, about this facility? Should these comments be considered by an auditor? Why?
Requirement #5: Upload Document
You should target approximately one to two paragraphs for each required item. Grammar, Formatting and Organization is a skill which should be demonstrated by accountants for all work. Therefore, it is part of the grade.
Only Word and Excel files will be accepted. Do not upload or any other type of file.
Although this deliverable relies on a collaborative effort, each group member is to create their own analysis and have other group members review it prior to submitting it to the instructor. As discussed in the grading section for deliverables one and two, it is inevitable that you will share ideas and see other member’s work. You should not copy other group member’s work without acknowledging them. If you do not acknowledge them, it is considered plagiarism. You should strive to be creative in your own way and share your writings. That will allow other group members to expand their knowledge. They should credit your contribution as well, if they desire to use it. Even if you do credit work contributed by others, each paper submitted should reflect a significant work product that you created on your own.
Late submissions lose 50% credit if submitted within one week after the due date. After one week past the due date, no credit will be given. Note that this deliverable still has to be completed to advance to the next deliverable. If it is not completed, no further credit will be given for the term project.
See Appendix A, Grading Rubric for Deliverable Three.
Deliverable Four: Communicating Results (PowerPoint Presentation)
The main goal of deliverable four is to communicate the issues you discovered by preparing and presenting your findings to the class by making a recorded PowerPoint presentation. Deliverable four is summary statement of deliverables one, two and three. Students will continue to work in assigned groups to complete deliverable four and will be graded as a group.
Deliverable Four Objectives:
1. Demonstrate your understanding how to contribute to a collaborative PowerPoint presentation.
2. Gain an understanding how to record narrative.
3. Gain an understanding of the importance in communicating problems and findings to help users of accounting information make business decisions.
4. Demonstrate good grammar, formatting, and organization.
Deliverable Four Requirements:
1. Collaborate.
2. Present findings.
3. Record a sound bite.
4. Rehearse the presentation.
5. The ’Manager’ for this deliverable uploads the document via Blackboard.
Requirement #1: Collaborate
Students will continue to collaborate within their assigned groups to complete this deliverable, within their assigned groups to complete deliverable four, and the work product will be group graded.
Requirement #2: Present Findings
The partner in charge of the audit has been told the manager that he must fly out to meet another client. S/He needs to see the risk analysis the team has done on this hospital corporation, and s/he doesn’t have much time.
S/He would like for your team to put together a short PowerPoint presentation summarizing your work it should:
· Start with one slide introducing the client. Just a few basics.
· Contain the highlights of you vertical and horizontal analysis. Is there anything that stands out as unusual that might indicate an audit work.?
· Is there anything in the ration analysis that might indicate an audit risk?
· Based on your analysis is there anything in the MD&A that seems off?
· Based on your analysis of the company’s disaster preparedness and their response to COVID is there anything the partner should know?
· Based on your research about the company’s hospital in the news and/or patient comments is there anything outstanding that the partner should know?
· Is this client average audit risk? Low risk? High risk? Why? (In a nutshell)
· Should this client be brought on, if new or retained?
Your group will present summarizing results of any information/analysis your group found most interesting. The key to success in this deliverable is to use less words and more visuals. The reason that you are recording audio is to explain your slides, not to read word for word a paragraph of information. Presenting pictures and/or graphs, with limited text should be your goal. Text that is mall and difficult to read is not optimal. A lot of text on a slide is also not optimal.
Since you are presenting to a partner the presentations should be professional. Flashbangs are not necessary but plain white backgrounds are also not appropriate.
Th slide show should move along. The partner should not be expected t have to move the slides on his own or start the sound every slide. There are ways to do this. Check with PowerPoint gurus in the library or online if you don’t know how.
Requirement #3: Record a Sound Bite
Each member of the group will record an approximately 90 second sound bite explaining the group’s findings. Group members control who presents what information. If a member of your group is unable to speak, someone else may present on that person’s behalf. The overall goal is to develop the ability to present an interesting finding as concisely as possible. If four members are in a group, that means the entire presentation should be no more than six minutes.
If you do not know how to make a recorded presentation on a PowerPoint, the following videos are instructive.
Video examples of narrating in PowerPoint:
· How to Record Narration for a PowerPoint Presentation For Dummies:
· Microsoft Office Support:
https://support.office.com/en-us/article/record-a-slide-show-with-narration-and-slide-timings-0b9502c6-5f6c-40ae-b1e7-e47d8741161c
Requirement #4: Rehearse the Presentation
This is a critical part that cannot be overlooked. Rehearse the presentation several times to make sure it flows well and is within time limits. It is imperative that you be understood when others are listening. You may want to consider making a recording and have your manager or someone else view and listen it who is not used to hearing you speak. That person must be able to understand everything you say and find it interesting. Therefore, make sure that your audio capability is working correctly. Ultimately, if the instructor cannot understand you, it will be difficult to assess this part of your grade. You can probably never rehearse enough.
Requirement #5: Upload Document for Grading
Overall, the presentation should be between six to eight slides. Try not to place a bunch of text on the slide and then read it word for word. People can read. What the audience wants see and hear is what you have to say and how you present it. Use graphs, illustrations, pictures to get your point across. It is normally more effective. Grammar, Formatting and Organization is a skill which should be demonstrated by accountants for all work. Therefore, it is part of the grade.
Only PowerPoint files will be accepted. Do not upload any other file types.
As with the other deliverables, this is a group graded collaborative effort. Each group member works with the leader to organize the presentation. As discussed in the grading section for deliverables one, two, and three it is inevitable that you will share ideas and see other member’s work. You should not copy other group’s work without acknowledging them. If you do not acknowledge them, it is considered plagiarism. Each paper submitted should reflect a significant work product that your group created.
Late submissions lose 50% credit if submitted within one week after the due date. After one week past the due date, no credit will be given. Note that this deliverable still has to be completed to advance to the next deliverable. If it is not completed, no further credit will be given for the term project.
Remember to put the ‘Group Submission Sheet’, signed by the manager, as your first slide.
See Appendix A, Grading Rubric for Deliverable Four.
_Deliverable_Four_Process
If you have further questions about Deliverable #4, check out the
FAQ page under
Additional Questions Concerning Deliverable Four: PowerPoint Presentation.
Requirement #6: Upload Document for Discussion
Upload your PowerPoint to the Discussion Board. Students are required to make at least three substantial comments on PowerPoints uploaded by other teams.
Step #6 – Deliverable Five: Reflections
The main goal of deliverable five is to reflect on all the work that you have accomplished.
Deliverable Five Objectives:
1. Reflect on how working in collaboration with other students in groups helped you gain an understanding of the term project work.
2. Reflect on how the term project work allowed you to connect accounting theory learned in the textbook to how it is put into practice.
3. Reflect on how you can use your newly discovered skills to help make better accounting business decisions.
Deliverable Five Requirements:
1. Write a two to three page reflection.
2. Upload the document via Blackboard.
Requirement #1: Write a Reflection
Unlike the first four deliverables, deliverable five is solely an individual effort and is not a collaborative effort. No review by other group members is required. However, if you have weak English writing skills, you may want to ask group members to critique it for spelling, grammar and logistical flow errors prior to submitting it to the instructor.
You are to write a reflection that addresses your work, and how collaborating with other students in groups helped you gain an understanding of the term project work. You should discuss how you connected accounting theory learned in the textbook to how it is put into practice. This is an important aspect of the project. You also need to discuss how you can use your newly discovered skills to help make better accounting business decisions.
In considering your write-up, the following are some questions you may integrate into your discussion. You don’t have to answer these questions, as they are just for your consideration in case you are lacking ideas. Your discussion should be heart felt.
Do not simply just answer these questions and insert them into your reflection. You are to write up a reflection that is in an essay format and in your own words.
· Compared to other term projects you have worked on to date (if it applies), how would you compare this one against all others?
· Were your expectations met as far as learning outcomes for the project?
· What surprised you the most about term project at the end compared to the beginning?
· How did the spreadsheets help you understand accounting?
· How did the risk assessments enhance your understanding of accounting?
· What did you like about how this project was delivered?
· What was your most favorite and least favorite part of the project? How did they affect your learning experience about accounting?
· What experiences working with your group enhance your ability to work with groups in general?
· How did this term project enhance your ability to connect accounting theory to practical applications?
· Would you recommend other potential students to experience a term project like this? Why?
· What was the most surprising thing that you learned about how management asserts information in its 10-Ks?
· What new things did you learn how management can manipulate accounting information and disclosures to make themselves appear stronger or better?
· Explain how you would feel more confident in an employment interview discussing your ability to analyze financial statements. Did this project change your confidence level?
· How did this project enhance your ability to see business in a new light when you walk into a store?
· As a result of this project, discuss how you believe you could bring more value to your current or future employer.
· From an academic viewpoint, given you experience with this class, what accounting knowledge do you think would have been valuable to know and understand before you registered for this course?
· How important is it to know your basic accounting knowledge to analyze financial statements?
· How much about accounting and business do you now realize that you did not know when you registered for the course?
· How important is it to have the right teachers instructing this project? Did you have the right teacher? Why?
· If you could explain to other students why they should engage in a project like the hospital project to learn how indispensable accounting is to understanding business, what would you say?
· From an analyst perspective, what would you tell the CEO of your target corporation the most surprising thing you learned about his company?
· There is always something that could make this project better. What would it be?
· What are your feelings to make a project like this mandatory in all your courses? Why?
Requirement #2: Upload Document
The reflection will be graded on your communication skills how you can articulate your thoughts on the term project. Therefore, spelling, grammar, formatting and organization of your thoughts are the key items to focus on. Each area will be worth 25% of the reflections grade. Please keep in mind about the rules on plagiarism. Plagiarized work will not be accepted.
Late submissions lose 50% credit if submitted within one week after the due date. After one week past the due date, no credit will be given. If it is not completed, no further credit will be given for the term project.
Only Word files will be accepted. Do not upload a pdf file.
See Appendix A, Grading Rubric for Deliverable Five
.
If you have further questions about deliverable one, check out the
FAQ page under
Additional
Questions Concerning Deliverable Five: Individual Reflections
.
Special submission instructions
Only the team leader for a particular deliverable has to submit the assignment for the entire
team. For Deliverables #1-4 submission must include the ‘Top Sheet’ that is presented in Appendix D. In a ‘Word submission make this the first page. In and Excel submission put this on the first worksheet. In a Power Point submission put this on the first slide.
If a team member has not completed the work assigned to him/her by the ’Manager’ their grade will be reduced based on the indication of the ’Manager’. The manager’s decision is final.
Final Thoughts
In addition to the instructions for analyzing the public company, to enhance your understanding of the business entity and its environment, students should use all resources available to them, including to, but not limited to the library (specifically the business librarian), Internet, professional opinions and interpretations, company published information, brokerage house information, etc. Students should think about creative ways to extract and understand information. The manual will guide you, but it
will not hold your hand during the term project. It is your project to learn from.
Appendix A: Grading Rubric for FSA
Deliverable #1
8 points
1. Students will demonstrate ability to use basic skills in Excel
20%
2. Students will demonstrate ability to perform basic FSA: vertical & horizontal analysis
20%
3. Students will demonstrate ability to calculate FSA ratios
20%
4. Students will demonstrate basic graphing skills in Excel including labeling of graphs so that the information is clear and usable to outside reader/users
20%
5. Proper alignment of numbers, use of commas, use of dollar signs
20%
Deliverable #2
8 points
1. Adequately explains how one risk discussed by management might affect the FSA done in Deliverable #1
20%
2. Adequately performs and explains a ‘what-if’ analysis should a risk come to fruition.
20%
3. Adequately explains what risks could most adversely affect the financial statements and why
20%
4. Document exhibits proper grammar, spelling, sentence structure. Is written in a wells structured easy to read format.
20%
5. Exhibit proper grammar formatting, organization
20%
Deliverable #3
8 points
1. Clear discussion of disaster preparedness. Students identify 3-4 probable and dangerous disasters.
15%
2. Discussion of the disaster preparedness of target company
15%
3. Discussion of how the target company handled COVID
15%
4. Recommendations for improving disaster preparedness.
20%
5. Discovered and discussed comments about a specific hospital?
20%
6. Exhibit proper grammar, formatting, organization
15%
Deliverable #4
5 points
1. Presentation is simple and to the point
20%
2. Presentation highlights important information about target company
15%
3. Summary of the risk analysis is based on understanding of the target company
20%
4. Partner has been given the knowledge necessary for decision making
15%
5. Exhibit proper grammar, formatting, and organization
15%
6. Partner is happy the team did well
15%
Deliverable #5
3 points
Reflection is clear and concise.[footnoteRef:1] [1: A reflection is clear when other people who are not used to your writing style is understandable. It is concise when you say what you have to in as little words as possible. Do not go off in tangents.]
25%
Reflection is thoughtful.[footnoteRef:2] [2: Your reflection is thoughtful when you have given much thought and contemplation to what you want to express. It should not be rushed and put together at the last minute. You should write a few paragraphs and then reread and refine the words that you would like to express, adding bits and pieces to the point you feel that you have made a statement that you are satisfied with.]
25%
Discusses lessons learned.[footnoteRef:3] [3: Your reflection should incorporate lessons that you learned.]
25%
Exhibit proper grammar, formatting, and organization.[footnoteRef:4] [4: The reflection should be free of grammatical errors, formatted well and organized. That is, the discussion flows well and does not appear disorganized.]
25%
Appendix C, Frequently Asked Questions (FAQs)
In this appendix, I share some questions and comments that prior students have expressed and my response to them. You may find these helpful to clarify what is on your mind.
Additional General Questions Concerning the Term Project
If I submit work late, do I still get credit for it?
You lose 50% of the value of the deliverable it is late. If you do not submit it, you get a zero grade for the term project. This is a semester long project with strict deliverable dates. The outcome of a deliverable informs the next deliverable and your group members are counting on you to perform timely.
Additional Questions Concerning Group Work
If we are not able to reach team member assigned to our group via email, what can we do?
For the first couple of weeks in a new semester, communicating with group members may be a slow process. Some students may still be weighing whether to remain in the class and do not want to commit just yet. If students do not communicate after the last day to drop the course without incurring a “W” grade, you are to let the instructor know immediately. Nonresponsive students may be reassigned into a “nonresponsive” group to allow other group members to advance the term project without worrying about nonresponsive group members. My past experience is that those reassigned into a nonresponsive group do not fair well in the term project or the overall course.
If during the semester a responsive group member becomes unresponsive for no apparent reason after a reasonable period of time (usually about a week), you are to let the instructor know. From past experience, some students had to leave the country on a family emergency and had no way to communicate, or they became sick and were admitted to a hospital, or experienced some other ailment that was debilitating. Have patience with those students who are normally responsive and suddenly become unresponsive. There may be a good reason for it. But just don’t wait several weeks go by before letting the instructor know.
Do I have to submit the documents in some special file type or format?
Deliverable one has to be an excel spreadsheet. Deliverable two, three and five have to be in a Word document. Deliverable four in a PowerPoint document. Word files should be single spaced. Ultimately, when you upload the document, your instructor must be able to open it. Make sure the file opens in Microsoft and Apple products. If the file cannot be opened, don’t expect the instructor to hunt you down to get a document that opens.
I work better by myself. Do I really have to work in groups? What is the difference between group collaborative work versus individual work for each deliverable?
Yes, for numerous beneficial reasons, I have placed you into working groups to help facilitate your learning for deliverables one through four. Assigning students into groups to work on deliverables one through three allows you to freely collaborate with each other without the pressure of a “group” grade. Group work allows you to connect with each other and share each other’s knowledge to help you get through each step of the term project. Some students get stuck and need someone to communicate with to get through a deliverable. For example, one past student commented, “[Group collaboration] certainly helped to chat with team members to bounce off ideas, or reconfirm that you’re on the right path and can share your opinion. For example, I was struggling about 2016 and 2015 data for analysis and only through conversation with team members did I realize to just leverage the previous year’s annual reports. That one suggestion saved so much time and pressure to figure out what to do.”
Some students prefer to work alone and feel that they have no need for help at all and can breeze through each deliverable. While it is a nice trait to be able to work independently, working alone denies a valuable opportunity to help shepherd those students who need help. I expect that you try your best to mentor others assigned in your group to help them better understand the material that you may find easy. Those students who need help are expected to reach out to their group members and ask for help.
This approach has been working with great results in past semesters, with different types of accounting courses, both undergraduate and graduate, and in different modalities: online, hybrid and in-class sessions. Demonstrating the ability to work in a group, especially under adverse circumstances is a valuable and sought after trait in the business world. Going through repeated group work exercises will help you hone your skills and prepare you better for job interviews and promotional opportunities.
Deliverable #1, #2, and #3 are individually graded, but we work in collaboration. What exactly does that mean?
All deliverables except for #4 are individually graded, but when I read further it seems like we must work as a group for #1, #2, #3, and #4. It is confusing.
Collaborators are meant to serve as helpers and facilitators. For deliverable #1, each member of the group creates their own spreadsheet. For deliverable #2 and #3, each member of the group creates their own risk analysis. Each member of the group can work at their own pace for each deliverable, and will ultimately be graded individually for their own work. However, each group member is expected to get their spreadsheet or risk analysis completed and reviewed by another group member in coordination with the assigned team leader, in a reasonable time frame to allow a timely submission.
Everyone in the group does not have to upload deliverable one at the same time, or even on the same day. However, it must be uploaded by the due date. There may be instances when one group member is experiencing issues in their life and cannot upload their spreadsheet until the last day, or possibly late. That should not bar others from submitting their spreadsheet timely.
If one group member does not submit their deliverable #1, #2, or #3 timely, will that affect the grade of others in the group?
No, it will not affect the grade of others in the group. Everyone is graded independently. Students that submit late usually deny themselves of a review of their work and deny other group members the opportunity to review the work.
What if committed to my group to take care of certain tasks and subsequently I experience a temporary issue to get the tasks done timely?
This could happen to anyone, and it does happen. It is reasonable to expect that someone in your group will commit to a task and for some unexpected reason cannot complete the task timely. How you deal with it is what is important. It is expected that all group members be sensitive that an unexpected event could happen to them just as easily as it happens to someone else. For the group member that this unexpected event occurs, it is your responsibility to articulate in some fashion that respects your privacy yet gets the point across that you are trying to work through an issue that requires your attention. An approximate timeline to resolve the issue, if known, should be communicated to your group members. For the group members who can continue to work uninterrupted on agreed upon tasks, it is expected that you will be reasonably patient and understanding while your group member sorts through their temporary issue. You may even consider helping that group member get through their task. Always keep in mind that one day you could be the person with an unexpected issue to deal with. How would you want to be treated?
It is also expected that if an unexpected event becomes more permanent and you can no longer contribute to your group and must withdraw from the course, common courtesy will dictate that you inform your group members and instructor so they can make good decisions how to proceed with the rest of the project. You don’t have to provide a reason, but you should let other members know you will no longer be participating.
Can work be split up between group members?
No. Each group member has to create their own work. You can collaborate by discussing and sharing information, and have it reviewed by other group members, but ultimately each group member is responsible for their own work and their own timely submission.
I would like to meet with my group in-person or using some sort of video-meeting mechanism to streamline the process. I need options as my schedule may not align with my teammates’ schedules.
Meeting in person, as much as that would be helpful, encouraged and ultimately very beneficial, may not work for everyone in an online class environment, especially in a pandemic. Although statistically the vast majority of online students live/work within commuting distance of the school they attend, schedules may not align perfectly, posing a challenge for some of you. Some of you are in more remote locations and find it impossible to physically meet. Even in an in-class meeting environment, some students just attend class and leave the school immediately due to other commitments. Fortunately, CUNY as well has hundreds of other schools are moving in the direction of more and more video collaboration and other online collaborative options. The working world is continually moving to video conferencing and conference calls. You are strongly encouraged to take advantage of it to discover efficient ways to work within your groups. This particular project allows for students to work collaborative in online, hybrid or fully in-class meeting environments.
I don’t believe a team approach is meant for deliverable one simply because everyone can have a different task (one takes care of horizontal analysis, another takes care of vertical analysis, etc.). We can divide up the work more efficiently.
Work in deliverable one through four is meant to allow collaboration and to help each other share knowledge. As pointed out, it would be a challenge to really learn the objective of deliverable one if each group member divided tasks. In fact, it would be counterproductive and will not achieve the learning objectives. It is best to approach the deliverable one task by individually developing your own spreadsheets, but with group member collaboration to constructively critic each other’s work to make it better. From what I observed in past deliverable one submissions, collaboration has not been done to the extent that it should. The peer review process has always been encouraged, but not taken full advantage of. You can miss valuable skill building by not having your work peer reviewed. As one of my former students once commented, “What we can do as a team is to share tricks and effective way of doing things in excel.”
Teammates may not work or live near me. I work at a different pace. Can’t I do the project by myself?
In the business world, there is a growing trend that your colleagues at work often do not work or live near each other. This project gives you an opportunity to explore better ways to deal with distance issues within your group to align the pace of each group member more closely. Although almost impossible to achieve total pace alignment, it is skill that needs to be developed in order to help make better business decisions.
Additional Questions Concerning Deliverable One: Spreadsheets and Data
I may have underestimated the magnitude of data we would be analyzing. Do I really have to analyze all this data?
This is often the case with these types of projects. However, many jobs requiring interaction with accounting functions are underestimated in terms of time and commitment. This project helps to expose this reality to newbies to the accounting world, and reinforcing it with the more experienced accountants.
For deliverable one, can I use ratios other than the ones that are required?
You have to calculate the required ratios. This allows your group members to discuss outcome where everyone can participate in a discussion. In addition, you may use other ratios that are particular to the industry you are analyzing or if they are interesting to you.
A company I looked at reported $750.9 for other long-term liabilities in 2017 for the balance sheets in 2018 form 10-K, and $755.3 in the 2017 form 10-K. Which amount should we use?
This is always an interesting observation. When comparing the 2017 and 2016 financial statements, data on some balance sheet accounts are different for the same line items. In other words, the ending balance for some balance sheet accounts reported in the 2016 10-K did not carry over to same 2016 balance sheet accounts reported in the 2017 10-K. This is not an infrequent occurrence. Here is an example to help you understand this phenomenon. Let us say that ABC Company’s form 10-K for 2017 may report accounts receivable for $10,000 in 2016 and $11,000 for 2017. However, for the 10-K filed in 2018, the 2017 accounts receivable may be reported at $10,900. There is an obvious discrepancy between the reported amounts for the same year.
Therefore, for analytical purposes, a question arises. Which figure is the correct figure to use when analyzing a company? Should you use the originally reported figure in the earlier year, or use the adjusted reported figure in the later year? I have no definitive answer. It is probably worth an academic article to research. However, there is some guidance to help you understand why those phenomena occurs. In the Term Project Folder, you will find an article, “A Closer Look at Financial Statement Restatements”, which explains these phenomena and will help your make a final decision on what numbers to use.
Two schools of thought come to mind to decide what number to use. Some people may argue to use the original figures because these were the figures reported at the time investors/creditors made decisions. Others may argue that although at the time that investors/creditors made decisions, adopting that thought process waters down the predictive value of the financial statements. In the end, as someone making a business decision, you have to make the choice which figures you are using and if ever called into question, defend your decision. Reading through the article may help you understand how to potentially defend a decision. One could argue that there is no right or wrong answer, just preference anchored to a purpose.
This may not be the answer that you may want to hear, but not everything is clear cut in accounting.
It would have been beneficial to download the Financial Statements in Excel format instead of having to write the accounts and figures all over again. That would have saved plenty of time. However, I do believe by entering the data we became more familiar with the accounting terms.
It may be beneficial to download an excel file containing the income statement, balance sheet and cash flow statement. However, doing so impedes most people from developing familiarity with public firm’s actual accounting classification terminology, especially newbies to accounting who do not deal with public company data on a regular basis. Transferring data manually to develop familiarity is one of the primary purposes of deliverable one. As one of my former students once commented, “You need to touch and feel the numbers, build the statements, and it makes you want to understand your creation.”
I found creating the charts a bit difficult as I haven’t done that exercise in a long time. Do I really have to create charts? I never use them in my current job and I don’t think I will ever have to create them in any future job.
As far as the charting is concerned, it is critical that you learn data visualization. Besides excel, I encourage you to learn the basics of Microsoft Power BI and Tableau. At the Data and Analytics conference sponsored by the American Accounting Association in June 2019, there were 263 accounting professors there from all over the country and internationally. All of them were learning the latest in data gathering and visualization techniques. These techniques are being incorporated in accounting and business programs at a faster and faster rate. High level managers from EY and Deloitte were also present and all they talked about was the pressing need for their employees to be able to visualize data. This is the future of accounting and business. Graphing in excel should be second nature to you. If it isn’t, make it so. It has become a basic skill almost every employer will demand of you.
For the charts in deliverable one, can I use whatever type of chart that I want?
This is a common question regarding charting. Which type of chart should you use? For horizontal and ratio analysis, two-dimensional (2D) line graphs are effective visualization tools. For vertical analysis, bar graphs are effective visualization tools. However, it is important that lines are not bunched together in your chart.
When I create a two-dimensional line chart for horizontal and ratio analysis, my lines are bunched together (one line appears to sit on top of another line), and I cannot clearly see which line is which.
To avoid bunching of your lines in the chart, you have to increase the increments between numbers on the y-axis of the chart. For example, instead of labeling numbers on the y-axis 1, 2, 3, etc., consider labeling them 1.5, 2.0, 2.5, 3.0, etc. If that does not work, label them with even greater increments until the lines do not sit on top of each other.
Why do I have to submit deliverable one on an Excel spreadsheet and not a pdf file? I am good converting excel spreadsheets into pdf’s.
An Excel spreadsheet will contain the formulas and other information that you used to create your spreadsheet. When converting to a pdf, the audit trail of how formulas were used and how they tied into other areas of the spreadsheet is lost. Some students attempt to create a pdf from an excel spreadsheet, but do not possess the skill to do so and formatting is off. The most common problems are the data is cut off from one page and does not appear on another, or data bleeds into other pages without appropriate column headings to understand what the data relates to. In order to avoid readability issues, only an excel spreadsheet is acceptable. While it is appreciated that some students may have knowledge to properly format an excel spreadsheet so it is readable in a pdf, an audit trail must be maintained.
Additional Questions Concerning Deliverable Two: Company Level Risk and 10-K Analysis
Although teamwork was encouraged, my teammates and I were individually trying to gain as much understanding of the information as possible. We ultimately agreed that it was indeed quite a daunting task in figuring out the risks from the bounty of information. Connecting the information we gathered from the statements and deducing risk association was a bit difficult. How can it be made easier?
Deliverable two can be a daunting challenge. That is why you need to focus on one or two risks and do not deviate until you understand them well. The following is some more guidance if you are still stuck on what to do and how to do it – which you can apply to the deliverable three hospital facility level risk analysis as well.
Connecting risks to the financial statements becomes so much easier when you can answer the question:
“If something were to happen to your chosen hospital, be it good, bad or indifferent, what would be the effects on the financial statements, and how do they reveal itself in the vertical, horizontal and ratio analyses”?
The following is an example how this process can work. Let’s say the price of mattresses could suddenly rise because of a coup attempt in a country where your hospital imports a significant amount of mattresses. The government could become unstable. Transportation lines could be disrupted. The price of fuel could spiral out of control. So many things could happen. Then ask yourself, “From an accounting perspective, what do mattresses represent to your company”? Is it a supply, inventory, a fixed asset, a liability, an expense, etc.? Once you understand its classification, which is a fixed asset, you need to understand how it is reported, which is a long term asset. Where is a long term asset found? It is found on the balance sheet. If the price of mattresses rise, what happens to the balance sheet? The price paid for fixed assets rises. Given all else equal, the price rise would reveal itself in the horizontal and vertical analysis, as well as the long-term (fixed) asset related ratios. How would increased prices affect the income statement? If your company increases prices on its hospital beds, revenue would increase, not because the overall sales volume increases, but the cost of the mattresses increase, often forcing occupancy price increases. How would that affect the financial statements and how would these effects reveal themselves? Theoretically, gross profit could increase, decrease or remain the same.
The price of mattresses that I just elaborated may or may not be part of the discussion that management chooses to disclose in its risks or any other place in the 10-K. Some hospitals may have had to replace all their mattresses due to the coronavirus. Mattresses are not cheap. If this is a risk you chose to examine in deliverable two, I would look for any discussion on price increases/decreases and understand how management is framing the discussion to see if it conforms to what you are seeing in the horizontal, vertical or ratio analysis (quickly viewed by looking at your graphs). This takes us back full circle to the question “If something were to happen to your company, be it good, bad or indifferent, what would be the effects on the financial statements, and how do they reveal itself in the vertical, horizontal and ratio analyses”? But now you rephrase the question to state, “What is management saying if something were to happen to my company, be it good, bad or indifferent, and does their narrative in the 10-K conform to the effects on the financial statements, and are those statements consistent with the vertical, horizontal and ratio analyses outcomes”?
Let us take another possible approach. You may be able to think in terms of the purpose of the financial statements and how their purpose may be compromised. If the purpose of the Income Statement is to report Revenues and Expenses and the ability of a company to make a profit, what events could compromise the ability of a company to make a profit? In other words, what events could diminish the company’s ability to produce revenue or control expenses? If you recall from your readings, the purpose of an asset is to produce revenue. If an asset is compromised, its revenue producing ability could be diminished. So, what events could cause assets to not produce revenue? There are many situations whereby that can occur. For example, if an item of inventory which is an asset is stolen, it can no longer produce revenue since it is no longer for sale. Normally, if a company sold inventory for cash, it would debit Cash and credit Sales Revenue. If the inventory item was stolen, that entry will never be made and therefore, a credit to Sales Revenue no longer is a possibility. When creating an income statement, that item of stolen inventory will never produce a sale. Therefore, Revenue is decreased and thus, so is net income. When you review the 10-K, especially the risk factors, what does management discuss about inventory controls to mitigate the risk of theft of inventory? What is the effect on the liquidity ratios?
Let’s examine this via the balance sheet. The purpose of the balance sheet is to report the financial condition of the company at a point in time, specifically reporting assets, liabilities and equity. A company’s ability to control liabilities is a very important to an investor/creditor. If assets remain the same, the more liabilities a company incurs, the less equity it will have. The less equity a company has, the less the owner’s have to a claim on assets. A problem that many public companies face is controlling the debt/assets ratio. The more debt, the more a company has to make its assets produce revenue in order to pay back liabilities. So, understanding how a company controls its debts is critical. What situations do you know of that could cause debts to rise or go out of control? These would be risks to a company. Consider the following. At a certain point, the more a company borrows, creditors will make assumptions that it is riskier to lend money to them. Creditors signal this by charging higher interest rates and impose shorter pay back periods, as well as less more restrictive terms. Some of these restrictive terms could come in the form of debt covenants which may state that if certain ratios trend negatively, it may trigger loans to be called (that is, to be paid back immediately). For instance, a debt covenant could require a company to maintain a current ratio of 2:1. If the company falls below it for two straight quarters, they may call the loan due. If you were privileged to this information, you have ask yourself, “What risks could cause the current ratio to fall below the 2:1 threshold in my example?” From your deliverable one spreadsheet, you now know the numerator and denominator components of a current ratio so you can figure it out. What is it that management discusses about its debt that may affect the balance sheet? How does management disclose it? What is the trend? What is management doing to reduce the risk of rising debt?
We could spend all day discussing potential risks to a company. Companies have dedicated staff just looking into these types of issues. How they examine risks, how they disclose them and what they choose to do about them varies from company to company. How they affect the financial statements varies from company to company. What you will probably discover is that management discusses certain risks at length and others barely disclose anything, if at all.
When analyzing risks in deliverable two,
there is no right or wrong answer. Just your best interpretation of the situation you are analyzing to help you understand a new approach to making good, informed business decisions. As you can see from the grading rubric, this deliverable is not graded whether or not you identified the “right” risk and analyzed it for a specific, correct answer. The grading is based more on a process of identifying risk, demonstrating how it can be tied to the financial statements from your perspective and supporting your rationale, understanding ratios in your analysis, and of course, your presentation.
It does take practice to get good at this type of analysis and you certainly may not be used to it, even for experienced accountants. In fact, several of my former students who were high level, experienced working accountants expressed that this approach was very beneficial, and they learned a lot of new things. That is another reason why this project is divided into deliverables and a team approach is best to collaborate, sharing ideas and insights, and try to better understand what you are reading.
This exercise is not difficult. It just takes a little focus to identify a potential risk, read everything you can about it, and figure out how it affects the financial statements. The spreadsheet analysis will be extremely helpful to dissect each account. I am not expecting a full blown risk analysis. That would be many pages long. You could write a book on the risks your company faces. I want no more than two pages, single spaced to discuss your findings. Keep it short and concise.
I am still having difficulty understanding which accounts I believe could be affected by the risk I identified and how they could affect the accounts disclosed in the balance sheet, income statement, and statement of cash flows.
Using journal entries is a practical approach to demonstrate how accounts could be affected. For example, let’s assume your company identified that it could be sued for making coffee too hot. What journal entry would your company make in its books if several customers actually did burn themselves and they decided to sue your company? This accounting falls under the topic of contingent liabilities. If a loss event is probable and reasonably estimated, your company would make a journal entry debiting an expense account and crediting a liability account. Companies have discretion in what they actually name these accounts, as long as they are expense and liability accounts. Let’s assume your company debits Lawsuit Expense and credits Estimated Lawsuit Liability. Furthermore, they expect litigation in this matter to take longer than one year, so they classify the Estimated Lawsuit Liability as long term. The Lawsuit Expense has nothing to do with the cost of inventory, and therefore it is an operational expense. The Lawsuit Expense account affects the Income Statement, and the Estimate Lawsuit Liability affects the Balance Sheet. Therefore, various ratios in a ratio analysis would be affected.
How would your vertical, horizontal and ratio analyses be affected by a lawsuit?
Continuing the hot coffee spill lawsuit example, increasing a lawsuit expense would affect vertical analysis by altering the overall expenses to revenue ratios. It would also affect the overall mix of operational expenses. It would only affect horizontal analysis if there are other lawsuits existing that are recorded in the books, otherwise it would be a new account entered into the horizontal analysis. It could affect ratio analysis multiple ways.
To understand how it may affect ratios, you first need to familiarize yourself with the vast array of ratios that exist. In this course, we only focus on a relatively small amount of ratios to make this project more manageable. Once you have familiarized yourself with the ratios, you must deconstruct (break apart) the components of the numerator and denominator of each ratio. For example, let’s assume that you have familiarized yourself with the long term debt to long term assets ratio (a measure of solvency). This ratio measures how much long term debt a company has relative to its long term assets. A long term debt to long term assets ratio of 1:2 means it has $1 in long term liabilities to $2 of available long term assets to pay that long term debt. That further means that out of all its Property, Plant and Equipment, it can pay off all its long-term debt. If a company is sued and records a journal entry the long term debt to long term assets ratio increases because the numerator gets larger while the denominator remains constant. When your company settles the lawsuit, it lowers its long term liabilities, but also uses its short term assets (using cash). The settlement not only will affect the long term debt to long term assets ratio, but also the current ratio. If you deconstruct the current ratio, you will see that the numerator consists of current assets and the denominator consists of current liabilities. Cash is a component of current assets, while long term liabilities are not a component of current assets. Understanding mathematical operations related to fractions would help you better understand how ratios are affected.
Many transactions affect ratios in different ways. Depending on the user of financial information, your choice of ratio analysis can be widely affected.
Should I select a risk that is broad or narrow in scope?
Generally, the more broad the risk, the more difficult the task to tie them to the financial statements. Additionally, it will be more difficult to discuss them in a concise, coherent discussion.
Here is a case in point. A few of our students in past classes attempted to tackle strategic or financial risk to the company and tie specific indicators in horizontal, vertical and ratio analysis. Those are among the broadest and toughest risks to tackle. You have to clearly define strategic or financial risk before you can proceed. Therefore, these broad issues are not recommended for this type of project.
The better types of risk to analyze are much more specific, occurring within strategic or financial risk. Examples include the risk of not collecting money owed on accounts receivable, or the risk of a machine that makes a specific imaging (equipment) being recalled and therefore the hospital facility can no longer produce revenue on the imaging, or the risk that a vendor they deal with goes out of business and therefore a supply chain in inventory disruption occurs.
As you conduct the hospital facility visitations (virtual or from a distance), you have to keep in mind to identify risks that are simple and easy to understand, and could occur in any of your company’s locations. Perhaps I can yet explain more specific and manageable risks to discuss through the story about the kid who starts a lemonade stand.
Let us start from the point that a little girl has started a successful lemonade stand on the corner of her street. All the kids in the neighborhood love and buy the lemonade. The girl used a secret recipe her grandmother gave her which she has sworn never to reveal. Let’s say that a boy in the neighborhood is entrepreneurial and approaches her to expand the lemonade stand business to another location in the next neighborhood and split the profits. The boy saved money from his paper route and is willing to invest it to build another lemonade stand. In order to make a good business decision, the boy needs to understand the risk of investing his time and money into the business. Fortunately, the little girl took good notes of the finances of the business, documenting all sales and expenses. Her Dad the Accountant even taught her to create a balance sheet, income statement and cash flow statement.
The boy has to assess the probability that the business will continue and be profitable. He performs a risk analysis and identifies various risks of expanding the lemonade stand business. What if another kid opens up lemonade stand nearby? What happens if the price of lemons, or sugar increases? What happens if the kid has to pay another kid to operate the stand? What happens if the health department requires them to get a special lemonade stand license? What happens if a kid makes lemonade without washing their hands and someone gets sick from the product? What happens if the lemonade stand was not constructed correctly and a kid gets hurt and the parents sue the girl’s parents? Speaking more globally, what happens if tariffs are implemented that affects the price of sugar? What if a devastating fungus hits lemons trees in the southern portion of the North America, where a significant amount of lemons grow? What happens if her Grandmother thinks she is sending an email just to her granddaughter giving her the secret recipe for the lemonade, but she accidently sends it to someone else in the neighborhood who tells everybody (an unintentional disclosure) else in the neighborhood via a Facebook posting? Okay, some of these risks I discussed maybe a stretch from reality, but I think you get the point. Anything good or bad can happen to a business. Use your imagination and common sense what those events could be.
Once the boy can assess these risks, he will have to ask himself, if one or more of these events happen, how will affect the financial operations of the business? Can the boy use any financial tools to figure it out? Yes, he can use horizontal, vertical and ratio analysis to get a clearer picture how these events could affect the business. He can further visualize the data with charts. Let’s say he is most concerned about another kid in the next neighborhood opening up a lemonade stand as a competitor. What does competition mean? If you were selling something and a competitor started selling a similar product to yours, what areas of the financial statements would it most likely impact? Probably revenue. A competitor could take away sales. If enough sales are diverted from the business to a competitor, another problem to deal with is controlling expenses. In the lemonade stand example, if a kid opens up a competing stand nearby and sales are drawn away, the boy will have inventory that may become stale and obsolete. Lemons and ice are perishable, and they have an immediate effect on cost. The boy will have to control costs by reducing the inventory and supply levels.
The steps to understanding how risks could affect the financial statements of the lemonade example can be extrapolated to a public company like yours. Of course, the issues with a public company are much more complex, but the principles of analyzing are similar. You have to start with fundamental questions and use common sense to understand what management is saying to the public and how it conforms to the actual published figures in the financial statements in order to make good business decisions. Among the many benefits of the term project, this approach helps to understand this process.
When you conduct your hospital facility level visitations, let your mind wonder what could happen in that hospital facility that could also happen to several hundred or thousands of hospital facilities in the same time frame. It could be a strike upsetting the supply chain, the way they conduct their policies, the type of medical testing kit used, an inefficient machine used in all hospital facities, an ingredient in their consumable products suddenly known to cause harm, the need to refurbish furniture, etc. Those are just some of the many, many visual things I could sit in a hospital facility and think of. A strike affects inventory (revenue, assets, expenses), policies affect Human Resource and salary issues (liabilities and expenses), coffee and cocoa beans affect inventory (revenue, assets, expenses), harmful consumable products affect possible lawsuits (liabilities and expenses), refurbishing furniture (assets – particularly cash).
Other issues that are not so apparent could be the mix of inventory or whether they use LIFO or FIFO. What depreciation methods and assumptions are they using? Is a hospital bed supposed to be depreciated over 2 years, 3 years, 5 years? Does it have any salvage value? How does the choice of a depreciation method affect the financial statements? How do they accept payment? Cash, credit, prepaid store value cards, their app? What could go wrong with these methods? How are they paying for their inventory – cash or credit. If credit, what are the terms (affects current and acid-test ratios).
Additional Questions Concerning Deliverable Five: PowerPoint Presentation
The fourth step in the term project requires you to prepare and present (that is, communicate) your findings to the class. This is a recap of your entire term project presented in a clear and concise manner. In a 6-8 minute narrated PPT presentations, you are to present one to two slides for each deliverable summarizing results of any information/analysis you found most interesting.”
What I did not state for deliverable four is how to make the presentation and your audience. You do not have to make a video presentation whereby you are in the video. You should voice narrate it if possible. Your audience is general in nature. You are not speaking to the instructor. You are speaking to anybody who potentially would like to understand a little bit about your company. The audience could include potential friends or family who may want to buy your company’s stock, or an investment banker who is considering buying a large stake in the business, or a banker who is considering giving a loan to your company, or your teacher who wants to understand what you learned. Keep in mind that you are not making a full-blown financial analysis of your company – that would take months and a lot more accounting knowledge. This presentation is just a little slice of the financial analysis pie in your little corner of the world and you are telling your story about what you learned. Don’t go crazy making slides that fade in and out, or making them spin, or creating letters that fragment when disappearing. Although these affects jazz up a simple presentation, they are not necessary and in fact, discouraged. Keep the presentation professional looking.
For the group PowerPoint, how long should the presentation actually be?
I don’t have a hard and fast rule for the length of this presentation. I stated in the instructions that it should be about 6-8 minutes. That is your target time frame. It can be longer or shorter. It could be as little as five minutes (but I don’t see that as possible given the magnitude of the project summation), or 20 minutes (but such a long presentation will be a tremendous amount of work on your part, classmates may not view it in its entirety, and your PPT file sizes will magnify).
Keep in mind that there are many groups in the class. If you had to view six other presentations posted on BB, each 20 minutes long, it is 3 hours of viewing. With everyone having busy schedules and preparing for the final exam, I highly suggest keeping things short and sweet. Say a lot in as little time as possible but keep it interesting.
For the group PowerPoint, we are still confused how to present the slides. Can you offer any more advice how should we present our PPT?
In any good presentation, you are telling a story. In this presentation, you are telling a very short story about your project, deliverable by deliverable. If you were to tell the story of what you did for your term project to your friends/family, what would you say to them and how would you show them in just few minutes? The probably is high that you told a close friend or relative about this term project and what you had to do. What story did you tell them? You may be able to draw from those stories and integrate it into your PPT.
If you were to summarize in one or two slides per deliverable how this project enlightened your skills in accounting, and wanted to show your friends, family, classmates, potential recruiters, employers, colleagues, school administration, etc, how would you present it?
Showing what your group members learned during the length of the term project and why it is interesting is the bottom line.
What is considered “enough” is for your group to encapsulate a cogent summary of the project?
What is “enough” is when you start losing your audience because it is too long, or too complex to understand, or it just becomes uninteresting.
What shouldn’t we presentation in our PowerPoint presentation?
There is no need for any type of long introduction about your company. Who runs the company, when it was founded, where it is headquartered, etc. should be very concise. The project is not about those details. Just skip the heavyt intro stuff you probably would make in other classes and get right to the heart of the matter. I want to hear
your story about what you did and learned, not your company’s story.
Are there specific points that we have to address in the PowerPoint slides?
Within your group, if you can identify one or more abstract or difficult accounting concepts that you read in the textbook that was made much clearer because of this project, discuss it. The main point of this project is to make abstract or difficult accounting concepts easier to understand.
Does each member in our group have to upload the PowerPoint presentation?
No, only one person on behalf of the group (the selected deliverable four group leader) should upload it in Blackboard. Once graded, all members of your group will have the grade posted and available for you to see in your My Grades section. The grades for the PowerPoints will only be available to the group who submitted it.
Do you have to use SafeAssign or TURNITIN for our PowerPoint?
Depending on the school’s policies, some work is required to be submitted through a plagiarism tool. Generally, we make our students use plagiarism tools.
Additional Questions Concerning Deliverable Five: Individual Reflections
Why can’t I collaborate with other group members to help me write up my reflection?
The individual reflection is personal. It is meant to allow you, as an individual to express how you feel this project helped you.
What kinds of things should I be writing about?
A33: You should be writing about what you learned from the material and what you learned from how the work was done.
Appendix D, Submission Top Sheet
Prof. F. Kass
Term Project Submission Cover Sheet
Course
Section
Term
Deliverable #
Title of Deliverable
Company
Team Members
1
2
3
4
5
6
Team Leader Certification
I hereby certify that:
1. I am the appointed Manager for this deliverable.
2. Each of my team members worked to 100% of the expectation on this project.
3. If any team member did not work to expectation, I have indicated next to their name (above) the percentage of the expectation they did work. (You must be able to explain any reduction in the work.)
4. No part of this submission was copied or otherwise plagiarized. All rules of academic integrity have been adhered to.
Name
Signature
This sheet must be the top sheet for each group submission. If submitting in Excel® copy and paste the grid into Excel. If submitting a PowerPoint put this in the first slide.
Appendix E – Some Tips for Writing and Submitting a Paper
1. All writing should be done in Times New Roman font, 12
2. All writing style and citations should be done according to the American Psychological Association, Seventh Edition. Details can be found at:
a.
https://apastyle.apa.org/style-grammar-guidelines/paper-format/margins
b.
https://libguides.brooklyn.cuny.edu/cite/apa
3. The library has an on-line tools called Refworks and Write-N-Cite that can help you with citations and bibliographies. Librarians are available to help you set up and use these tools.
4. Your paper should be double spaced.
5. All your submissions should be in an MS Office format. BB has problems with formats other than MS Office or PDF. If you need to scan a document, you can do that in the library or West Quad computing center.
6. Grades will be reduced if your cover sheet is missing, or a document is not uploaded properly.
7. When writing a paper on behalf of a team do no us “I”. Use “we”.
8. You can, and should, use charts in your writing to illustrate your point.
Appendix F – Questionnaire to Test for a Hospital Corporation
Questionnaire about the hospital corporations:
Note: For this part of the project, you may copy and paste answers from the 10-K
|
1. Name of the Corporation |
|
2. From the form 10-K filing, Part1, Item 1 What is their business description? |
|
3. From Note 1 to the Financial Statement What is their principal business? |
|
4. What is the location of their corporate headquarters? |
|
5. What is their EIN? |
|
6. What is their Stock Symbol? |
|
7. On what market do they trade? |
|
8. In what section of the country do they primarily do business? |
|
9. How many hospitals do they own and/or operate? |
|
10. How many beds are under their management? |
|
11. Which CPA firm did their last audit? |
|
12. Which office of the CPA firm did their last audit? (For example, most car manufacturers are audited by the Detroit, Michigan office of the CPA firm.) |
|
13. How many members are on their audit committee? |
|
14. Do any members of their audit committee have accounting expertise? Financial expertise? |
image1
image2
image3
image4
image5
image6
image7
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
