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    Financial Statement Analysis (Apple, Inc.) and Types of Business Forms

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    What information do financial statements provide? What are the advantages and disadvantages of the different forms of business?

    Topic A
    Look at the four basic financial statements for any publicly traded corporation. You can find them at the SEC website using their search tool here: http://sec.gov/edgar/searchedgar/companysearch.html. Find the total assets, liabilities, and shareholders' equity for the most recent year (in the annual report). Study the income statement for the most recent year. What information do these statements provide? Make a list of 10 questions you have about the financial statements.

    Topic B

    You are a consultant who advises potential new business owners. An acquaintance is planning to start a small business that he wants to run as a sole proprietor. But he explains that he does not understand other business forms that he may adopt, and two of his friends may want to join the business in management roles. The business will be a landscaping firm that is expected to grow rapidly and require large investments in equipment in two to three years. Create a PowerPoint presentation for the potential new business owner that compares and contrasts the three main business forms and addresses advantages and disadvantages of each form. Include examples of types of businesses that would best fit each form. Present your recommendation for best business type for the new business owner.

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    Solution Preview

    Topic A
    First, let us identify the four basic financial statements that all publicly traded corporations have to submit to the Securities and Exchange Commission (SEC) every quarter and year. These are:
    1. Balance sheet - this financial statement shows the cumulative record of the company's assets and the funding resources for these assets - liabilities and owners' equity from the time the company was established to present.
    2. Statement of cash flows - this shows the sources of the company's cash and where it used its cash for the given accounting period, which could be monthly, quarterly or annually. This financial statement is divided into three sections: cash from (used by) operating activities, cash from (used by) financing activities; and cash from (used by) financing activities.
    3. Income statement - this statement presents the company's income for the given accounting period
    4. Statement of changes in owners' equity - this shows the changes in owner's capital. These changes usually come from net income, withdraw and additional investments by owners.

    I used Apple, Inc. for this exercise. You can access their financial statements for the year ended September 30, 2013 in their Form 10-K filing with the SEC which is at http://www.sec.gov/Archives/edgar/data/320193/000119312513416534/d590790d10k.htm.

    This filing contains other data but we will only look at the four financial statements which is presented starting at page 44.

    For the total assets, ...

    Solution Summary

    What information do financial statements provide? What are the advantages and disadvantages of the different forms of business?