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Financial Statement Analysis: Coca-Cola, Google and Yahoo!

You will be using financial statements to answer the following questions.

1. Choose any three publicly traded companies as long as you have at least one company that deals with a product and at least one company that deals with a service.

2. Next, go to the web site of each company and find their annual report to shareholders. You will generally find this in "investor" or "shareholder" information. You may need to dig in by several layers before you come to financial statements. If the company has a search feature on its web site, enter "annual report."

3. For each company answer these questions: How much cash is available for the company to pay its current debts? Is the company in trouble or in good shape? [Hint: compare Current Assets with Current Liabilities. Assume that all Current Assets will be converted into cash before all of the Current Liabilities become due.] You will need to provide supporting details such as numbers from the financial statements.

4. Is each company increasing or decreasing its investment in its operations. [Hint: look at "Cash Flow from Investing Activities on the Statement of Cash Flows. Then note the change in Non-Current Assets on the Balance Sheet from one year to the next.]

5. How well is each company doing in its operations? [Hint: Look at the three year trend in Net Income on the Income Statement and at Cash Flow from Operating Activities on the Statement of Cash Flows.]

6. Finally, based on your answers to the above questions, give each of the presidents of your companies a letter grade (A, B, etc) for his/her performance over the most recent year reported in the financial statements. Explain your grade.

Solution Preview

For your convenience, I have attached a formatted MS Word file and a formatted MS Excel spreadsheet containing the information below. I have also posted notes that you might find useful in gaining a better understanding of the covered material. Feel free to contact me in the future in the event that additional assistance is required.

Publicly Traded Companies under Review:
1. The Coca-Cola Company - a production company
2. Google, Inc. - an Internet service provider
3. Yahoo! Inc. - an Internet service provider

As can be seen in the comparison of selected financial results chart above, The Coca-Cola Company although generating a great deal more income than both Google and Yahoo combined, has less cash available to pay its debts, than the two service companies, with only $12B dollars in current (Quick) assets available during 2007 to offset $13B dollars in current debts. Both Google and Yahoo for the same year were in a better financial position to meet their current financial obligations, with Google having $4B in current assets to meet $2B in debt, and Yahoo! having a $3B current asset cushion ...

Solution Summary

This formatted Excel spreadsheet illustrates how financial statements can be utilized to answer the following questions:

1. How much cash is available for a company (or companies) to pay current debts?
2. Is the company (or companies) in trouble or in good shape?
3. Is each company (or companies) increasing or decreasing its investment in its operations.
4. How well is each company (or companies) doing in its operations?

$2.19