Build Your Own Analysis Engine Project Guidelines Paper For the company: Beyond Spring Inc. (Nasdaq CM:BYSI)Follow the guideline to do project list below w

Build Your Own Analysis Engine Project Guidelines Paper For the company: Beyond Spring Inc. (Nasdaq CM:BYSI)Follow the guideline to do project list below with Footlocker Inc with an example.Also i can email you with the textbook if you need.Relate to knowledge base on F/S analysis and reform the B/S I/S, cashflow. Build Your Own Analysis Engine (BYOAE) PROJECT guidelines for the company
Beyond Spring Inc
The company: Beyond Spring Inc. (Nasdaq CM:BYSI)
Executive Summary – Address the letter to the CFO of the company from you.
Table of Contents – List the components of the report.
Report – Here you will describe the company, the analysis, and your conclusions. After
an introduction, the sections will be:
1. The Business (generally describe the business including its stock price
and symbol; see 10-k items 1, 1A, and 5, plus any other material you
deem relevant; cite the sources).
2. Management Outlook for the Company (use information from the MD&A
section, 10-k item 7, plus any other material you deem relevant; cite the
sources).
3. Market Outlook for the Company (summarize an analyst’s report; identity
any financial statement issues if any; cite the sources).
4. Accounting Policy (see 10-k item 8 and notes, plus any other material you
deem relevant).
5. Financial Performance (based on reformulated financials, use summary
measures to compare the latest fiscal year to the one previous; end with a
simple valuation model).
6. Conclude with commentary pertaining to accounting quality, the potential
for perceived manipulation of earnings, valuation implications, and liquidity
and solvency.
7. Exhibits
Roadmap to Developing Your Own Financial Statement Analysis (1)
Introduction
The Project will entail examining financial statements for the last three fiscal years.
This roadmap leads you through the steps to create a valuation tool. With this tool you will be able to
reformulate financial statements in a spreadsheet program, analyze the financial statements using the
techniques in the book, forecast pro forma financial statements, and value firms from those pro forma financial
statements. In the end you will have a valuable tool to carry with you into your professional life and to use for
your own personal investing.
Use the tool for:
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Reformulating financial statements (as in Chapters 8-11)
Analyzing financial statements (as in Chapters 12-13)
Assessing the quality of the FS and the valuation and solvency of the company (as in Chapters 15, 17,18, and 20)
You will find that building your own analysis product is very satisfying. It will help you grasp the concepts behind
the analysis, for the concepts come to life as you make them work for you in practice. And you will discover the
points where your understanding is weak. Off-the-shelf spreadsheet programs that you can use at the press of
a button are available but pressing buttons is dangerous if you are not sure about what is going on inside the
program. Better to develop your own model, following sound principles, and so be assured of the integrity of the
product.
Notes:
(1) Based on information provided with Financial Statement Analysis & Security Valuation Fifth Edition, Stephen Penman 2012.
Roadmap to Developing Your Own Financial Statement Analysis
The roadmap: steps for building the product
Chapter 8 gives the form of the financial statements you should work with and the accounting relations
that tie the various parts of the statements together.
Start with reformulation of the financial statements within a spreadsheet, following the design in the
book. Then carry out the financial statement analysis.
Work with the textbook beside you. The most relevant part of the text is Chapter 7 to Chapter 16,
where financial statement analysis and valuation are covered in detail. Nike Inc. serves as an example
of the application techniques described in the chapters.
The steps:
1. Download financial statements
Last three fiscal years
2. Reformulate financial statements
Statements of shareholders’ equity
Income statements
Balance sheets
Statements of cash flows
3. Financial statement analysis
Ratios based on reformulated financial statements
Analysis of profitability
Analysis of growth
4. Simple Valuation
Valuation using simple book value plus the present value of residual earnings.
Roadmap to Developing Your Own Financial Statement Analysis
Step 1: Download Financial Statements
The US Securities and Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval (SEC
EDGAR) system provides electronic access to companies’ financial reports. Access a company through
EDGAR at:
https://www.sec.gov/edgar/searchedgar/companysearch.html
Roadmap to Developing Your Own Financial Statement Analysis
Step 2: Reformulation
Analysis begins with the reformulation of financial statements. Reformulation readies the statements for analysis
within a spreadsheet. The aim is to:
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Separate operating and financing items in the statements
Bring additional information into the statements from footnotes and elsewhere. The financial statements
aggregate a lot of information (particularly the income statements). Break down the aggregation to give more
detail.
Allocate taxes in the income statement to operating and financing activities
Distinguish different components of income such as core operating income from sales, other core operating
income, and unusual items
Before beginning, make sure you understand the reformulation template in Chapter 8 of the book. Chapters 8-11
cover the rules and principles for reformulation.
Spreadsheet programs like Excel allows you to use either the simple copy-and-paste method or the formula
method to manipulate the financial statements when doing the reformulation.
In the next section, the reformulated statements of shareholders’ equity, balance sheets, income statements, and
cash flow for Foot Locker, Inc. for FY2015-FY2017 are given next to the original statements.
Note the following points on the reformulation:
(a) Cash and cash equivalents in the balance sheets are split between a portion for operating needs and
investment of excess cash in financial assets
(b) Some additional expense items may be added to the income statements from the footnotes.
(c) Core and unusual operating items have been distinguished in the income statements.
(e) The tax allocation in the income statements involves not only allocating taxes between operating and
financing activities but may also be between core operating income and the restructuring charges. Note that
foreign currency translation gains and losses are already after tax.
Roadmap to Developing Your Own Financial Statement Analysis
Summary of reformulation steps
1. Statement of Shareholders’ Equity
1) Restate beginning and ending balances for items incorrectly included in or excluded from common
-Preferred stock (take out from SE and include in “financial liabilities” in B/S).
+Dividends payable (take out from “accrued liabilities” in B/S and include in SE)
– Noncontrolling interest
2) Calculate net transactions with shareholders
= Cash dividends +share repurchases – share issues
(Cash dividends = dividends declared – change in dividends payable)
3) Calculate comprehensive income
= Net income +”other comprehensive income”
-Earnings from accounting changes
-Preferred dividends
-Hidden dirty-surplus losses
2. Balance Sheet
1) Classify GAAP assets and liabilities accounts into 4 categories: OA, FA, OL, FL
2) Regroup accounts under NOA (OA, OL) and NFA (FA, FL)
3) Refer to comments in the Foot Locker example to make adjustments for specific accounts
3. Income Statement
1) Reclassify GAAP income and expense items into core operating, non-core operating, and financial
2) Read footnotes carefully for income and expense items to find any non-core activities incorrectly
classified under core activities
3) Account for tax effects in reclassifying incomes and expense items to make them after-tax basis
4) Bring “other comprehensive income” from the Statement of Shareholders’ Equity. Most of them go
under non-core operating activities. No need to account for tax for these since they are after-tax basis
4. Statement of Cash Flows
No need to make major adjustments. Derive Free Cash Flow under two different methods. For the net
dividend (“d”), use the value derived in the equity reformulation.
5. Reformulation Checks
Link accounts from four statements to ensure that numbers are reconciled according to the equations in
Chapter 8.
Foot locker, Inc.
Ticker Symbol:
FL
Step 2: Reformulation
2.1. Reformulation of the Statement of Shareholders’ Equity
(in millions)
Additiona Treasury
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY l Paid-In
Stock
USD ($) shares in Thousands, $ in Millions
Capital & [Member]
Beginning Balance at Jan. 30, 2016
$ 1,108
$ (1,371)
Beginning Balance (in shares) at Jan. 30, 2016
173,398
Beginning Balance (in treasury shares) at Jan. 30, 2016
(36,421)
Restricted stock issued (in shares)
203
Issued under director and stock plans
$ 32
Issued under director and stock plans (in shares)
1,342
Share-based compensation expense
$ 22
Accumulat
Retained
ed Other
Earnings
Comprehe
$ 3,182
$ (366)
Exhibit A
Total
$ 2,553
REFORMULATED SHAREHOLDERS’ EQUITY
FY15
Ending Balance FY2015
Transactions with Shareholders
Issued under director and stock plans (in shares)
Share-based compensation expense
32
22
Excess tax benefits from equity awards
Shares of common stock used to satisfy tax withholding obligations (in shares)
20
Share repurchases
$
2,692
CS dividends declared
Dividends payablet
(7)
Excess tax benefits from equity awards
Forfeitures of restricted stock
Forfeitures of restricted stock (in shares)
Shares of common stock used to satisfy tax withholding
obligations
Shares of common stock used to satisfy tax withholding
obligations (in shares)
Share repurchases
Share repurchases (in shares)
Reissued – employee stock purchase plan
Reissued – employee stock purchase plan (in shares)
Retirement of treasury stock
Retirement of treasury stock (in shares)
Net income/(loss)
Cash dividends declared on common stock ($1.24, $1.10,
$1.00 per share in 2017, 2016 and 2015 respectively)
20
1
$ (1)
Reissued – employee stock purchase plan
(20)
$ (7)
Cash dividends paid on CS
Ending Balance (in shares) at Jan. 28, 2017
Ending Balance (in treasury shares) at Jan. 28, 2017
Restricted stock issued (in shares)
Issued under director and stock plans
Issued under director and stock plans (in shares)
Share-based compensation expense
Shares of common stock used to satisfy tax withholding
obligations
Shares of common stock used to satisfy tax withholding
obligations (in shares)
Share repurchases
Share repurchases (in shares)
Reissued – employee stock purchase plan
Reissued – employee stock purchase plan (in shares)
Retirement of treasury stock
Retirement of treasury stock (in shares)
Net income/(loss)
$ (283)
(42,327)
2
$ (81)
664
(147)
(502)
Cash dividends
147 E
147 CF
139 CF
139
664
(8)
(1)
12
Check sums
(here is a way to check that the items broken out sum to the amount shown on the statement – a simple yet useful tool)
667
2,254
(363)
2,857
Issued under director and stock plans
(8)
(1)
12
2,710
$
Transactions with Shareholders
Share-based compensation expense
Shares of common stock used to satisfy tax withholding obligations
Share repurchases
FY16
Reissued – employee stock purchase plan
Cash dividends paid on CS
11
15
(10)
CS dividends declared
Dividends payablet
(467)
Dividends payablet-1
8
(147)
(590)
157 E
157 CF
147 CF
Cash dividends
147
CS dividends declared
158 E
(1,120)
169
$ 11
608
$ 15
Comprehensive income
Net income/(loss)
Translation adjustment, net of tax
Change in cash flow hedges, net of tax
11
15
(10)
$ (10)
Pension and postretirement adjustments, net of tax
284
114
(1)
11
(140)
Unrealized gain on available-for-securities
$ (84)
(12,131)
$ (467)
(12,414)
$8
110
$ 487
12,131
Ending Balance FY2017
8
Transactions with Shareholders
Issued under director and stock plans
Share-based compensation expense
Shares of common stock used to satisfy tax withholding obligations
(403)
284
$ 842
121,262
$ (63)
41
114
(1)
11
1
(41)
2,019
(279)
93
$6
175
$ 22
2,676
6
22
(1)
2,519
Reissued – employee stock purchase plan
Cash dividends paid on CS
Dividends payablet
Dividends payablet-1
(375)
2
(157)
(503)
FY17
Net income/(loss)
Translation adjustment, net of tax
Pension and postretirement adjustments, net of tax
Cumulative effect of the adoption new ASUs | ASU 2014-09
Cumulative effect of the adoption new ASUs | ASU 2016-16
Ending Balance FY2018
22
(1)
(36)
$ (375)
(7,887)
$2
48
$ 400
8,597
(375)
2
(339)
541
541 [1],[2],[3]
(158)
(158)
(75)
(16)
4
37
$ (37)
$ 2,104
(75)
(16)
4
37
$ (370)
$ 2,506
(711)
During the fourth quarter of 2017, the Company recorded a provisional
$99 million tax liability for the mandatory deemed repatriation of foreign
sourced net earnings and a corresponding change in our permanent
reinvestment
assertion
under
ASC 74030.
During
third,
and preDuring
the fourth
quarters
of 2018
and 2017,
thesecond,
Company
recorded
During the third quarter of 2017, the Company recorded a pre-tax charge
Cash dividends
158 CF
157 CF
157
Comprehensive income
541
(75)
(16)
4
37
491
6
$ (1)
$ 809
112,933
409.0
$
284 [1],[2],[3]
(157)
114
(1)
11
1
(1,433)
$ (61)
(8,597)
1
(467)
(157)
Cumulative effect of the adoption new ASUs | ASU 2016-16
[2]
[3]
(139)
Ending Balance FY2016
132,616
Translation adjustment, net of tax
Pension and postretirement adjustments, net of tax
Cumulative effect of the adoption new ASUs | ASU 2014-09
[1]
Dividends payablet-1
2
(1,445)
(8)
(1)
12
$ 900
Comprehensive income
Net income/(loss)
Translation adjustment, net of tax
Change in cash flow hedges, net of tax
Pension and postretirement adjustments, net of tax
(432)
664
(147)
Cash dividends declared on common stock ($1.24, $1.10,
$1.00 per share in 2017, 2016 and 2015 respectively)
Ending Balance at Feb. 02, 2019
Ending Balance (in shares) at Feb. 02, 2019
Ending Balance (in treasury shares) at Feb. 02, 2019
(432)
(102)
$ (432)
(6,985)
$2
81
$ 1,728
42,327
Share repurchases
Cash dividends declared on common stock ($1.24, $1.10,
$1.00 per share
in 2017,net
2016
Translation
adjustment,
of and
tax 2015 respectively)
Change in cash flow hedges, net of tax
Pension and postretirement adjustments, net of tax
Unrealized gain on available-for-securities
Reclassification due to the adoption of ASU 2018-02 | ASU
2018-02
Ending Balance at Feb. 03, 2018
Ending Balance (in shares) at Feb. 03, 2018
Ending Balance (in treasury shares) at Feb. 03, 2018
Restricted stock issued (in shares)
Issued under director and stock plans
Issued under director and stock plans (in shares)
Share-based compensation expense
Shares of common stock used to satisfy tax withholding
obligations
Shares of common stock used to satisfy tax withholding
obligations (in shares)
Share repurchases
Share repurchases (in shares)
Reissued – employee stock purchase plan
Reissued – employee stock purchase plan (in shares)
Retirement of treasury stock
Retirement of treasury stock (in shares)
Net income/(loss)
139
(7)
Translation adjustment, net of tax
Change in cash flow hedges, net of tax
Pension and postretirement adjustments, net of tax
Ending Balance at Jan. 28, 2017
CS dividends declared
32
22
20
FY18
$
2,664
Delta
$
158 explained by cash dividends
Foot locker, Inc.
Ticker Symbol:
FL
Step 2: Reformulation
2.2. Reformulation of Balance Sheets
CONSOLIDATED BALANCE SHEETS – USD ($) $ in Millions
Current assets
Cash and cash equivalents
Merchandise inventories
Other current assets
Assets, Current, Total
Property and equipment, net
Deferred taxes
Goodwill
Other intangible assets, net
Other assets
Total Assets
Current liabilities
Accounts payable
Accrued and other liabilities
Liabilities, Current, Total
Long-term debt
Other liabilities
Total liabilities
Shareholders’ equity
Liabilities and Equity, Total
[1]
FY18
Feb. 02,
2019
FY17
Feb. 03,
2018
$ 891
1,269
358
2,518
836
87
157
24
198
3,820
$ 849
1,278
424
2,551
866
48
160
46
290
3,961
387
377
764
124
426
1,314
2,506
$ 3,820
258
358
616
125
701
1,442
2,519
$ 3,961
Assess the Company’s level of cash to determine if there is excess.
If greater than 5% of the most recent fiscal year’s sales, follow below instructions.
Exhibit B
REFORMULATED BALANCE SHEETS
Operating assets
FY2018
$
$
FY2018
FY2017
17.3%
55.3%
15.6%
36.4%
3.8%
6.8%
1.0%
8.6%
145.0%
16.6%
54.6%
18.1%
37.0%
2.1%
6.8%
2.0%
12.4%
149.5%
387
219
426
1,032
258
201
701
1,160
16.9%
9.5%
18.6%
45.0%
11.0%
8.6%
29.9%
49.5%
2,294
2,341
100.0%
100.0%
Total financial assets
494
494
460
460
21.5%
0.0%
21.5%
19.6%
0.0%
19.6%
Financial liabilities
Current portion of long-term debt
Other financial liabilities
Long-term debt
Total financial liabilities
124
124
125
125
0.0%
0.0%
5.4%
5.4%
0.0%
0.0%
5.3%
5.3%
335
16.1%
0.0%
116.1%
14.3%
0.0%
114.3%
Total operating assets
397
1,269
358
836
87
157
24
198
3,326
FY2017
389
1,278
424
866
48
160
46
290
3,501
Operating cash
Merchandise inventories
Other current assets
Property and equipment, net
Deferred taxes
Goodwill
Other intangible assets, net
Other assets
If less than 5% of sales, calculate what three months of operating expenses equals to estimate a proper level of cash.
If less than three months of sales, is there a cash deficiency? See past years, for instance, and comment on whether appropriate.
Choose a level of “operating cash” and allocate remaining amount to a financial asset.
For simplicity choose either 5%, 10%, or 15% of sales.
Of recent year sales revenue
cash%
$
5.0%
397
$
10.0%
794
15.0%
$ 1,191
See what three months of operating expenses amount to as a % of sales to assist in estimating.
Operating liabilities
[2]
Accounts payable
Accrued and other liabilities
Other liabilities
Total operating liabilities
Net operating assets (NOA):
Financial assets
Cash and cash equivalents
Restricted cash
370
NFA (NFO)
Common Shareholders’ Equity (CSE)
$
2,664
$
2,676
CHECK:
Total Assets
FS
DELTA
3,820
3,820
–
3,961
3,961
–
CHECK:
Total Liabilities
FS
Dividends Payable
DELTA
1,156
1,314
158
–
1,285
1,442
157
–
CHECK:
CSE
Reform CSE
DELTA
2,664
2,664
–
2,676
2,676
–
FY2017
25% opex
cash%
$
448
5.6%
FY2016
$
419
5.3%
FY2015
$
408
5.1%
Accrued Liabilities
Excludes common dividends that were moved to equity
Foot locker, Inc.
Ticker Symbol:
FL
Step 2: Reformulation
2.3. Reformulation of Income Statements
CONSOLIDATED STATEMENTS OF OPERATIONS – USD ($)
shares in Millions, $ in Millions
CONSOLIDATED STATEMENTS OF OPERATIONS – USD ($) shares in Millions, $ in
Millions
Sales
Cost of sales
Selling, general and administrative expenses
Depreciation and amortization
Litigation and Other Charges
Income from operations
Interest (income) / expense, net
Other income
Income before income taxes
Income tax expense
Net income
Basic earnings per share
Weighted-average shares outstanding
Diluted earnings per share
Weighted-average shares outstanding, assuming dilution
[1]
[2]
[3]
[4]
12 Months Ended
Feb. 02,
Feb. 03,
2019
2018
$ 7,939
5,411
1,614
178
37
699
(9)
(5)
713
172
$ 541
$ 4.68
115.6
$ 4.66
116.1
$ 7,782
5,326
1,501
173
211
571
(2)
(5)
578
294
$ 284
$ 2.23
127
$ 2.22
127.9
Exhibit C
REFORMULATED INCOME STATEMENTS
Jan. 28,
2017
$ 7,766
5,130
1,472
158
6
1,000
2
(6)
1,004
340
$ 664
$ 4.95
134.0
$ 4.91
135.1
Operating profit represents income before
During the fourth quarter of 2017, the
During the fourth quarters of 2018 and
During the third quarter of 2017, the
Operating revenue
Cost of sales
Gross margin
Operating expenses
SG&A
Advertising
Depreciation and amortization
Other expense, net
Total operating expenses
Core operating income (before tax)
Tax on operating income
Tax as reported
Tax on other operating income
Tax benefit from net interest expenses
Total tax on operating income
Core operating income (after tax)
$
FY2018
7,939
5,411
2,528
$
1,430
184
178
1,792
736
FY2017
7,782
5,326
2,456
1,319
182
173
1,674
782
172
9
(3)
178
558
294
58
(1)
351
431
(37)
5
(32)
(9)
(23)
(211)
5
(206)
(58)
(148)
Other operating income (expense)…
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