ACCT202 Capstone Project

Financial Accounting ACCT202 Capstone Project – An Overview

At North, all of our ACCT202 –Financial Accounting II courses are encouraged to have some type of capstone project incorporated into the course. Your course has adapted with some modification the continuing analysis problem found in your textbook as the capstone project that meets our needs.

Before starting this project I want to emphasize how important this project is to North’s accounting department and its ability to design, deliver and update courses that meet student needs while having some sort of overarching evidence that students are learning. This important project also provides accounting students with an opportunity to demonstrate that they can “pull everything together” in a professional and learned way in regards to their experiences in ACCT201 & ACCT202. If we accept that accounting, as defined, is a system of identifying, recording, and communicating economic events of the firm so that interested users can make decisions, then it should be clear that this project focuses on using all you have learned about identifying transactions, recording those transactions and preparing financial statements so that you can now use that knowledge for the end game- analyze financial statements in order to make sound business decisions regarding the firm.

Therefore, this project requires you to step up your level of professionalism, written communication, research and analysis. In this project we’re looking for the ability to analyze accounting information and prepare a professional written report. We’re looking for the writing process and communications necessary to be successful in the business community. In the business community it’s important that we avoid giving one line answer that fail to allow a reader or customer to grasp the impact and importance of what we are communicating. Likewise, in this project, brief incomplete concepts and statements, unsupported conclusions and less than professional written communication will not be acceptable.

In preparing your written response in this project – I want you to remember at all times that you’re either taking the role of a Wall Street analyst who has tens of people listening to your advice, and depending on what you say, these people might invest tens of millions of dollars based on your analysis and recommendations. Or, you might want to think of yourself as a highly compensated vice president of a commercial bank making decisions to loan millions of dollars to a company based on your analysis of the company future ability to sustain itself, grow and ultimately repay the loan. Either way, your analysis must to be thorough and your concluding statements and recommendations have to be clear; supported by verifiable source data or calculations.

In all aspects of this project you are required to show your own work. Simply Googling the ratios, using some other investment web site or printed research report issued by a brokerage firm or bank and turning it in as your own, will not work. In fact the use of such tactics and submitted response will be considered a form of plagiarizing and could result in you receiving a failing grade or other sanctions imposed by the college. In the written/analysis portion, keep in mind the importance of the writing process and communication necessary in the business community - and take a professional approach to this answer. Please visit the LOFT on campus if you need assistance in writing professional level papers. You can also visit the business librarian if you need assistance doing college level research. These resources are both available to online students who cannot come to campus via links in Canvas to the Loft Writing Center Plus and to the NSCC Library Resources.

1) Compute the ratios in the exhibit on page 3 for Target and Walmart for 2010. The financial statements can be found in the annual report – visit each company’s website, then go to investor relations to access the online report. For both companies, assume that all sales are credit sales. Compare the ratios of Target and Walmart. Which company do you think is doing a better job in managing the following? Explain your answers.

a. Liquidity

b. Net income or loss

c. Financing with debt or equity

d. Investing in assets

e. Rewarding its stockholders

2) Compute Target’s ROE for the year ending January 29, 2011, including the elements of net income/sales, sales/average total assets, and average total assets/average stockholders’ equity. What does this analysis tell you about how Target generates its ROE?

3) What are Target’s dividends per share and dividend payout ratio for the last two years? Why do you think Target pays a dividend? How do you think Target determines the amount of dividend they will pay?

4) Given Target’s stock price was $50 per share at the end of January 2011, what was Target’s PE ratio as of that date? If the average PE for companies is 15, what does this tell you the market is saying about Target’s future?

5) Research Target for any important issues including ethical issues which it may have had to deal with in the last three years – evaluate the company’s response to these issues.

6) Looking back over your answers to questions 1 – 5, how do you think Target is performing? What is the short term (one year) and long run (five+ year) financial outlook Target? Would you buy the stock of Target? If so, why? If not, why not? On the other hand, if you were a commercial banker, would you lend money to this company? Support your conclusions with a summary of your research and analysis.

7) Do you have any ideas of how to improve Target’s performance and its value?