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2 Discussion question replies 200 words each with 2 references each.
Christopher Lavoie
Lowes (LOW on NYSE)
After reviewing the Annual Report (10K) for Lowes Companies Inc., I have made several observations about the companies report. After reviewing the financial statement, it seems to be one of the most important parts of the overall report. The financial statement is import to investors and potential investors because it shows whether or not the company is doing well and the data to determine if the future of the company will be the same. The cash flow, balance sheet and shareholders information with all the companies liabilities are there for someone to review and look over. The notes section gives further details on the companies financial information and how decisions are made. By reviewing the income statement an investor can determine what outside factors effects the companies profits and losses. In the report the section Management’s Discussion and Analysis of Financial Condition and Results of Operations breaks down the report to show how the company is doing and what management expects the future to look like.
The Financial Statement provides a great place to start researching a company, it does have some shortcomings. Sometimes assets can be overvalued or they can be hard to put a value on for some businesses. Companies can have value that is hard to put on a balance sheet, brand names that have been built over a long period of time or relationships can have large values that are hard to quantify. This problem has been made worse as more private equity funds have started putting different values on companies. Since the valuation on assets can be subjective, this can cause balance sheet revisions. For example in 2016 General Electric(GE) purchased a business for $10 billion even though it had a $-7 billion of value on its statement. GE justified the purchase by saying that the acquisition brought in revenue for cross-selling opportunities.
With all this information being considered, it doesn’t seem that too much information is being put out for competitors to take advantage of. Especially knowing that there can be some information that can be subjective and more specific information can be with held or not fully explained. These reports give a good overview of how the company has performed in the past and managements outlook on the future.
Fridson, M. S., & Alvarez, F. (2022). Financial statement analysis a practitioner’s guide Workbook. New York, Ny Wiley.
Ellianna Citro
For this assignment, I have chosen to review the 2023 Annual Report for The Coca-Cola Company.
Coca-Cola’s annual report compares and contrasts financial data within its statements with those from previous years. Through this comparison, managers and potential investors can clearly notice the upward or downward trends in net income and various accounts. The financial statements make up a significant portion of the annual report, including comprehensive notes for each of the statements.
The management discussion does mention the financial statements, and goes further to include several smaller tables that display information relevant to the topic, such as net operating revenue. Notably, the management discussion also includes unique financial tables, such as one that that displays the net operating revenue for different continents.
The financial statements include sufficient information for potential investors. The statements provide a thorough breakdown of asset accounts, equity, cash flow, etc. Investors can make informed decisions and determine profitability through analysis of the financial statements.
It is difficult to determine if the statements provide too much information, specifically in regard to competitors. While annual reports need to be concise enough to conceal information from competitors, they also need to provide adequate information for managers, investors, and other stakeholders. According to the text, “Investors, creditors, and workers rely heavily on accounting information to evaluate which businesses are worthy of receiving resources.” (Edmonds, 2023). I find the information provided to be sufficient for stakeholders while also not providing too much information. For example, the notes to the financial statements provide concise information, limiting it when needed. When noting concentrations of credit risk, the only information provided is the following: “We believe our exposure to concentrations of credit risk is limited due to the diverse geographic areas covered by our operations.”
The financial statements provide the company and stakeholders with crucial accounting information that is essential to business operations. Without the financial statements, they would be unable to make informed decisions. Furthermore, the notes on the financial statements breakdown further financial information on other regions and areas of operation. Through the statements, the company can determine whether certain divisions are profitable or not. Additionally, through the comparison of previous years, the company can determine whether recent business decisions have had any significant influence in revenue and expenses.
References
Edmonds, C., et al., (2023) Survey of Accounting. (7th ed.). McGraw Hill.
The Coca-Cola Company. (2023, December 31). Annual Report for the fiscal year ended December 31, 2023. https://www.sec.gov/ix?doc=/Archives/edgar/data/21344/000002134424000009/ko-20231231.htm.
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