Financial data
Financial data, from the set of financial statements, is the basis for Data Analytics. The purpose of this critical thinking assignment is to help you identify relevant questions that may be answered using Data Analytics.
Company Summary
You were just hired as financial analyst for a capital organization that acquires business, focusing on Mergers and Acquisitions (M&A) Activity. Your main job function is to evaluate publicly listed companies in the United States to determine if your company wants to acquire that organization. The company you work for has developed Data Analytics tools using the financial statements for evaluations risk assessment. The company uses these analytics to provide recommendations for acquisitions and mergers. As a new analyst, you’re determined to make a good first impression.
The company selected is Lockheed Martin. You will conduct your analysis using the company's most recent 10-K report.
In this critical thinking assignment, you will:
Part 1: Identify the Questions
Think about ways that you might analyze data from a financial statement. You could use a horizontal analysis to view trends over time, a vertical analysis to show account proportions, or ratios to analyze relationships.
Using financial statement analysis, generate three different metrics for evaluating financial performance. Such methods could come from common size financial analysis, ratios, industry averages, etc. One metric from each of the financial statements: Balance Sheet, Income Statement and Statement of Cash Flow
Compose three questions (one for each of the statements) that will arise from your analysis.
Part 2: Master the Data
Now we evaluate specific account values or financial statement paragraphs. As an analyst, you have access to the Security and Exchange Commission’s (SEC’s) EDGAR database of XBRL financial statements as well as a list of XBRL tags from the Financial Accounting Standards Board (FASB).
XBRL stands for eXtensible Business Reporting Language and is used to make the data in financial statements machine-readable. Public companies have been preparing XBRL reports since 2008. While there are some issues with XBRL data, such data have become a useful means for comparing and analyzing financial statements. Every value, date, and paragraph is “tagged” with a label that identifies what each specific value represents, similar to assigning attributes in a database. Because companies tag their financial statements with XBRL tags, you can use those tags to identify specific data that you need to answer your questions from Part 1.
Analyze your questions:
Evaluate each question from Part 1. What are specific data attributes that will help you find the answer to your questions.
Will information from the notes or other statements help you answer your question? If so, provide that information as well.
For each of your questions, identify the account or the data attribute you need to answer your question. Then use FASB’s XBRL taxonomy (see next section for instructions) to identify the specific XBRL tags that represent those accounts. For example:
Company name = EntitySectorIndustryClassificationPrimary
Gross margin = GrossProfit
Sales revenues = SalesRevenueNet
Cost of goods sold = CostOfGoodsAndServicesSold
Year = DocumentPeriodEndDate
Identify XBRL tags from the FASB’s taxonomy:
Open a web browser, and go to <link is hidden> /> Click the next to US GAAP (2016-01-31).
Click the ALL (Main/Entire) option, and then click Open to load the taxonomy.
Navigate through the financial statements to determine which accounts you need to answer your questions from Part 1. The name of the XBRL tag is found in the properties pane next to “Name.” For example, the tag for Total Assets can be found by clicking Statement of Financial Position [Abstract], Statement [Table], Statement [Line Items], Assets [Abstract], Assets, Total, as shown in Exhibit 1-1A. You may also use the search function.
Note: Be careful when you use the search function. The tag you see in the results may appear in the wrong statement. Double-click the tag to expand the tree and show where the account appears.
Part 3: Perform the Analysis
With your identified questions and the data sources, you can build your model and perform your analysis. Because XBRL data are dynamic, we’ll use a tool that pulls live data based on your inputs.
In your web browser, click Here
(Links to an external site.)
to access the Financial Statement Analysis Google Sheet.
Log into your Google Account.
Click File > Make a Copy.
In your new document, add your tags from Part 2 under the Financial Facts header, similar to Exhibit 1-1B.
Under the Analysis header, use formulas to create your analysis from Part 1.
Adapted from Data Analytics for Accounting (Richardson et al., 2018).
Required: Complete all of the parts above. Submit your Word document and your Excel file.
Your well-written paper must be 3-4 pages in addition to title and reference pages, must include five references, and at least two being scholarly/peer-reviewed. The paper should be formatted according to APA Requirements
(Links to an external site.)
. Cite at least two peer-reviewed sources in addition to the required reading for the modul
