Dr. John G. Wermert
School of Accounting
Drake University
2507 University Ave.
Des Moines, IA 50311
Telephone: (515) 271-3899
Fax: (515) 271-4518
E-mail: john.wermert@drake.edu

Course

Principles of Financial Accounting

Abstract

Financial Statement Analysis Using EDGAR
(Internet Exercise #1)
This application is a financial statement analysis case that students are required to complete in my Principles of Financial Accounting class. The assignment requires students to use an Internet browser (such as Netscape Navigator or Internet Explorer) to locate and download the 10-K of a company from the SEC's EDGAR database, which includes the SEC filings for most publicly-held companies. After they download the 10-K, students must locate, properly format and print the financial statements included in the 10-K. Next, they apply financial statement analysis techniques to this information as well as a set of financial statements from an annual report that I distribute in class. (Alternatively, you can have students download both sets of financial statements required for the case.) Students record their answers on a form provided by the instructor to facilitate grading and evaluation. Finally, the students must compare the financial statement ratios of the two companies and write a short memo documenting their conclusions. They are directed to organize their comments around the four categories of ratios discussed in class (i.e. short-term liquidity, long-term solvency, profitability, and market performance). Detailed written instructions are provided to assist the students.

Learning

Some of the benefits of this approach to incorporating technology include:

• a. This case gives students hands on experience with retrieving electronic financial information.
• b. It exposes students to the SEC EDGAR database, an important database of financial (and nonfinancial) information that students should be aware of.
• c. Students obtain additional experience using web browsers.
• d. The case is easily modified from one semester to the next by changing the companies that the students are required to analyze.
• e. No specialized hardware or software is required (other than a web browser and word processor).
• f. The exercise is performed outside of class, therefore, only a small amount of time is required to discuss the solution.
• g. The exercise can be performed individually or in teams. I have found that teams of two work well.

Practice

Students learn about a very important source of financial statement information. They learn how to retrieve information from this database and how to interpret it. This is consistent with the objectives of a financial accounting class taught using the "user perspective."

Resources

SEC's web site (which includes the EDGAR database): www.sec.gov