Prior to beginning work on this discussion forum, read Chapter 9 in the course textbook, Using Financial Accounting Information: The Alternative to Debits and Credits.
Using the same company and annual reports that you chose for your Week 1 – Discussion Forum, Reading and Using the Annual Report Case Study. BP was the company used for the week 1 discussion.
- Calculate the current ratio and quick ratio for the latest two years, obtain the industry average ratios from the Mergent Online database, available through the University Library, or another outside resource of your choice, and analyze the results.
- The IBISWorld database is accessible through the University Library. This database contains industry reports and market research on more than 1,300 United States industries. The reports provide key data, financial ratios, and benchmarks, plus industry forecasts. Mergent Online allows comparisons between a chosen company and industry best practices. If needed, review the How to Find Industry Ratios and Averages Using Mergent Online Links to an external site.tutorial on how to use the Mergent Online database.
- Discuss what each of these ratios tells you about the company’s current financial condition, and how they compare to the industry averages.
- Identify the major causes of any changes in these ratios and discuss your assessment of the company based on these changes.
- Review the balance sheet and the notes to the most recent financial statements, and identify any contingent liabilities.
- Discuss whether or not you agree with how the company chose to treat each contingency on the financial statements (i.e., recorded vs. disclosed, but not recorded).
- Discuss the effect on the financial statements of the company’s treatment of the contingency.
- Discuss whether the contingent liabilities change your assessment of the company.
Your initial response should be a minimum of 200 words.
Annual Report. (2020). BP company. Retrieved from https://www.bp.com/content/dam/bp/businesssites/ en/global/corporate/pdfs/investors/bp-annual-report-and-form-20f-2020.pdf
Porter, G., & Norton, C. (2018). Using financial accounting information: The alternative to debits and credits (10th ed.). Retrieved from https://www.cengage.com