Question

Financial Accounting

Individual Assignment USING AMERICAN AIRLINES

You should answer all of the questions listed below as they relate to the financial statements of any U.S. public company of your choice in its latest annual report. Please use the Securities and Exchange Commission web site as your primary source for financial statements. All publicly traded U S companies have their annual reports called the 10-K available through the Securities and Exchange Commission web site. http://www.sec.gov/

Instructions for use of the site are as follows: About half way down the home page is a box titled Search EDGAR, free access to over 21 million filings. Enter the company name or ticker symbol. That brings up a page called EDGAR Search Results. In the line "filter results" enter "10-K" in filing type and hit search. That will bring up recent company annual reports. Note: You have a choice of "Documents" or "Interactive Data." Both contain all the information. "Interactive Data" uses Excel and provides the best access to information for questions 1, 2, and 3. "Documents" provides information that is easy to read for questions 4 through 8. After you click on Documents, click on the red letters and numbers to the right of the "10-K" heading.

1) What 3 items of important information does the income statement reveal about the financial performance of the company over the last three years?

2) What 3 items of important information does the balance sheet reveal about the financial position of the company over the last two years?

3) Can you identify the major sources of funding used by the company from the information presented in the company's annual report? Please look at the Statement of Cash Flows, formerly called the Source and Uses of Funds Statement.

4) Who is responsible for:

      a) the issuance, and

      b) the content

of the company financial statements? (Note: this information may be difficult to find. Look for statements by management and the independent auditing firm.)

5) What assurance, if any, is there that the financial statements are in compliance with GAAP, and are free of material misstatements?

6) Of what use, if any, are the notes to the financial statements? Give an example of something learned from the footnotes of your company.

7) What can you learn from the Business Section of the 10-K? Give two facts learn from reading this section.

8) What can you learn from the Management Discussion and Analysis of Financial Condition and Results of Operations (MD&A)? Give two facts learned from reading this section.

Answer 1

Ans-1 1) Mainline passenger revenues is more or less constant.

2) in 2016 to 2017 expenses increased more than 10%, however revenue increased around 5%.

3)Basic EPS has constantly been decreasing.

Ans-2 1)Current Assets has decreased which may lead to liquidity crunch.

2)Current Liabilities has increased again relating negatively to liquidity.

3)Decrease in share capital due to repayment"reflects decrease in confidence of shareholder"

Ans-3 Major source of funding has been sale of short term investments.

Ans-4 a) for Issuance of financials- management is responsible.

b) For content of financial statements- management is responsible.

Ans-5 Auditor needs to have reasonable assurance that the financials are free from mistatement, hence assurance is "reasonable".

Ans-6 Foot Notes provide detail at times required for any transaction, example employee bonus cost (total amount is reflected in the finacials, however,"employee bonus expense included costs related to the $1,000 cash bonus and associated payroll taxes granted to mainline employees as of December 31, 2017" is information which depicts the information within that amount.

Ans-7 From the business section, we can learn about the main business of the company, what are its business segmnents, its business history, its achievements. In all it provides an overview about operations of the company.

Primary business of the company is "The operation of a major network carrier, providing scheduled air transportation for passengers and cargo"

"American is a founding member of the oneworld alliance, whose members serve more than 1,000 destinations with approximately 14,250 daily flights to over 150 countries"

Ans-8 We can learn from the said section about strategic objectives of the management, about company's mission & vision & also about recent achievemnets.

2 Facts are:-

1) In 2017 by being named Air Transport World’s Airline of the Year in recognition of our successful integration and the significant investments we made in our product and people.

2) Operated the youngest fleet among the major U.S. network carriers and invested $4.1 billion in new aircraft.