Ratio Analysis

Go to the website www.sec.gov to find the financial statements. Using the financial statements for Xerox Corp
for quarters during 1997 through 1999 or use the current financial statements for either Ford Motor Co. or WFC
Holdings Corp. Include a short analysis of the impact of misleading financial reporting on the ratio you choose
by choosing one of the earnings manipulation techniques discussed in Schilit and then demonstrating the
impact on your ratio by assuming the firm you chose misreported an item by $1 billion in one of the accounting
periods you analyze.
One possible example would be that they reported bogus revenue. In that case you would add $1 billion to
revenues and $1 billion to accounts receivable for one of the periods and see how that affects the time series
analysis of your ratio. Your grade will be based on analyzing steps 1-8 plus the analysis of the impact of
misleading financial reporting.

Sample Solution