Question

Complete the following homework scenario:

Select one (1) U.S. publicly traded company and review its most recent Annual Report. (You may use one (1) of the three (3) companies you selected for your Stock Journal assignment.)

Use the Income Statement and Balance Sheet to determine the changes in:

• assets, liabilities, and equity
• total revenue and net income

Briefly describe the change from the current and prior years in each of these key areas and determine if the changes would be positive or negative from an investor / stockholder's view.

Answer 1

Company Name: ACADIA PHARMACEUTICALS INC

Founded in 1993

Ticker :ACAD

Share Price (NASDAQ) as on 24 Feb 2020: $ 42.25

Changes in total revenue, net income, asset, liabilities and equity

Revenue (In $)

In 2017: 124,901

In 2018: 223,807

Change in % : 79.19%

Comment: Compare to 2017 the company has shown 79% growth which means the company has delivered outstanding performance in their sales. The high growth in revenue is positive for investors.

Net Income/Loss

In 2017: (289,403) Loss

In 2018: (245,192) Loss

Change in % : 18.03%

Comment: The company has net loss in current and prior years but in 2018 the loss has reduced by 18% from last year. The net loss is not a positive sign for the investors but the company has reduced its loss from last year. Therefore the investor should hold the investment till it finds positive net income.

Assets

In 2017: 384,506

In 2018: 540,202

Change in % : 40.49%

Comment: The assets has been increased by 40% which means the company is expanding and which could generate high revenue in coming year. This is a positive sign for the investors.

Liabilities

In 2017: 49,221

In 2018: 61,123

Change in % :24.18%

Comment: The liability of company is also increasing with the increase in assets. This mean short term and long term requirement is funded from debt side. Long term debt funding will increase the burden on company and ultimately reduce the company profitability. Therefore this is not a good sign for investors.

Equity

In 2017: 335,285

In 2018: 479,079

Change in % :42.89%

Comment: Even company has incurred losses but the shareholder fund is positive and increased by 42.89%. Which means it has accumulated capital for equity investors. This is very good sign for investor in term of capital appreciation on their investment.

Overall the company is in the expansion mode and generating good revenue. However the current profitability is negative due to high expenditure cost. So investor should look in dept to take any investment decision

Authors Bio

Jitendra Sikligar

Cost Accountant, Chartered Global Management Accountant, Research Analyst