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1.Required:1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each.2. Using the Balance Sheet from your answer above calculate;Balance Sheet???Assets???Cash8,442??Short-term Investments and Marketable Securities8,109??Receivables4,812??Allowance for Doubtful Accounts-53??Prepaid Expenses2,781??Inventories3,264??Other Current Assets2,973??Total Current Assets?30328?Long-term Investments10,448??Property, Plant and Equipment23,486??Accumulated Depreciation-9,010??Trademarks6,527??Other Intangible Assets20,810??Other Non-current Assets3,585??Total Non Current Assets55,84655846?Total Assets?86174?Liabilities and SHE???Liabilities ???Income Taxes Payable$471 ??Accounts Payable8,680??Short Term Notes Payable17,874??Other Current Liabilities796??Current Liabilities?27821?Long-Term Liabilities14,736??Other non-current Liabilities10,449??Common Stock1,760??Non current Liabilities?26,945?Total Liabilities?54,766?Shareholders' Equity???Paid-in-Capital in Excess of Par Value11,379??Retained Earnings55,038??Treasury Stock-35,009??Total SHE?31,408?Liabilities and SHE?86,174????????Working Current Ratio,?1.0930328/27821 Days in Inventory,?60.89365*3178.5/19053 Average Collection Period,?36.79365*4839.5/48017 Return on Assets Ratio,?10.86%9019/83074 Debt to Total Assets and ?63.55%54766/86174Return on common stockholders’ equity ?28.48%9019/31664.5Required:Using the information provided above:1. Prepare a multiple-step income statement2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results.(Points : 36)Income Statement ?Net Sales466,114Cost of Goods Sold352,488Gross Profit113,626Operating, Selling and Administrative Expenses88,873Operating Profit24,753add other Income?Membership Revenues3048Earnings before interest and taxes27,801#REF!2,064Earnings before taxes25,737less Taxes7981Net Income17,756??Gross profit/Sales?113626/46611424.38%Net Income /Sales?17756/4661143.81%The gross profit margin is around 24%, while the net profit margin is around 4%. It shows that the profit margin available to recover operating expenses which is around 24% and after deduction of operating expense, only 4% of sales are available; it shows that 20% has been used to meet operating expenses.3.? Required:1)?Please calculate the percentage increase or decrease in cash for the operating, investing, and financing sections and explain the major reasons for the increase or decrease for each of these sections.2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio.3. (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the 2 questions below:Cash flow from operating activitiesIn millionsIn millionsFor the year ended 2012For the year ended 2011Net (loss) earnings$(12,650)$7,074Depreciation and amortization5,0954,984Impairment of goodwill and purchased intangible assets18,035885Stock-based compensation expense635685Provision for doubtful accounts14281Provision for inventory277217Restructuring charges2,266645Deferred taxes on earnings(711)166Excess tax benefit from stock-based competition(12)(163)Other, net265(46)Accounts and financing receivables1,269(227)Inventory890(1,252)Accounts payable(1,414)275Taxes on earnings(320)610Restructuring(840)(1,002)Other assets and liabilities(2,356)(293)Net cash provided by operating activities10,57112,639Cash flows from investing activities:Investment in property, plant, and equipment(3,706)(4,539)Proceeds from sale of property, plant, and equipment617999Purchases of available-for-sale securities and other investments (972)(96)Maturities and sales of available-for-sale securities and other investment66268Payments in connection with business acquisitions, net of cash acquired (141)(10,480)Proceeds from business divestiture, net 8789Net cash used in investing activities(3,453)(13,959)Cash flow from financing activities:(Payments) issuance of commercial paper and notes payable, net(2,775)(1,270)Issuance of debt 5,15411,942Payment of debt(4,333)(2,336)Issuance of common stock under employee stock plans716896Repurchase of common stock(1,619)(10,117)Excess tax benefit from stock-based compensation12163Cash dividends paid(1,015)(844)Net cash used in financing activities(3,860)(1,566)Increase (decrease) in cash and cash equivalents3,258(2,886)Cash and cash equivalents at beginning of period8,04310,929Cash and cash equivalents at end of period$11,301$8,043Required:Please calculate the percentage increase or decrease in cash for the operating, investing, and financing sections and explain the major reasons for the increase or decrease for each of these sections. Cash flow from operating activitiesIn millionsIn millionsDifference% Change?20122011??Net (loss) earnings($12,650)$7,074 ($19,724)-278.82%Depreciation and amortization5,0954,984$111 2.23%Impairment of goodwill and purchased intangible assets18,035885$17,150 1937.85%Stock-based compensation expense635685($50)-7.30%Provision for doubtful accounts14281$61 75.31%Provision for inventory277217$60 27.65%Restructuring charges2,266645$1,621 251.32%Deferred taxes on earnings-711166($877)-528.31%Excess tax benefit from stock-based competition-12-163$151 -92.64%Other, net265-46$311 -676.09%Accounts and financing receivables1,269-227$1,496 -659.03%Inventory890-1,252$2,142 -171.09%Accounts payable-1,414275($1,689)-614.18%Taxes on earnings-320610($930)-152.46%Restructuring-840-1,002$162 -16.17%Other assets and liabilities-2,356-293($2,063)704.10%Net cash provided by operating activities10,57112,639($2,068)-16.36%?????Investment in property, plant, and equipment-3,706-4,539$833 -18.35%Proceeds from sale of property, plant, and equipment617999($382)-38.24%Purchases of available-for-sale securities and other investments -972-96($876)912.50%Maturities and sales of available-for-sale securities and other investment66268$594 873.53%Payments in connection with business acquisitions, net of cash acquired -141-10,480$10,339 -98.65%Proceeds from business divestiture, net 8789($2)-2.25%Net cash used in investing activities-3,453-13,959$10,506 -75.26%Cash flow from financing activities:??$0 #DIV/0!(Payments) issuance of commercial paper and notes payable, net-2,775-1,270($1,505)118.50%Issuance of debt 5,15411,942($6,788)-56.84%Payment of debt-4,333-2,336($1,997)85.49%Issuance of common stock under employee stock plans716896($180)-20.09%Repurchase of common stock-1,619-10,117$8,498 -84.00%Excess tax benefit from stock-based compensation12163($151)-92.64%Cash dividends paid-1,015-844($171)20.26%Net cash used in financing activities-3,860-1,566($2,294)146.49%Increase (decrease) in cash and cash equivalents3,258-2,886$6,144 -212.89%The cash flow from operating activities was decline by around 16% and it was mainly due to change in current assets and current liabilities, which comprises of account receivable, inventory and accounts payable. The cash used for investing activities was declined by around 75% in 2012, due to less purchase of fixed assets and the other business acquisition was also on lower side in 2012 as compared to 2011. The cash used for financing activates was around 146% more in 2012 as compared to 2011, due to more payments of long term debt and dividends payment in 2012 as compared to 2011.Please calculate the free cash flow for 2012 and explain the meaning of this ratio.Cash flow from operating activities = 10571Less Investment in Property plant and Equipment =3706Free Cash flow = 6865It shows the free cash flow available for investment and payment of dividend after deducting the necessary investment in property plant and equipment from operating cash flows. -4. Required:Required: Goforit carries significant electronics inventory in a competitive environment where prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales.In this scenario the LIFO method will create more profit as the cost of goods sold will be charged with lower cost as the prices are falling.b. Goforit has a large investment in warehouse equipment including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: Straight line (SL) or double declining balance (DDB)? The straight line method will show the higher income in early years, but not in later years, but the double declining balance method will show vice versa. If company wants to show net income more in early years, then the straight line method should be used to show the depreciation on lower side as compared to double declining balance method. (Points : 36)5.?(TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions belowRatio NameJohnson & JohnsonPfizerProfit marginIt shows that the profit earned on sales. It shows the relationship Net income to sales. The Pfizer has earned around 25% on its ales after covering all expenses. The Pfizer is doing better than Johnson as it has higher profit margin.Inventory turnover ratioIt shows the efficient usage of inventory. The Pfizer has used its inventory 1.7 times to generate sales. The Johnson is better than Pfizer as it has higher inventory turnover ratio.Average collection periodIt shows how many days are needed to collect form customers. It is 69 days for Pfizer to collect from customer. The Johnson is doing better as it has collection period of 59 days.Cash debt coverage ratioIt shows the relationship of cash to debt. It is 16% of debt for Pfizer. The Johnson is better has it has higher Cash to debt coverage ratio. Debt to Total assetsIt shows the amount of total assets financed by total liabilities. For Pfizer it is around 127%, it means that the company has more liabilities than total assets. The Johnson is doing better as it has lower debt ratio.Required:1)?Please explain the meaning of each of the Pfizer ratios above.2)?Please state which company performed better for each ratio.(Points : 36)QCM1.?(TCO A) An advantage of the corporate form of business is that _____.?(Points : 5)its ownership is easily transferable via the sale of shares of stock2.?(TCO A) The Dividends account _____.?(Points : 5)All of the above3.?(TCOs A, B) Below is a partial list of account balances for Denton Company:Cash $7,000Prepaid insurance 700Accounts receivable 3,500Accounts payable 2,800Notes payable 4,200Common stock 1,400Dividends 700Revenues 21,000Expenses 17,500?What did Denton Company show as total credits??(Points : 5)$$29,4004.?(TCOs B, E) A small and private company may be able to justify using a cash basis of accounting if it has _____.?(Points : 5)insignificant receivables and payables5.?(TCO D) Two companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using _____.?(Points : 5)FIFO will have the highest ending inventory6.?(TCO A, E) Equipment was purchased for $17,000 on January 1, 2006. Freight charges amounted to $700 and there was a cost of $2,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $3,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2007, if the straight-line method of depreciation is used??(Points : 5)$6,6807.?(TCOs D, G) Lopez Corporation issues 500 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 96. The journal entry to record the issuance will show a _____.?(Points : 5)debit to Cash for $480,0008.?(TCO C) Accounts receivable arising from sales to customers amounted to $80,000 and $70,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $240,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____.?(Points : 5)$250,0009.?(TCO F) If you are comparing the 2010 income statement numbers with the income statement numbers from 2009 and 2008, you are conducting a _____.(Points : 5)horizontal analysis10.?(TCO F) Vertical analysis is also known as _____.?(Points : 5)common-size analysis11.?(TCO F) Which one of the following is not a characteristic generally evaluated in ratio analysis??(Points : 5)Marketability of the product12.?(TCO F) A common measure of profitability is the _____.?(Points : 5)return on common stockholder's equity ratio13.?(TCO F) Long-term creditors are usually most interested in evaluating _____.?(Points : 5)solvency14.?(TCO G) To calculate the market value of a bond, we need to _____.?(Points : 5)find out the present value of all of the future cash payments promised by the bond ................
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