The purpose of this assignment is to apply principles and skills associated with financial reporting, analysis, and valuation.
Using what you have learned from the topic resources, complete the following problems and cases from the textbook.
- Problems and Cases 1.10
Prepare the assignment in Excel with each problem or case as a separate tab. All narrative questions should be fully addressed within the Excel document on the tab associated with the problem or case.
Problems and Cases 1.10 Effect of Industry Characteristics on Financial StatementRelations.Effective financial statement analysis requires an understanding of a firm’s eco-nomic characteristics. The relations between various financial statement items provide evidence ofmany of these economic characteristics. Exhibit 1.15 (pages 52–53) presents common-size con-densed balance sheets and income statements for 12 firms in different industries. These common-size balance sheets and income statements express various items as a percentage of operating rev-enues. (That is, the statement divides all amounts by operating revenues for the year.) Exhibit 1.15 also shows the ratio of cash flow from operations to capital expenditures. A dash for a particularfinancial statement item does not necessarily mean the amount is zero. It merely indicates that theamount is not sufficiently large enough for the firm to disclose it. Amounts that are not meaning-ful are shown as n.m. A list of the 12 companies and a brief description of their activities follow
Exhibit 1.15
Common-Size Financial Statement Data for Firms in 12 Industries(Problem 1.10 Cengage
Balance Sheet Companies 1-12
1 2 3 4 5 6 7 8 9 10 11 12
Cash & Marketable Securities 2256.10% 4.10% 20.10% 2 10.6 96.9 4.1 2198 26 4.5 1.9 39.3
Receivables 352.8 2.8 15.2 8.9 12 8.8 4.2 1384.8 4 13.3 2 5.1
Inventories 2.4 7.9 7 2.1 3 1.5 8.9 4 1.3 Property Plant and equpment net 286.8 43 55.4 221.5 33.8 278.8 7.8 41.4 61.1 32.9 Accumulated deprecation -59.8 -20.4 -32.5 -132.6 -22.6 -52.8 -2.6 -14.1 -28.3 -18.9 Property Plant and equpment net 227.00% 22.50% 22.9 88.9 11.2 226 5.3 27.3 32.9 14 intangibles 36.5 43.4 39.8 75.2 40.5 6 101.9 5 109.4 8.3 90.9 Other assets 57.30% 7.2 24 4.8 19 28.3 81 208.5 7.2 59.7 11.4 33.3 Total Assets 2666.20% 280.00% 133.20% 85.4 207.9 188.6 322.9 3893.3 56.4 218.2 57.9 182.6 Current liabilities 2080.80% 37.80% 32.70% 27.7 26.6 37.8 41.7 2878.4 30 20.7 15.3 43.4 long term debt 390.90% 69.10% 12.70% 31.7 48.2 28.5 172.2 596.1 0.4 38.4 31.6 other long term liabilities 92.60% 5.60% 21.10% 14.6 90.2 15.3 53.8 171.3 4.4 33.9 12 9.4 shareholders equity 101.90% 167.50% 66.70% 11.3 42.8 107 55.1 247.5 21.4 125.3 -1 129.8 Total liabilities and sharholders equity 2666.20% 280.00% 133.20% 85.4 207.9 188.6 322.9 3893.3 56.4 218.2 57.9 182.6 Income Statement Operating revenues 100.00% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% cost of sales -54.60% -61.60% -29.00% -58.1 -40.1 -36.1 -56 -73.4 -85.8 -59.5 -75.1 -26.1 depreciation and amorization -2.00% -9.90% -4.40% -2.9 -15 -1.5 -10.8 -5 -1.5 -5.7 -4.9 -2.8 selling and administrative -1.40% -12.10% -29.30% -23.7 -27.6 -27.6 -19.3 -5.1 -2.6 -27.9 -7.6 -33.7 research and development -1.60% -12.20% -14.6 -7.7 -5.1 -8.5 intersest 9.50% -2.80% -0.10% -2.5 -1.9 1 -8.5 78.4 -1.8 -2 1.3 income taxes -14.30% -0.10% -6.20% -3.8 -3.4 -4.3 -2.6 -16 -1 -2.2 -2.8 -4.7 all other items net -8.00% 0.10% 1.60% -5.5 2.3 -28.8 -0.3 5.2 0.4 Net Income 27.60% 13.60% 20.30% 9 6.6 17 5.3 42.3 3.7 8 8 25.5 Cash Flow from operations capital expenditures n.m. 1 4.90% 2.7 1.5 9.8 1 n.m. 8.8 1.8 1.6 5.1
REQUIREDUse the ratio Companys 1-12 A. Amazon.com: Operates websites to sell a wide variety of products online. The firmoperated at a net loss in all years prior to that reported in Exhibit 1.15. ? B. Carnival Corporation: Owns and operates cruise ships. ? C. Cisco Systems: Manufactures and sells computer networking and communications products ? D. Citigroup: Offers a wide range of financial services in the commercial banking, insurance,and securities business. Operat ing expenses represent the com pensation of employees ? E. eBay: Operates an online trading platform for buyers to purchase and sellers to sell a va-riety of goods. The firm has grown in part by acquiring other companies to enhance orsupport its online trading platform ? F. Goldman Sachs: Offers brokerage and inves tment banking services. Operatingexpenses represent the compensation of employees ? G. Johnson & Johnson: Develops, manufactures, and sells pharmaceutical products, medi-cal equipment, and branded over-the-counter consumer personal care products. ? H. Kellogg’s: Manufactures and distributes cereal and other food products. The firmacquired other branded food companies in recent years. ? I. MGM Mirage: Owns and operates hotels, casinos, and golf courses ? J. Molson Coors: Manufactures and distributes beer. Molson Coors has made minorityownership investments in other beer manufacturers in recent years ? K. Verizon: Maintains a telecommunications network and offers telecommunications serv-ices. Operating expenses represent the compensation of employees. Verizon has mademinority investments in other cellular and wireless providers ? L. Yum! Brands: Operates chains of name-brand restaurants, including Taco Bell, KFC,and Pizza Hut Cengage ?
