Solution-Manual-for-Interpreting-and-Analyzing-Financial-Statements-5th-Edition-by-Schoenebeck.doc

Full fle at hps://testbanku.eu/ hps://testbanku.eu/

SOLUTION MANUAL FOR INTERPRETING AND ANALYZING FINANCIAL STATEMENTS 5TH EDITION BY SCHOENEBECK Complete dowlo!d!"le #le !t$ hps://testbanku.eu/Soluon-Manual- hps://tes tbanku.eu/Soluon-Manual-or-Int or-Interpreng-and-A erpreng-and-Analyzng-Fnan!al-Stat nalyzng-Fnan!al-State"ents-#th-$ e"ents-#th-$dondonby-S!hoenebe!k

BALANCE SHEET Assets Liabilities Stockholders’ Stockholders’ equity %he &alan!e Sheet '&/S( pro)des a snapshot o a !o"pany*s fnan!al poson as o a !ertan date. It reports !%%et%& te"s o )alue )alue su!h as n)entory and e+up"ent, and hether the assets are fnan!ed th l'!"'l'(e% 'debt( or %to)*+olde,%- e./'t0 'e+uty(.

INCOME STATEMENT Revenues (Expenses) Net income %he In!o"e State"ent 'I/S( reports the !o"pany*s proftablty durng an a!!ounng perod. It reports a"ounts re!e)ed re!e)ed ro" !usto"er !usto"erss or produ!ts produ!ts sold or ser)!es ser)!es pro)ded, pro)ded, and e2pe%e%& the ,e1e/e%, a"ounts !osts n!urred to produ!e re)enues. %he deren!e s et ')ome3

STA STATEMENT OF STOCKHOLDERS’ EQUITY Retai Retained ned earni earnins ns!! beinn beinnin in  "ontr "ontribu ibuted ted capita capital! l! bei beinn nnin in # Net income # $ssuance o% shares (&ividends) (Repurchase to retire shares) Retai etain ned earn earnin ins s!! endi endin n "ont "ontri ribu bute ted d capi capita tal! l! endi endin n %he State"ent o Sto!kholders* $+uty 'S/$( reports  the e!,'4% 'net n!o"e( o ths a!!ounng perod are dstrbuted as d'1'ded% or retaned n the busness as ,et!'ed e!,'4% . It also reports a"ounts pad '!ontrbuted( by sto!kholders to pur!hase !o""on sto!k and preerred sto!k.

STATEMENT OF CASH FLOWS "ash in'los ("ash out'los) "hane in the cash account %he State"ent o ash Flos '/F( reports !ash n0os and !ash ou1los durng an a!!ounng perod.

23

4h! 4h!h h fna fnan! n!a all stat state" e"en entt rep repor orts ts5 5 a.

het hethe herr the the !o"p !o"pan anyy as as prof profta tabl ble e or not6 not6

'&S '&S / IS / S$ / F(

b.

hethe hetherr asset assetss are are pr"ar pr"arly ly fnan!e fnan!ed d th th debt debt or e+uty e+uty6 6

' BS / IS / S$ / F(

!.

d)de d)dends nds de! de!lar lared ed by the board board o dre!t dre!tor orss or share sharehol holder ders6 s6

'&S / IS / SE / F(

d.

!ash !ash re!e re!e)e )ed d ro" ro" !usto" !usto"er erss durng durng the a!!oun a!!ounng ng perod perod6 6

'&S / IS / S$ / CF(

e.

the the re)en e)enue uess o a !orp !orpor ora aon on6 6

'&S '&S / IS / S$ / F(

.

the the lab abl le ess o a !orp orpora oraon on6 6

' BS / IS / S$ / F(

g.

reta retaned ned earnn earnngs gs at the begnn begnnng ng o the a!!oun a!!ounng ng perod perod6 6

'&S / IS / SE / F(

Introdu!on

7age 3#

hapter 3


ACTIITY 6

BA L A NCE SH EE T

P/,po%e:

8 8 8

9nderstand the nor"aon pro)ded by the balan!e sheet Iden Idenyy asset, asset, labl lablty ty,, and sto!k sto!khol holder ders* s* e+uty e+uty a!!o a!!ount untss report reported ed on the the balan!e sheet 9nde 9nders rsttand and the the a!!o a!!oun unn ng g e+u e+ua aon on

PEPSICO (PEP*) 12/27/200 BALANCE BALANCE SHEET ( in millions) ASSETS "ash and cash equivalents Short/term investments Accounts receivable! net $nventories 3ther current assets 6roperty! pl plant! an and eq equipment! ne net 7oodill 3ther intanible assets Lon/term investments 3ther noncurrent assets T"#$% A&&'#&

 *!+,*01 -!,.1 *!4** 0!1*00!,,1 4!0*0!.,+ 1!..1 *!,4.

LIABILITIES Accounts payable Short/term debt 3ther current liabilities Lon/term debt 3ther noncurrent liabilities

 *!.-, 1,2 4!45* 5!.4. 5!*-1

STOCKHOLDERS! EQUITY "ontributed capital Retained earnins 8reasury stock and other equity

1.0 1+!,1. (0.!201)

+,,-

T"#$% L . SE

+,,-

%he balan!e sheet reports assets and the a"ount o fnan!ng ro" lables and sto!kholders* e+uty as o a !ertan date. %he a!!ounng e+uaon s:

A%%et% 7 L'!"'l'(e% 8 Sto)*+olde,%Sto)*+olde,%- E./'t0 A%%et% are te"s o )alue that a !orporaon ons or has a rght to use. %yp!al asset a!!ounts n!lude !ash, a!!ounts re!e)able, n)entory n)entory,, e+up"ent, buldngs, and land. A!!ounts receivable are a"ounts to be received n n the uture ro" !usto"ers. L'!"'l'(e% are a"ounts oed to !redtors the a"ount o debt oed to thrd pares. %yp!al lablty a!!ounts n!lude a!!ounts payable, ages payable, notes payable, and bonds payable. %he key ord ound n "any lablty a!!ounts s payable. A!!ounts payable are a"ounts to be paid n n the uture to supplers. !lear. Sto!kholders* e+uty "ay also Sto)*+olde,%Sto)*+olde,%- E./'t0 s the poron o assets the oners on ree and !lear. be reerred to as shareholders* e+uty or oners* e+uty. %yp!al sto!kholders* e+uty a!!ounts n!lude: Contributed Contributed Capital ; A"ounts pad '!ontrbuted( by sto!kholders to pur!hase !o""on sto!k and preerred sto!k. Retained Earnings ;

23

Ideny Ideny the a!!ounng a!!ounng e+uaon e+uaon a"ounts a"ounts or 7eps 7epso o orpora orporaon on usng usng the the nor" nor"aon aon abo)e. abo)e. Assets 9:5&;;< "llon = >ables 96:&=== "llon ? Sto!kholders* $+uty 9>6&>?@ "llon

2@

4ll 4ll the a!!oun a!!ounng ng e+ua e+uaon on hold hold true true or or e)er e)eryy !orpor !orporao aon6 n6 ' Ye% /
Why 6

Yes, because assets will always be fnanced by either liabilies (debt) or stockholders stockholders equity. All assets are either owned ree and clear by the owners (equity) or fnanced by creditors (debt). 2

Asse Assets ts !an !an et ethe herr be fnan fnan!e !ed d t th h l'!"'l'(e% or %to)*+olde,%- e./'t0.

B Stock market symbols are shown in parentheses .

Introdu!on

7age 3C

hapter 3

Full fle at hps://testbanku.eu/ hps://testbanku.eu/ 2D

Eo Eo s th thss !o"p !o"pan anyy fnan fnan!e !ed6 d6 7r 7r"a "ar rly ly t th h ' l'!"'l'(e% / sto!kholders* e+uty(. Eo !an you tell6

Total liabilies ($2,!!!) are "reater than total stockholders# equity ($2,%&). 2#

2C

r!le r!le hether hether the the a!!ount a!!ount s s !lassfed !lassfed as an an 'A(sset, 'A(sset, '>(abl '>(ablty ty,, or part part o Sto!khol Sto!kholders ders $+uty $+uty 'S$( 'S$( on the balan!e sheet. a.

ash

'A / > / S$(

b.

A!!ounts receivable

'A / > / S$(

!.

A!!ounts payable

'A / L / S$(

d.

o""on sto!k

'A / > / SE(

.

$+up"ent

' A / > / S$(

e.

'A / L / S$(

g.

&uldng

' A / > / S$(

h.

Getaned earnngs

'A / > / SE(

.

In)entory

' A / > / S$(

H.

Mortgage payable payable

'A / L / S$(

k.

&onds payable

'A / L / S$(

l.

>a > and

'A / > / S$(

9se 7eps 7epso* o*ss balan!e balan!e sheet sheet on the pre)o pre)ous us page page to anse anserr the ollong ollong +ues +uesons: ons: a. 4hat a"ount o !ash does ths !o"pany epe!t to re!e)e ro" !usto"ers !usto"ers thn the net e "onths6 9<& @=: "llon 9<&@=: b. %he tle o the largest largest asset a!!ount a!!ount s P,ope,t0 Pl!t !d E./'pmet& et reporng reporng 9>>&@@: "llon. 4hat types o asset !osts are n!luded n ths a!!ount6

Answers will 'ary, but should includeact includeactory ory equi*ent or *i+in" be'era"es, bolin", and *aki *akin" n" snack ood- act actory ory,, ware warehouse house,, and ad*i ad*inistr nistra'e a'e buildin"sbuildin"s- sales and deli'ery 'ehicles- and co*uter equi*ent. !. Eo "u!h does ths !o"pany !urrently !urrently oe supplers6

96&=<@ "llon

d.Sn!e the !o"pany started busness, hat s the total a"ount shareholders ha)e pad or ther shares o sto!k6 9:=> "llon e. Sn!e the !o"pany started busness, ho "u!h net n!o"e as earned and not yet dstrbuted as d)dends6 9:?&@:= "llon

Introdu!on

7age 3J

hapter 3


ACTIITY : P/,po%e:

I N C O M E S TAT E M E N T 8 8

9nderstand the nor"aon reported on the n!o"e state"ent Iden Idenyy re)en re)enue ue and and epen epense se a!!oun a!!ounts ts repo report rted ed on the the n!o" n!o"e e state state"en "entt

PEPSICO (PEP) 200 INCOME STA STATEMENT ( in millions) Sales revenue revenue "ost o% oods sold 7ross pro'it Sellin! eneral and administrative administrative (S7A) expense &epreciation and amorti9ation expense Nonoperatin revenues $ncome be%ore income tax 6rovision %or income tax

 -1!*40 *+!140 **!2++ 04!2+0 ,(.,) 5!+*0 0!.52

Net income



4!0-*

%he n!o"e state"ent reports the !o"pany*s proftablty durng an a!!ounng perod.

Re1e/e% are a"ounts re!e)ed ro" !usto"ers or produ!ts sold and ser)!es pro)ded. Sales revenue and service revenue are a"ounts earned engagng n the pr"ary busness a!)ty. E2pe%e% are the !osts n!urred to produ!e re)enues. $penses are re!orded n the a!!ounng perod they beneft ' a !ause and ee!t relaonshp ests( or are n!urred ' there s no !ause and ee!t relaonsh relaonshp(. p(. Cost epense reports the holesale !osts o n)ento n)entory ry sold durng the Cost of goods goods sold sold epense a!!ounng perod. Net ')ome s the deren!e beteen re)enues and epenses.
R'''&  E34'&'& 5 N'# 6"8' 23

2@

r!le r!le hether hether the the a!!ount a!!ount s !lassfed !lassfed as a 'Ge)(enu 'Ge)(enue, e, '$p(ens '$p(ense, e, or '
4age epense

'Ge) / E2p /
d.

&uldng

'Ge) / $p / Not(

b.

In)entory

'Ge) / $p / Not(

e.

Gent epense

'Ge) / E2p /
!.

ost o goods sold

'Ge) / E2p /
.

Ser)!e re)enue

' Re1 / $p /
Ge)e Ge)e 7eps 7epso* o*ss @KKL n!o"e n!o"e state" state"ent ent abo)e abo)e and and anser anser the the ollo ollong ng +ueson +uesons: s: a.

%hs !o"pany reports ' 6 /  / D / #( re)enue a!!ounts and '@ /  / < / #( epense a!!ounts.

b.

&e)e &e)errages ages and and sna sna!k !kss er ere sold sold to to !us !usto"e to"ers rs or or 9<:&65> "llon that !ost the !o"pany 96?&:5> "llon to produ!e.

!.

%he %he tle tle o o the the lar largest epe epens nse e a!! a!!oun ount s Co%t o Good% Sold reporng reporng 96?&:5> "llon, h!h s typ!ally the largest epense a!!ount or a !o"pany thn the ' ,et!'l / ser)!e( ndustry. 4hat spe!f! types o !osts ould be n!luded n ths a!!ount or 7epso6 Answers will 'ary, but should include at least two o the ollowin" syru concentraon or the be'era"es, in"redients or snack oods, acka"in" *aterials, *anuacturin" labor, and other *anuacturin" costs such as dereciaon o /.

d. 2

4as 7epso proftable6 ' Ye% / <6 "llon

Introdu!on

7age 3L

hapter 3


ACT I ITY < P/,po%e :

S TAT E M E N T O F S TO C K H O L D E R S - E  U I T Y 8 8 8

9nderstand nor"aon pro)ded by the State"ent o Sto!kholders* $+uty 9nder 9nderst stand and !hang !hanges es th thn n !ontr !ontrbut buted ed !apt !aptal al and ret retan aned ed earn earnngs ngs Iden Ideny y rel rela aon onsh shp pss bet betee een n the the IS, IS, G$, G$, and and the the &S

PEPSICO (PEP) 200 STA STATEMENT OF STOCKHOLDERS’ EQUITY ( in millions) C"#96:#'; C$46#$% :einnin balance $ssuance o% shares Net income &ividends 3ther transactions



E;6< :$%$'



R'#$6'; E$96<&

O#='9 E>6#?

 *.!0.-

 (00!-1+)

(22)

4!0-* (*!422) (.2)

(5!-.1)

1

 0+

(1+,1)

-.+ +

T"#$% S#"@="%;'9& E>6#?  17+20 +1-2 (2+,,) (7+71)  12+10

%he state"ent o sto!kholders* e+uty reports !hanges thn the !ontrbuted !aptal, retaned earnngs, and other e+uty a!!ounts a!!ounts durng an a!!ounng a!!ounng perod. perod. 0ontributed caital '( s n!reased hen addonal shares o sto!k are ssued and de!reased hen those shares are rered. 1etained earnin"s 'G$( s n!rea n!rease sed d by et ')ome 'earnngs( o the a!!ounng a!!ounng perod perod and de!reased de!reased hen earnngs are ')ome 'earnngs( dstr dstrbut buted ed as d'1'ded% to the sto!khold sto!kholders. ers. $arnngs $arnngs not dstrbut dstrbuted ed as d)dends d)dends are reporte reported d as retaned earnngs. 23

$arnn $arnngs gs s s anoth another er or ord d or or 're) 're)enu enue e / re!e re!e)a )able bless / et ')ome(. $arnngs o a !orporaon belong to the '"anagers / %to)*+olde,% (. $arnngs !an ether be dstrbuted to the sto!kholders as ' d'1'ded% / epenses / retaned earnngs( or kept n the busness as 'd)dends / epenses / ,et!'ed e!,'4%(.

2@

In!o" n!o"e e Sta State" e"e ent: &alan!e Sheet: Stat State" e"en entt o o S$: S$:

Ge)enu )enue es - $pe $pens nses es = Net I)ome Assets = L'!"'l'(e% ? Sto)*+olde,%- E./'t0 Sto!kholders* $+uty = ontrbuted aptal ? Ret!'ed E!,'4% ?ther $+uty &eg &eg Get Geta ane ned d $ar $arn nng ngss ? Net I)ome - N)dends = Ed'4 Ret!'ed E!,'4%

2

2D

r!le r!le hethe hetherr the a!!ount a!!ount s report reported ed on the In!o"e In!o"e Stat State"e e"ent nt 'IS(, 'IS(, State"e State"ent nt o Sto!khol Sto!kholder ders* s* $+uty 'S$(, or the &alan!e Sheet '&S(.
2#

on ontrb trbut uted ed !ap !apta tall
'IS 'IS / SE / BS( ' IS / SE / &S( 'IS / SE / &S( 'IS 'IS / SE / BS(

e. . g. h.

Sales re)enue ' IS / S$ / &S( A!!ounts re!e)able 'IS / S$ / BS( 4age epense ' IS / S$ / &S( &onds payable 'IS / S$ / BS(

9se 7eps 7epso* o*ss @KKL state" state"ent ent o sto!kh sto!kholder olders* s* e+uty e+uty abo)e abo)e to anse anserr the ollo ollong ng +ueso +uesons: ns: a. ontr ontrbut buted ed !!apt aptal al repo reporte rted d at the end o the the a!!oun a!!ounng ng perod perod s 9:=> "llon, h!h s the a"ount shareholders pad or 'net n!o"e / d)dends / '%%/ed %+!,e% (. b.

Getane aned de ear arn nng ngss n! n!rrease eased d by by ' et ')ome / d)dends d)dends / ssued shares( shares( o 95&><6 "llon and de!reased by 'net n!o"e / d'1'ded% / ssued shares( o 96&5;; "llon.

!.

4hen 4hen the the !o"p !o"pany any ssues ssues share sharess o sto!k sto!k,, total total sto!k sto!khol holder ders* s* e+u e+uty ty ' '),e!%e% / de!reases(. 4hen 4hen the !o"pan !o"panyy buys buys ba!k ba!k share sharess o sto!k sto!k,, total total sto!kh sto!khold older ers* s* e+uty e+uty 'n!r 'n!reas eases es / de),e!%e% (.

Introdu!on

7age 3O

hapter 3


ACTIITY 5 P/,po%e:

S TAT E M E N T O F C A S H F L O  S 8 8

9nderstand nor"aon pro)ded by the State"ent o ash Flos 9nders 9nderstan tand d that that !ash 0o 0oss are orga organz nzed ed as oper operan ang, g, n)es n)esng ng,, and fnan! fnan!ng ng a!)es

%he state"ent state"ent o !ash 0os organz organzes es !ash n0os and !ash ou1los as operang operang a!)es, n)esng n)esng a!)es, and fnan!ng a!)es.

PEPSICO (PEP) 200 STA STATEMENT OF CASH CASH FLOWS ( in millions) Net cash received %rom operating activities (N"3A) Net cash paid %or investing ac activities (N"$A) Net cash paid %or financing ac activities (N";A) E%%ect o% exchane rate chanes "hane in cash # "ash! beinnin beinnin o% the period



,!222 (*!,,5) (1!+*4) (041) (041) 0!0420+

< "ash! end o% the period



*! * !+,-

&usness &usness a!)es !an be !lassfed nto three dsn!t dsn!t !ategor !ategores: es: opera!ng , inves!ng, and and nancing.

eran" Ac'ies relate to a !o"panys "an busness o sellng produ!ts or ser)!es to earn net n!o"e. 3n'esn" Ac'ies relat relate e to the nee need d or n)esng n)esng n prope property rty,, plant plant,, and e+up" e+up"ent ent or epandng by "akng n)est"ents n other !o"panes. 4inancin" Ac'ies relate to ho a !o"pany fnan!e fnan!ess ts assets assets -- th th debt debt or sto!kh sto!khold older ers s e+uty e+uty.. %he State State"en "entt o ash ash Flos Flos des!r des!rbes bes a !o"panys !ash n0os and ou1los or ea!h o these three areas. 23

2@

9se 7eps 7epso* o*ss @KKL stat state"en e"entt o !ash !ash 0os 0os abo)e abo)e to anse anserr the ollong ollong +ues +uesons: ons: a.

7epso ge generated !a !ash in"ows o 9@&;;; "llon ro" ' ope,!(4 / n)esng / fnan!ng( a!)es.

b.

7eps 7eps o o pur!ha pur!hase sed d prope propert rtyy, plan plant, t, and e+up e+up"e "ent nt,, h! h!h h resu result lted ed n a !ash !ash 'n0o 'n0o  / o/low( o 96&@@ "llon ro" 'operang / '1e%(4 / fnan!ng( a!)es.

!.

7eps 7epso o repur repur!ha !hased sed share sharess o sto!k sto!k and and pad pad d)de d)dends nds,, h!h h!h resul resulted ted n n a !ash !ash 'n0o 'n0o / o/low( o 9:&?65 "llon ro" 'operang / n)esng / #!)'4( a!)es.

d.

At t he he b eg egnnng o  @K @KKL, ! as ash a as 9;>? "llo "llon. n. Nurng Nurng the year year,, !ash ' '),e!%ed / de!reased( by 9>&>5< "llon, resulng n an endng !ash balan!e o 96&?@< "llon.

e.

ash at at th the en end o o @K @KKL s s th the '%!me !% / derent than( !ash at the begnnng o @KKO.

r!le r!le hether hether the a!!oun a!!ountt s report reported ed on the the In!o"e In!o"e State"e State"ent nt 'IS(, 'IS(, the &alan!e &alan!e Shee Sheett '&S(, '&S(, or the the State"ent o ash Flos '/F(.
ash

'IS / BS / CF(

.

Sales re)enue

' IS / &S / F(

b.

Gent epense

' IS / &S / F(

g.

A!!ounts re!e)able

'IS / BS / F(

!.

Gent payable

'IS / BS / F(

h.

ash re!e)ed ro" !usto"ers

'IS 'IS / &S / CF(

d.

ash ash pad ad or rent

'IS 'IS / &S / CF(

.

ash used or !aptal ependtures 'IS 'IS / &S / CF(

e.

Getaned earnngs

'IS 'IS / BS / F(

H.

ash ro" ssung shares o sto!k

Introdu!on

7age @K

'IS / &S / CF(

hapter 3


ACT I ITY @ P/,po%e :

G E N E R A L LY A C C E P T E D A C C O U N T I N G P R I N C I P L E S  G A A P  8 8

9nderstand th that PA PAA7 'P 'Penerally A! A!!epted A! A!!ounng 7rn!ples( ar are the ru rules o fnan!al a!!ounng Appl Applyy the the hs hstor tor!a !all !os !ostt pr prn! n!p ple le

'Penerallyy A!!epted A!!epted A!!ounng A!!ounng 7rn!ples 7rn!ples(( are the rules that "anage"en "anage"entt "ust ollo hen GAAP 'Penerall preparng fnan!al state"ents. state"ents. 









23

%he SEC Se)/,'(e% !d E2)+!4e Comm'%%'o has legsla)e authorty to set the reporng rules or a!!ounng nor"aon o the publ!ly held !orporaons t regulates. It has desgnated PAA7 to be the oQ!al rules. %he S$ pro)des o)ersght and enor!e"ent authorty o)er the Fnan!al A!!ounng Standards &oard 'FAS&( and the 7ubl! o"pany A!!ounng )ersght &oard '7A&(. %he se)en se)en ull- ull-"e "e )ong )ong "e"bers "e"bers o the FASB F'!)'!l A))o/(4 St!d!,d% Bo!,d set a!!ounng reporng standards and or"ulate PAA7. A/d't% aest to hether a !o"pany*s fnan!al state"ents !o"ply th PAA7. nly CPA% Ce,(#ed P/"l') A))o/t!t% A))o/t!t%, l!ensed by the state, !an !ondu!t the audts. defned ed by the AICPA7roessonal onal Et+')!l "e+!1'o, s defn AICPA-%% Ame,')! I%(t/te I%(t/te o CPACPA-% % ode o 7roess ondu!t. %hs !ode holds 7  7As a!!ountable or ser)ng the publ! nterest. nterest. %he f)e ull-"e "e"bers o the PCAOB P/"l') Comp!0 A))o/(4 O1e,%'4+t Bo!,d establsh audng standards and !ondu!t nspe!ons o the publ! a!!ounng fr"s that peror" audts. 'FAS& / S$ / GAAP / AI7A( are the rules that "ust be olloed hen preparng the fnan!al state"ents or eternal use.

2@

GAAP stands or Gee,!ll0 A))epted A))o/(4 P,')'ple% .

2

'CPA% / Manage"ent / orporate a!!ountants( !ondu!t audts that aest to hether a !o"pany*s fnan!al state"ents !o"ply th PAA7.

EIS%GIA> S% 7GI<I7>$ states that assets assets and ser)!es ser)!es should should be re!orde re!orded d at ther GAAP >$ T+e H'%to,') H'%to,')!l !l Co%t Co%t P,')'ple P,')'ple states a!+uson !ost, thus usng 'erifable nor"aon that s the "ost reliable nor"aon. 2D

An auto auto has a s!ke s!kerr pr!e o R@K,KKK. R@K,KKK. A !o"pany !o"pany pur! pur!hases hases the the auto, auto, but but negoate negoatess th the the sales sales person and pays a pr!e o only R3L,KKK. n the balan!e sheet, '9>=&??? / R@K,KKK( ll be reported or the auto. auto.

%hrty years years ago ago land as pur!hased pur!hased or R@,KKK, h!h no has a !urrent !urrent "arket "arket

)alue o R3KK,KKK. n the balan!e sheet, ' 96&??? / R3KK,KKK( ll be reported or the land. 2#

4hen the the fnan!al fnan!al stat state"ent e"entss are prepare prepared d a!!ordng a!!ordng to PAA7 PAA7, assets assets and ser)!es ser)!es are report reported ed at ther ' !)./'%'(o )o%t / !urrent "arket )alue(.

2C

%EI< A&9% I%: I%: Is knoledge knoledge o an asset*s asset*s !urrent !urrent "arket "arket )alue e)er useul6 useul6

' Ye% /
#f so$ when 6 5nowled"e o an assets current *arket 'alue is 'aluable when buyin" or sellin" an

indi'idual asset or the business and when usin" an asset as collateral or a loan.

I<%$G I<%$G FI G$7G%I

%here '!,e / are not( deren!es a"ong the a!!ounng a!!ounng standards o derent derent !ountres. !ountres. IFGS are global a!!ounng standards that 9.S. PAA7 s ' )o1e,4'4 tow!,d / n ull !o"plan!e th(.

Introdu!on

7age @3

hapter 3


ACTIITY  P/,po%e:

A N A LY S I S $ R AT I O S 8 8 8

9nderstand that analyss re)eals relaonshps $plor $plore e the rela relaon onsh shps ps a"ong a"ong asse assets, ts, lab labl les es,, re)en re)enues ues,, and net net n!o"e n!o"e $a"ne $a"ne the debt rao, rao, GS 'return-o 'return-on-sal n-sales( es( rao, rao, asset-turn asset-turno)er o)er rao, rao, and the GA 'return-on-asset( 'return-on-asset( rao

%he three tyes o analysis are Gao Analyss, Analyss, %rend Analyss 'horzontal 'horzontal analyss(, and o""on-Sz o""on-Sze e State"ents ')er!al analyss(. Analysis re'eals relaonshis relaonshis by !o"parng a"ounts to: '3(

other other a"oun a"ounts ts or or the sa"e sa"e pero perod d 'raos 'raos and and !o""on!o""on-sz sze e state state"en "ents( ts(,,

'@(

the sa"e sa"e nor nor"a "aon on ro" ro" a pro prorr pero perod d 'tre 'trend nd analy analyss ss(, (,

'(

!o"p !o"pe eto torr no nor" r"a aon on,, and and ndu ndust stry ry nor nor"s "s..

GA%IS M'),o%o 'MSF%(, !lJM!,t Sto,e% '4M%(, and Fo,d Moto, Comp!0 'F( are ell-knon !o"panes, but ho "u!h do you really kno about the"6 23

%#&'&C#' R#*#' For the fs!al years ended belo, put a large !r!le n the bo o the !o"pany

that you "uess has5 a.

the greatest a"ount o assets . '%hs one s !o"pleted or you.(

b.

the greatest a"ount o liabili!es.

!.

the gr greatest a" a"ount o o revenue .

d.

the greatest a"ount o net income.

MFST 1+/=une/+.

( in millions)

WMT 10/=an/+2

F 10/&ec/+.

ASSETS







LIABILITIES







21+2

All answers are acceptable. acceptable. Solutions appear ater Q7.

2@

REENUE







NET INCOME







that you "uess or5 %#&'&C#' R#*#' In ea!h large !r!le, pla!e the a*ount that a.

the greatest a"ount o assets . '%hs s !o"pleted or you.(

b.

the greatest a"ount o liabili!es.

!.

the gr greatest a" a"ount o o revenue .

d.

the greatest a"ount o net income.

&ow turn to page +, and see how well you guessed-

Introdu!on

7age @@

hapter 3

Full fle at hps://testbanku.eu/ hps://testbanku.eu/ ./

a-

%or eac each h comp compan any y list listed bel belo ow$ comp comput ute e the deb debtt ra!o ra!o$$ whic which h reve reveal alss the the prop propor or!o !on n of assets nanced with debt- 6ebt rao 7 Total liabilies 8 Total assets

( in millions) >icroso%t (>S;8) Bal/>art Stores (B>8) ;ord >otor "ompany (;)

.,

D$#' ,?1+?*++. 0?10?*++2 0*?10?*++.

T"#$% A&&'#&  5*!521  0,1!-*2  *0.!1*.

T"#$% L6$:6%6#6'&  1, 1,!4+5  2.!0- *14!,12

D':# R$#6" 4+@04 00 107,

b.

4alal-Mart Mart s s pr" pr"ar arl lyy fnan fnan!e !ed d t th ' de"t / e+uty(, resulng n a debt rao that s 'less / mo,e( than #K.KKT, hle a !o"pany pr"arly fnan!ed th e+uty ll ha)e a debt rao that s ' le%% / "ore( than #K.KKT. Ford has a debt rao greater than '#KT / >??(, nd!ang ts lables are ' 4,e!te, / less( than ts a ssets.

a-

%or %or each each com compa pany ny lis liste ted d belo below w$ comp comput ute e Ret Retur urn n on Sal Sales es (R0 (R0S) S)$$ whic which h reve reveal alss the the por por!o !on n of each revenue dollar that results in prot- 19 7 :et inco*e 8 9ales re'enue

( in millions) Y'$9 E;'; R''' N'# I I "8' ROS >icroso%t (>S;8) ,?1+?*++.  ,+!-*+ *2@*, Bal/>art Stores (B>8) 0?10?*++2  -+4!,+5 0 ;ord >otor "ompany0(;) *?10?*++.  0-,!*55 100) b. Bal/>art Stores has '4,e!te, / less( re)enue than M!rosoU, but M!rosoU has a ' +'4+e, / loer( loer( GS rao than 4al-Mart. 4al-Mart. %he GS rao or M!rosoU nd!ates nd!ates 6;36@ o e)ery re)enue dollar resulted n proft 'net n!o"e(, but or 4al-Mart Stores only :3:? o e)ery re)enue dollar resulted n proft. Ford Motor o"pany reports a ' po%'(1e po%'(1e  e4!(1e( GS, nd!ang ',e1e/e  et ')ome( s nega)e. !.

For 4a 4al-Mart, ;@3? !ents o ea!h re)enue dollar ent to pay or all o the !osts o runnng the busness, lea)ng :3:? !ents o ea!h re)enue dollar or proft.

d.

%he %he !or !orpo pora rao on n t th h the the stro strong nges estt GS GS rao ao s s ' MSFT / 4M% / F(. 1ow can a company increase its R0S ra!o6

A co*any can increase its 19 rao by reducin" costs and oeran" *ore e;cient e;ciently, ly, thereby increasin" roft or a "i'en a*ount o re'enue, or by "eneran" *ore re'enue.

.2

e.

Noes Noes a llo o GS GS rao rao nd nd! !at ate e a ea eakk !or !orpo porraon aon6 6 'Ves 'Ves / No( Why 6 /'en thou"h art has a low 19 rao co*ared to >icroso?, it defnitely would not be considered considered a wea weak k cor cororao oraon. n. 0oro 0ororao raons ns use di@e di@erent rent strate"ie strate"iess to "enerate "enerate rofts (net inco*e). art#s strate"y is to kee rices low to "enerate a lar"e 'olu*e o sale re'enue.

a-

%or %or each each comp compan any y liste listed d belo below w$ comp comput ute e 'sset 'sset ur urno nove verr$ whic which h reve reveal alss how how e3ci e3cien entl tly y asse assets ts are used to generate revenue- Asset Turno'er Turno'er 7 9ales 1e'enue 1e'enue 8 Total Total Assets

( in millions) Y'$9 E;'; >icroso%t (>S;8) ,?1+?*++. Bal/>art Stores (B>8) 0?10?*++2 ;ord >otor "ompany0* (;) ?10?*++.

R''' T"#$% A&&'#&  ,+!-*+  5*!521  -+4!,+50,1!-*2  0-,!*55*0.!1*.

A&&'# T9"'9 [email protected]++ 2-1, 0700

b.%he asset turno)er raos !o"puted !o"puted abo)e are n the range ' le%% t+! : /  or "ore(. !. 'MSF 'MSF% % / MT / F( has the strongest asset turno)er, nd!ang the !o"pany "akes profts by generang a large )olu"e o re)enue usng rela)ely e assets. 4al-Mart generates 963<= n re)enue or e)ery R3 n)ested n)ested n assets.

Introdu!on

7age @

hapter 3

Full fle at hps://testbanku.eu/ hps://testbanku.eu/ 2C

a.

For ea! ea!h !o"p !o"pan anyy ls lsted belo belo , !o" o"pu putte Getur turn on Asse Assets ts 'G 'GA(, A(, h! h!h re)eals eals ho ho eQ!ently a !o"pany uses ts assets to generate proft 'net n!o"e(. A hgh GA rao depends on "anagng asset n)est"ents and !ontrollng epenses to keep net n!o"e hgh. Analyze the !o"ponents, GS and Asset %urno)er, to beer understand !orporate strategy 'produ!t-derena 'produ!t-derenaon on )s. lo-!ost lo-!ost strateges(. GA s the broadest "easure o proftablty. 1A 7 :et 3nco*e 8 Total Assets

( in millions) Y'$9 E;'; >icr >icros oso% o%tt (>S; (>S;8) 8) ,?1+ ,?1+?* ?*++ ++. . Bal/>art Stores (B>8) 0?10?*++2 ;ord >otor "ompany0*?10?*++. (;) b-

N'# I"8'

T"#$% A&&'#&  5*!521  0,1!-*2  *0.!1*.

ROA *-@*2 20 72)

%or %or each each compan company y below below$ comput compute e R0' R0' by mul!ply mul!plying ing the the two two compon componen ents$ ts$ Ret Return urn on Sale Saless and 'sset urnover$ previously computed- 1A 7 19 + Asset T8

( in millions) Y'$9 E;'; >icroso%t (>S;8) ,?1+?*++. Bal/>art Stores (B>8) 0?10?*++2 ;ord >otor "ompany0*?10?*++. (;)

ROS 3 *2@*, 0 100)

A&&'# T9"5'9ROA [email protected]++ *-@*2 2-1, 1, 700 72)

4 rounding error

!.

2J

%he !orpor !orporao aon n th th the the str strong onges estt o)er o)erall all "eas "easur ure e o proft proftab ablt ltyy s ' MSFT / 4M% / F( th an GA o 6<36; , nd!ang that or ea!h dollar n)ested n assets, the !o"pany generates, on a)erage, 6<36; !ents n profts. %he !orporaon th the eakest GA s 'MSF% / 4M% / F(, be!ause the !o"pany reported a net 'n!o"e / lo%%(. d.

4al-Mart St Stores ha has 'h 'hgh / low( GS and ' +'4+ / lo( Asset %urno)er, %urno)er, nd!ang that a ' lowJ )o%t / produ!t-derenaon( strategy s used, hle M!rosoU has ' +'4+ / lo( GS and 'hgh 'hgh / low( Asset %urno)er, nd!ang that a 'lo-!ost / p,od/)tJd'e,e(!(o ( strategy s used. Ford Motor o"pany has 'hgh / low( GS and 'hgh / low( Asset %urno)er, nd!ang that t s 'dong ell / ' t,o/"le(.

a.

%he %he ra rao o that that "e "eas asur ures es the the abl ablt tyy to to tr transl anslat ate e re) re)en enue ue nt nto prof proftt s s the the 'Nebt / ROS / Asset %urno)er / GA( rao.

b.

%he rao rao that that "eas "easure uress the the propo proporo ron n o debt debt used used to fnan!e fnan!e asse assets ts s s the the 'De"t / GS / Asset %urno)er %urno)er / GA( rao.

!.

%he bro broade adest st "easu "easure re o o proft proftab ablt ltyy that that !an be be brok broken en don don nto nto !o"po !o"ponen nents ts to be beer er understand !orporate strategy s the 'Nebt / GS / Asset %urno)er / ROA( rao.

d.

A hgh 'Nebt / GS / A%%et T/,o1e, / GA( rao nd!ates a hgh-)olu"e strategy.

Soluons to %#&'&C#' R#*#' 23 and 2@.

'R n "llons(

MFST K-Wune-KL

ASSETS

R

J@,JO

MT 3-Wan-KO R

F 3-Ne!-KL

3C,D@O

R 6>=&:6=

LIABILITIES

C,#KJ

OL,3DD

6:5&@:;

STOCKHOLDERS- EUITY

C,@LC

C#,@L#

'3J,33(

REENUE

CK,D@K

NET INCOME

9

>&@=>

,DKK

3DC,@JJ R '3D,CJ@(

d.

Introdu!on

7age @D

hapter 3


ACT I ITY = 7urpose:

A N A LY S I S $ T R E N D 8

7repare a trend analyss and understand the nor"aon pro)ded

A t,ed !!l0%'% !o"pares a"ounts o a "ore re!ent year to a base year. year. %he base year s the earlest year beng studed. %he analyss "easures the per!entage o !hange ro" the base year. year. 23 9se 9se the a"oun a"ounts ts lst lsted ed belo belo  to !o"pl !o"plet ete e the tren trend d nde ndees es or or otal e5penses and &et income. N)de ea!h a"ount by the a"ount o the base year and "ulply by 3KK. Ge!ord the resulng resulng trend inde5 n n the shaded area. 9se @KK# @K K# as the base year.

PEPSICO ( in millions) S$%'& 9''' T"#$% '34'&'& N'# 6"8'

2@

200 -1!*40 1.!0+2  4!0-*

2007 011 112

12!-511!.0,  4!,4.

B$&' Y'$9 200

200 0*0 11, 1,

14!015 *2!-24  4!,-*

0+. 101

1*!4,* *.!-. -!+5.

0++ 100 100

Fro" Fro" @KK# @KK# to @KKL @KKL sales sales grot groth h or 7eps 7epso o as as T. T. Nurng Nurng the the sa"e sa"e pero perod, d, tota totall epens epenses es n!reased :<. 4hen sales re)enue n!reases, epenses ould be epe!ted to ' '),e!%e / stay the sa"e / de!rease(. It s a)orable hen sales n!rease by T and epenses n!rease at a 'greater /

le%%e, ( rate than T. Fro" @KK# to @KKL, 're)enues / e2pe%e%( o 7epso n!reased at a greater rate, h!h s 'a)orable / /!1o,!"le(. 2

Assu"e Assu"e 7epso 7epso had had a goal goal o n!rea n!reasng sng profts profts by #T ea!h year year.. %hs goal as as '"et / ot met(.

2D

%he best best ye year ar fnan fnan!a !ally lly or 7eps 7epso o as as '@KKL '@KKL / @KKJ / 6??@(. Why 6

Total e+enses were ket under control. /+enses increased by B...B less than the !B increase in sales re'enue, which resulted in an i*ressi'e !B increase in net inco*e since the base year, the "reatest increase in net inco*e o the three years. Also, 2%%& 19 was &B, the hi"hest o the  years. %he orst year fnan!ally or 7epso as ' 6??= / @KKJ / @KKC(. Why 6

/+enses increased at a "reater rate than re'enue- e+enses increased by B, while sales re'enue increased by only B. This resulted in only a 2&B increase in net inco*e since the base year,, which was less year l ess than re'ious years. Also, 19 was 2B, the lowest o the  years. 2#

9se the the a"oun a"ounts ts lst lsted ed belo belo to to !o"ple !o"plete te the the trend trend nde ndee ess or iabili!es and Stockholders6 E7uity . N)de ea!h a"ount by the a"ount or the base year and "ulply by 3KK. Ge!ord the resulng n the shaded area. 9se @KK# as the base year. year. trend inde5 n

PEPSICO ( in millions)

12/27/200

12/2,/2007

12/0/200

B$&' Y'$9 12/1/200

A&&'#&

14!22-

001

1-!,*.

0+2

*2!21+

2-

10!5*5

0 ++

L6$:6%6#6'&

*1!...

17

05!12-

100

0-!4,*



05!-5,

100

SE>6#?

0*!0+,



05!*1-

121

04!1,.

10

0-!*40

100

2C

%he %he asse assets ts o 7eps 7eps o o n!r n!rea ease sed d by 3T ro" ro" 3@/3/@ 3@/3/@KK# KK# to 3@/@J 3@/@J/@K /@KKL, KL, nd! nd!a ang ng 7eps 7epso o s '4,ow'4 / shrnkng(. shrnkng(. Fro" Fro" 3@/3/@KK# to 3@/@J/@KKL, 'assets / l'!"'l'(e%( n!reased at a greater rate, nd!ang the !orporaon s relyng ' mo,e / less( on debt to fnan!e assets.

2J

Sto!k Sto!khol holder ders* s* e+ut e+utyy a"ount a"ountss are grea greater ter than than the the base base year year on '3@-@J-@K '3@-@J-@KKL KL / >6J6;J6?? / >6J:?J

2L

6??@( hen the trend nde s ' 4,e!te, / less( than 3KK. Sto!kholders* e+uty a"ounts are less than the base year on ' >6J6J6??= / 3@-@O-@KKJ 3@-@O-@KKJ / 3@-K-@KKC( 3@-K-@KKC( hen the trend nde nde s 'greater 'greater / le%%( than 3KK. It s s eas easer er to anal analyz yze e 7eps 7eps o o 'be 'beor ore e / !e, ( preparng the trend analyss.

Introdu!on

7age @#

hapter 3


ACTIITY ; P/,po%e:

A N A LY S I S $ C O M M O N J S I Z E S TAT E M E N T S 8

7repare !o""on-sze state"ents and understand the nor"aon pro)ded

%he COMMONJSIZE INCOME STATEMENT !o"pares all a"ounts thn one year to re)enue o that sa"e year. year. %he analyss "easures ea!h n!o"e state"ent a"ount as a per!entage o re)enue. 23

For For the o!a-ol o!a-ola a '( and Starbu Starbu!ks !ks 'S&9X( 'S&9X( !o"pan !o"panes es lste lsted d belo, belo, !o"ple !o"plete te the !o""on !o""on-s -sze ze state"e state"ents nts by d)dng d)dng ea!h a"ount a"ount on the n!o"e state"ent state"ent by sales re)enue. re)enue. Ge!ord the resulng !o""on-sze per!entage per!entage n the shaded area pro)ded.

200 ( in millions) S$%'& 9'''

PEPSICO (PEP) A8"#  -1!*40 0++

COCACOLA (KO) A8"# 

STARBUCKS (SBU) A8"# 

10!2--

100

0+!1.1

100 ,7

T"#$% '34'&'&

1.!0+2

..

*,!015

2

0+!+,5

N'# 6"8'

 4!0-*

0*

 4!.+5

1



10,



2@

'PEP /  / S&9X( s the largest !o"pany abo)e, reporng sales re)enue o appro"ately RD 'trll 'trllon on / "'ll'o / "llo "llon n / thousa thousand( nd(.. GS or 7eps 7epso o s >6 or ?3>6 n de!"al or", h!h nd!ates >6 !ents o e)ery dollar o sales re)enue resulted n proft. 19 7 :3 8 9ales 1e'enue

2

n the !o""on-sz !o""on-sze e n!o"e n!o"e stat state"ent e"ent,, e)ery e)ery a"ount a"ount s !o"par !o"pared ed to or d)ded d)ded by by total total 'assets 'assets / lab labl l es es / ,e1e/e / net n!o"e n!o"e(. (. o""on o""on-s -sze ze state state"en "ents ts are helpu helpull hen hen !o"par !o"parng ng !o"panes o derent derent sze. sze. ' T,/e / False(

2D

&ase &ased d only only on the the no nor" r"a aon on pro) pro)d ded ed abo) abo)e, e, h! h!h h !o"p !o"pan anyy ould ould be your our !ho !ho!e !e o n)est"ent6 n)est"ent6 '7$7 / KO / S&9X( Why8 0oca=0ola#s 19 o !B is the "reatest, indican" or e'ery dollar o sales re'enue ! cents "oes toward roft and !2 cents towards e+enses. 9aid another way, 5 incurs only !2 cents o e+enses to "enerate each $ o sales re'enue.

%he COMMONJSIZE BALANCE SHEET !o"pares all a"ounts thn one year to total assets o that sa"e year. year. %he analyss "easures ea!h balan!e sheet a"ount a s a per!entage o total assets. 2#

For For the o!a-ol o!a-ola a '( and Starbu Starbu!ks !ks 'S&9X( 'S&9X( !o"pan !o"panes es lste lsted d belo, belo, !o"ple !o"plete te the !o""on !o""on-s -sze ze state"ents by d)dng ea!h a"ount on the balan!e sheet by total assets. Ge!ord the resulng !o""on-sze per!entage per!entage n the shaded area pro)ded.

200 ( in millions)

2C

PEPSICO (PEP) A8"# 

COCACOLA (KO) A8"# 

STARBUCKS (SBU) A8"# 

A&&'#&

14!22-

0++

-+!402

100

4!,51

100

L6$:6%6#6'&

*1!...

,,

*+!+-5

-,

1!0.*



SE>6#?

0*!0+,

1-

*+!-5*

1

*!-20

--

Star Starbu bu!k !kss pr" pr"ar arl lyy fnan! fnan!es es asse assets ts th th ' l'!"'l'(e% / sto!khold sto!kholders* ers* e+uty ). %he debt rao or Starb Starbu!k u!kss s 5@, h!h nd!ates nd!ates debt 'lables( 'lables( s used to fnan!e 5@ o assets and e+uty 'sto!kholders* e+uty( s used to fnan!e << o assets. n the !o""on-sze balan!e sheet, e)ery a"ount s !o"pared to or d)ded by total ' !%%et% / lables. 6ebt 1ao 7 Ciabilies 8 Assets

Introdu!on

7age @C

hapter 3


A C T I  I T Y >? >? P/,po%e :

23

T E S T YO U R U N D E R S TA N D I N G 8 8 8

Ge)e the our fnan!al state"ents o"pute net n!o"e 7repa 7repare re and e)alu e)aluat ate e trend trend and !o""on !o""on-s -sze ze stat state"e e"ents nts

Make the ollong ollong state"e state"ents nts true by !orre !orre!ng !ng the alse alse nor"a nor"aon. on.

:oteD There *ay be *ore than one way to correct the alse inor*aon. a.

inco*e e re' re'enue enue sta state* te*ent, ent, sta state* te*ent ent o %he our fnan! an!al st state"ents n!lude the inco* stockholders# equity contributed caital, balance asset sheet , and the state"ent o !ash 0os.

b.

%he balance sheet state*ent o cash Eows reports the assets o the busness and ho those assets are fnan!ed.

2@

!.

Asse Assets ts ar are fna fnan! n!ed ed eth ether er by lla ab bl le ess or stockholders# equity e+enses.

d.

Accounts recei'able recei'able 1etained earnin"s s an asset a!!ount, accounts ayable recei'able s a lablty a!!ount, and retained earnin"s accounts ayable s a sto!kholders* e+uty a!!ount.

e.

A!!oun A!!ounts ts payab payable le re!e re!e)ab )able le are are a"ounts a"ounts to to be pad pad later later to suppl suppler erss by the !orp !orpor orao aon. n.

.

The state*ent o cash Eows inco*e state*ent reports !ash n0os and !ash ou1los.

g.

1e'enue 0ash s the a"ount earned engagng n the pr"ary busness a!)ty.

h.

$arn arnng ngss s s ano anothe ther te ter" or net inco*e re'enue.

.

H.

N)dends are not reported reported as an epense on the n!o"e state"ent.

r! r!le le the n!o n!o"e "e state state"e "ent nt a"oun a"ounts ts and !ros !rosss out out a"ou a"ount ntss not not repo report rted ed on the the n!o n!o"e "e state"ent. state"ent. %hen !o"pute net n!o"e. Supply epense

R L,KKK

Sales re)enue

K,KKK

o""on sto!k

ost o goods sold

J#,KKK

N)dends

R3KK,KKK #K,KKK @,KKK

9>&??? '= R3KK,KKK - RJ#,KKK - RL,KKK(

Suppose Suppose that that durng durng the the frst frst year o o busness busness R3KK,KKK R3KK,KKK o o age age !osts !osts ere ere n!urred n!urred RO#,KKK ere ere pad n !ash to e"ployees and the re"anng ages ll be pad to e"ployees on Wanuary  o the !o"ng year, the net payday. 4hat a!!ount tle and a"ount ll be reported on the ollong year-end fnan!al state"ents6 state"ents6 a.

In!o"e State"ent

e2pe%e   payable  pad( o 9>??&??? A!!ount tle: 4age ' e2pe%e

b.

&alan!e Sheet

A!!ount tle: 4a 4ages 'epense  p!0!"le p!0!"le   pad( o 95&???

!.

Stat State" e"en entt o ash ash Flo Floss A!!o A!!oun untt tle tle:: 4ages ages 'ep 'epen ense se  payable  p!'d( o 9;5&???

Introdu!on

7age @J

hapter 3


COCACOLA (KO*) 12/1/200 BALANCE BALANCE SHEET ( in millions) ASSETS ASSETS "ash and cash equivalents Short/term investments Accounts receivable! net $nventories 3ther current assets 6roperty! plant! and equipment! net 7oodill 3ther intanibles Lon/term investments 3ther non/current assets

LIABILITIES Accounts payable Short/term debt 3ther current liabilities Lon/term debt 3ther non/current liabilities

 -!5+0 *5 . 1!+2+ *!0.5 0!2*+ .!1*, -!+*2 .!-5, 4!552 0!511

STOCKHOLDERS! EQUITY "ontributed capital Retained earnins 3ther stockholdersC equity

 -+!402

TOTAL TOTAL ASSETS



0!15+ ,!410 4!+.5 *!5.0 -!*5.

.!.-, 1.!401 (*,!..5)  -+!402

TOTAL TOTAL L . SE

COCACOLA (KO) 200 INCOME STA STATEMENT ( in millions) Sales revenue "ost o% oods sold 7ross pro'it Sellin! eneral! and administrative expense 3ther operatin expenses Nonoperatin revenues and expenses $ncome be%ore income tax 6rovision %or income tax Net income

 10!2-00!15*+!45+ 00!5514+ (0!+ (0 !++5 +5 ) 5!-12 0!,1*  4!.+5

COCACOLA (KO) 200 STA STATEMENT OF STOCKHOLDERS’ STOCKHOLDERS’ EQUITY ( in millions) :einnin balance $ssuance o% shares Net income &ividends 3ther transactions transactions Endin balance

C"#96:#'; C$46#$%  .!*4. 4..

 .!.-,

R'#$6'; E$96<&  1,!*14

O#='9 ='9 E>6#?  (**!5-2)

4!.+5 (1!4*0) (.)

(-!01.)

 1.!401

(*,!..5)

TOTAL S/E  *0!5-4.. 4!.+5 (1!4*0) (-!0-,)  *+!-5*

COCACOLA (KO) 200 STA STATEMENT OF CASH FLOWS FLOWS ( in millions) Net cash received %rom operatin activities (N"3A) Net cash paid %rom investin activities (N"$A) Net cash paid %rom 'inancin activities (N";A) E%%ect o% exchane rate chanes "hane in cash # "ash! beinnin o% the period < "ash! end o% the period

Introdu!on

 5!450 (*!1,1) (1!2.4) (,04) ,+. -!+21  -!5+ !5+0

7age @L

hapter 3

Full fle at hps://testbanku.eu/ hps://testbanku.eu/ 2D

Ge)e th the @KKL Fnan!al State"ents o the o!a-ola o"pany on the opposte page to anser the ollong +uesons: a.

Assets 9; "llon = >ables 96?&?< "llon ? S$ 96?&<6 "llon Is the the a!!ounng a!!ounng e+uaon e+uaon n balan!e6 ' Ye% e%   No(

b.

!.

%he end endng ng balan balan!e !e o ret retane aned d earnn earnngs gs on the the Stat State"e e"ent nt o Sto! Sto!kho kholde lders rs** $+uty $+uty s s 9:=&5>: "llon. It s also reported on the 'In!o"e State"ent / B!l!)e S+eet / State"ent o ash Flos(.

d.

ash ash re report ported ed on the the &al &alan an!e !e She Sheet s s 9<&?> "llon. It s also reported on the 'In!o"e State"ent State"ent / State"ent o Sto!kholders* $+uty / St!temet o C!%+ Flow% (.

e.

%otal As Assets o o 9; "llon helped to generate Sales Ge)enue o 9:>&;<< "llon, h!h results n an Asset %urno)er rao o ?3==< , h!h s 'greater than/ !"o/t t+e %!me !% / less than( K.LK, the a)erage Asset %urno)er %urno)er rao o the SY7 #KK.

.

Sales Ge Ge)enue o o 9:>&;<< "llon "llon helped helped to generat generate e =3>= , h!h s ' 4,e!te, t+! / about the sa"e as / less than( 3KT, the a)erage GS o the SY7 #KK.

g.

%otal As Assets o o 9; "llon helped to generate generate <3:: , h!h s 'greater than/ le%% t+!( J.T, the a)erage GA o the SY7 #KK.

h.

%he "os "ostt !o"pr !o"prehe ehens ns)e )e " "eas easur ure e o proft proftab ablt ltyy s 'Asse 'Assett %urn %urno) o)er er / GS GS / ROA(. For o!aola, GA o ><3:: = Asset %urno)er o ?3==<  GS o >=3>=, nd!ang that a 'lo-!ost / p,od/)tJd'e,e(!(o ( strategy s used.

Introdu!on

7age @O

hapter 3

Full fle at hps://testbanku.eu/ hps://testbanku.eu/ 2#

For For the o!a- o!a-ola ola o"pa o"pany ny lste lsted d belo belo, !o"plet !o"plete e the trend trend nde ndees es or otal e5penses and &et n the shaded area. 9se @KK# as the base year. year. income. Ge!ord the resulng trend inde5 n

C"$C"%$ (KO) ( in millions)

200

2007

B$&' Y'$9 200

200

S$%'& 9'''

10!2--

01.

*.!.45

0*4

*-!+..

0+-

*1!0+-

0++

T"#$% '34'&'&

*,!015

1-

**!.5,

12

02!++.

10-

0.!*1*

100

N'# 6"8'

 4!.+5

11,

 4!2.0

12

 4!+.+

10-

 -!.5*

100

Fro" @KK# to @KKL sales re)enue re)enue o o!a-ola n!reased n!reased by , hle epenses n!reased by

-, resulng resulng n an n!rease n!rease n net n!o"e o 1,. o!a-ola has 'kept / ot *ept( spendng under !ontrol, resulng n an n!rease n net n!o"e that s 'greater / le%%( than the n!rease n sales re)enue o)er the sa"e "e perod.

2C

For the the o!a-ola o!a-ola o"pany o"pany,, !o"plete !o"plete the the !o !o""on""on-sze sze state" state"ents ents or 3@/3/@KK# 3@/3/@KK#,, 3@/3/@KKC, 3@/3/@KKC, and 3@/3/@KKJ belo. belo. Ge!ord the resulng common9si:e ; n the shaded area pro)ded.

C"$C"%$ (KO) ( in millions) A&&'#& L6$:6%6#6'& SE>6#?

D' 1+ 200



D' 1+ 2007



D' 1+ 200



200 B$&' Y'$9



-+!402 *+!+-5 *+!-5*

0++ -2 40

-1!*,2 *0!4*4 *0!5--

100 0 0

*2!2,1 01!+-1 0,!2*+

100 -

*2!-*5 01!+5* 0,!144

100 -

n 3@/3/@KK# ths !o"pany fnan!ed assets pr"arly th 'lables / %to)*+o %to)*+olde,%lde,%- e./'t0( and on 3@/3/@ 3@/3/@KKL KKL assets assets ere ere fnan!e fnan!ed d <; th lables, lables, nd!ang nd!ang that on 3@/3/@KKL ths !o"pany s relyng ' mo,e / less( on debt to fnan!e assets. In the !o""on-sze balance sheet , e)ery a"ount s !o"pared to or d)ded by tot!l !%%et%. In the !o""on-sze income statement , e)ery a"ount s !o"pared to or d)ded by %!le% ,e1e/e .

2J

Are Are Pene Penera rally lly A!!ept A!!epted ed A!!oun A!!ounng ng 7rn! 7rn!ple pless 'PAA 'PAA7( 7( ne! ne!ess essary ary6 6 ' Ye% /
Yes, rules are needed so that di@erent di@erent co*anies reort ite*s ite*s in si*ilar ways. This enables the ublic to understand understand the fnancial state*en state*ents ts and co*are co*anies. co*anies.

Introdu!on

7age K

hapter 3

Solution-Manual-for-Interpreting-and-Analyzing-Financial-Statements-5th-Edition-by-Schoenebeck.doc

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